Registered Investment Adviser Caleb Lawrence
The major averages enter the final hour with small losses on little real news. Since Monday the Standard and Poors 500 index is down fractionally, while the NASDAQ has lost 44 points or .7%. The Feds 2nd quarter flow of funds report is out always an interesting read it shows that household wealth increased 1.7 trillion to 96.2 trillion during the quarter, a new record high. Driven by gains in real estate and the stock markets primarily. Household percent equity increased to 58.4%, but remains below its pre-bust peak. This data is the primary rational for supposed success of QE or Quantitative Easing. Detractors point out the double-digit decline in the homeownership rate in the post bust period and that the vast majority of stock market wealth is held by the 10%. Both items have done little for your average American down on Main Street. Similar trends are seen in income distribution in the post bust period since 2008, the lion’s share of the gains accrued to the top 5%, again doing little to benefit your average American down on Main Street. Despite all of the endless recovery cheerleading CoreLogic reports the 2.8 million homes are still underwater, this despite new record highs for real estate in quite a number of markets. While it’s true that this figure has been decreasing steadily it speaks volumes about the popularity of Mortgage Equity Withdrawal or MEW, exotic financing and zero down mortgages popular prior to the real estate bust seen in the 2006-2009 period. Fast forward to the present and MEW is gaining in popularity once again, though it is a shadow of its former self accounting for just .3% of disposable personal income or about 12 billion Dollars in the second quarter.