Americans $1.7 trillion poorer

[Ichingcarpenter]

Source: CNN

NEW YORK (CNNMoney.com) -- Americans saw their net worth decline by $1.7 trillion in the first quarter - the biggest drop since 2002 - as declines in home values and the stock market ravaged their holdings.

Meanwhile, the amount of equity people have in their homes fell to 46.2%, the lowest level ever.

The net worth of U.S. households fell 3% to $56 trillion at the end of March, according to the Federal Reserve's flow of funds report, which was released Thursday.

Not surprisingly, plummeting home values and stock prices contributed heavily to the drop. The value of real estate assets owned by households and non-profits declined by $305 billion, while financial assets fell by $1.3 trillion, led mainly by a $556 billion drop in corporate equities and a $400 billion decline in mutual funds.

Read more: http://money.cnn.com/2008/06/05/news/economy/fundflows/index.htm?section=money_topstories

[OhioChick]

1. K&R

:kick:

[Hydra]

2. Congrats to Bushco and their supporters

Enjoy all of your blood money. It must suck to have nothing else that makes you happy.

[indepat]

3. Trying to top my extreme cynicism of everything associated with everything this administration has

wrought? Hooray! :D

[Hydra]

5. We are siblings in our cynicism, then :D

Brother! Sister!

[ozymandius]

4. Now we see what happens when the "adults are back in charge".

Adult-level theft of our equity and dignity.

[bdamomma]

6. I hope to see the day when these thugs pay so dearly

what they have done to so many people.

Hey Ichingcarpenter:hi:

[Ichingcarpenter]

7. How much is a Trillion Dollars?

If you had gone into business on the day Jesus was born,
and your business lost a million dollars a day, day in and day out
365 days a year, it would have taken you until October 2737 to lose a trillion dollars.



For most of us, even a million is incomprehensible. Have you ever tried to count to a million? Think about it: If you counted non-stop without eating or sleeping it would take approximately 23 days to count to a million. To count to a billion literally would take a lifetime: 95 years.

Counting to a trillion, assuming we get started right away and don't waste any time, would take about 2,000 centuries -- 200,000 years.

[David__77]

8. This is "the other shoe dropping."

For several years, there were "fictitious" gains resulting from a credit bubble. Of course the air has to be let out.

[slipslidingaway]

9. K&R. Always some good charts at this site...

http://contraryinvestor.com/2007archives/moaug07.htm

"...A while back now, we penned a discussion questioning just what the baby boom generation was going to do for money/liquidity as they entered retirement years. Our observation at the time in reviewing household balance sheets was that households held plenty of real estate and qualified plan assets (profit sharing, IRA, 401(k)), but very little in the way of cash. We questioned for how much longer would households, and especially the baby boomers, be able to continue leveraging up as retirement years for the boomers were fast approaching. And lastly, we pointed to the fact that throughout a good portion of their adult lives, the boomers had learned to embrace asset inflation for their “savings” activity, evidenced by appreciation in stocks and real estate, and the lack of traditional savings as would be calculated by the savings rate...


As you can see, increasingly gains in real estate and stock prices have accounted for ever greater amounts of total household net worth growth since the 1970’s. And importantly we need to remember that the baby boomers as a group really began to come of age in the late 1970’s/early 1980’s. In essence, what they’ve known in their adult life and have thoroughly enjoyed is household asset class inflation...

But within the current decade itself, and especially over the last few years, this is starting to diminish directly due to residential real estate softening. Of course, directly from Hank Paulson’s mouth in the Fortune article we cited to you earlier this year, he hopes “stock price appreciation has more than made up for the decline in residential real estate values”. (We continue to suggest you not forget his exact words as we move forward.) Nonetheless, in 1Q of this year, increases in household real estate values and equity holdings accounted for the smallest amount of total household net worth expansion in eight years at least..."

[tom_paine]

10. Factor in the declining strength of the dollar, and it's more like $3 trillion.

[dipsydoodle]

11. What goes up

quite often comes down again. This is especially so when increases are artificial. Best bet is to just deal with it.

[Virginia Dare]

13. What percentage of that trillion went into Bush/Cheney..

cronies pockets? Kenny-boy who?

[dipsydoodle]

15. Exactly

You might as well refer to as the ultimate money laundering machine the overall effect of which will have been to make the rich richer and the everyone else poorer.

[Igel]

17. Paper gains, paper losses.

In most cases.

Take my parents. They bought a house for $20 in '63. When they sold it, they got $260k for it. Part was inflation; part was improvements; part was changes in the neighborhood increasing demand.

They made a profit, I think, but to be sure you'd have to convert all the prices to a single dollar (say, 1995 dollars), take into account all the improvements.

They went to Arizona. They bought a house for $230k. 10 years later, it was assessed, given similar houses in the development, at $330k. Had they sold, they'd have made a profit, clearly.

Their house's value has clearly dropped, probably by about $40k. Had they been drawing up a balance sheet and listing the value of their assets, it would show a decline in net worth of $40--more, because they also lost value in stocks; my mother was esp. upset that stocks she'd held since the '70s lost value (even though they're still worth more than they were 5 years ago).

The gains in net value were good. They were fictitious. The losses are equally fictitious, until they cash out their stocks and sell their house.

It doesn't keep economists from generating numbers on the loss of net worth. Much of what's made of the losses is silly: The money wasn't going to be spent, had everybody tried to redeem their holdings at once there'd have been a complete housing market collapse, and it's much ado about nothing. On the other hand, it's important in a few ways. One such way is the feeling of wealth: You have your father's old coin collection, you're told it's worth $250k and you decide to keep it in your sock drawer for your grandkids, you still feel wealthy; you decide a year later to have it appraised again, and they tell you that either that kind of collection isn't sought after any more so it's only worth $50k--or they tell you the first appraiser was just wrong--you feel like you've lost $200k and you're much poorer. Feeling poor changes how you spend money. A second way is loss of collateral: If you've taken out a loan against the coin collection, you're screwed. It affects how you view the future, as well--yeah, it was for the kids, but if something happened you could fall back on it. Now ...

You want to know who profited? People who sold their houses at their peak value, people who sold stocks high having bought them and waited for them to appreciate in value. Banks may have profited, for a while--but if you look, you find that they're not all in great shape now, so "cui bono?" leads to goofy results here, and a lot of that profit went to the individuals, not the corporation. Of course, corporate profits often go to shareholders, which, these days, are people about to retire or their pension funds. Corporate executives profited, but even a $50 million is peanuts given the size of the paper losses.

[Virginia Dare]

12. MISSION ACCOMPLISHED!

this is the legacy of the Bush Administration:

[maxrandb]

14. I'd like to see how much of that went from the Middle Class

to the top .05%?

My guess is those folks aren't doing too bad!

[Terry in Austin]

16. Distribution of wealth in the US

These stats are presented as bad news, but there's a chronic condition behind them. It's pretty interesting to average the figures here, just to get an idea of what a disparity we have:

$56 trillion household net worth
divided by
12 million households
equals

$500,000 per household. I'm not worth a half a million -- are you?

Some struggle to eat so that others can play golf...

[emad]

18. Bush1 screwed up over the US ecomomy with that Gulf war business...

Any wonder that Bush2's screwed it up further over unfinished Iraq business?

[Psephos]

19. Saw the same headline in 2000 after the stock bubble burst

Bubble money on the way up balances out bubble money on the way down.

[LynnTheDem]

20. DAMN that Bill Clinton!!!

It's all his fault, of course!!!

Just like 9/11 is all his fault!!!

This is why we must have a president with an (R) behind its name, to save us from 9/11 attacks and declining worth!!!
















:eyes:

[Doctor_J]

21. "The fundamanetals are sound"

- First-ever MBA Resident