Friday, September 18, 2009

Household Net Worth stabilized in Q2/09

The Federal Reserve recently updated its Flow of Funds data, which includes the very interesting stuff summarized in this chart. From my perspective, the most important news in the latest report is that the decline in household net worth, which began in early 2008, was reversed in the second quarter of this year. Thanks, largely, to the rise in the equity market, but also to the stabilization of the real estate market.

It's been a painful recession, with households losing about $10 trillion in wealth, but it's over. Debt ratios are up, but households are now beginning to deleverage. So we have weathered the storm, and the healing process is underway.


krispyhoochie said...

Hi Scott,
I have been doing a lot of reading about long term treasuries. It seems as though a lot of influential investors see this as the next great bubble. ie: jim rogers, Julian Robertson etc.
Howewer, this trade seems to be range bound over the past couple of years.
Bill gross recently said that the chinese are purchasing less long term treasuries as well the u.sgovernment is close to the end of their buying program. Two reasons for long term interest rates to now rise.

What is your view on this situation?
Is it likely rates stay this low for a while longer.
How does one invest or trade for this situation.
I know you have mentioned tbt in the past. Do you feel it is accurately tracking the treasuries..

all advice is appreciated


p.s thanks for the good advice on natural gas

Scott Grannis said...

See my latest post on this subject. TBT has not been doing a good job. The risk of TBT is that over time the negative carry of being short bonds will erode the value of the fund. TBT is only going to fulfill its mission if yields move decisively; if they meander in a flat range, TBT will lose value, as it has. So it is not an ideal vehicle for being short the bond market, but it might be the easiest alternative for most small investors.