Capital Market Update; Investment & Finance Thread (Sept. 14 edition)

Weekly investment & finance thread ^ | Sept. 14, 2014 | Freeper Investors

[abb]

http://online.wsj.com/articles/u-s-household-wealth-hits-fresh-record-1411056031?mod=WSJ_hp_LEFTWhatsNewsCollection

U.S. Household Wealth Hits Fresh Record
Consumer Borrowing Climbs at Fastest Pace Since the First Quarter of 2008
By Neil Shah - Sept. 18, 2014 12:00 p.m. ET

Americans’ wealth hit the highest level ever in the second quarter amid a rise in stock and home prices, prompting consumers to ramp up their borrowing—a development that could boost the economic recovery.

The net worth of U.S. households and nonprofit organizations—the value of homes, stocks and other assets minus debts and other liabilities—rose 1.7%, or about $1.4 trillion, between April and June to $81.5 trillion, the highest on record, according to a report by the Federal Reserve released Thursday.

The figures aren’t adjusted for inflation or population growth. Much of the nation’s rising wealth also goes disproportionately to the wealthy, who tend to own stocks and save their money, reducing the benefits to the overall economy.

[Lurkina.n.Learnin]

“The net worth of U.S. households and nonprofit organizations”

Be interesting to see that breakdown.

[expat_panama]

--and a very good Friday morning to everyone as stocks'n'metals continue their divergent directions.  In fact, while metals settle into levels from four years ago, the S&P punched a record high so IBD changed the outlook back to 'confirmed uptrend'.  Only reports today are Natural Gas Inventories and Leading Indicators.  Some headlines:

• Markets Show Relief on Scottish 'No' Vote New York Times - 9 hours ago LONDON - As Scotland rejected independence, the pound initially gained strength and stocks rose in Britain and in Europe, reflecting relief that the United Kingdom would not face a tumultuous breakup and a prolonged period of uncertainty.
• "The Retiree Next Door": How successful retirees stretch their savings "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and Yahoo Finance
• China Opens Gold Market to Foreigners Amid Price Ambition China will give foreign investors direct access to its gold market for the first time today as the biggest-consuming nation seeks to exert more influence over prices while boosting the yuan’s global use. The Shanghai Gold Exchange will start trading contracts in the city’s free-trade zone that will… Bloomberg
• Developed World Slouches Toward Japanification - Jeff Snider, RCM
• Fighting Global Warming Could Be Cheap - Paul Krugman, NY Times

[expat_panama]

The net worth of U.S. households and nonprofit organizations—

Thanks sooo much for the heads up-- didn't realize it was that time again (the "Flow of Funds Report" only comes out every 3 months.  Here

interesting to see that breakdown

That's the best part, Table 100 on page 117 (page 131 of the pdf).

At first glance I'm seeing that since 2009 private debt has gone down while people's stocks'n'mutual funds have almost doubled.  Real estate's only gone up about 20% --that's a 4% annual rate compared to stocks at 15%.

[expat_panama]

The figures aren’t adjusted for inflation or population growth.

Yeah, that's what I wanted to check too...

OK, pretty much as expected. Including inflation + pop. growth shows we were better off before the 110th congress took over.

[abb]

http://online.wsj.com/articles/three-mistakes-investors-keep-making-again-and-again-1410533307

Three Mistakes Investors Keep Making Again and Again

Spend less than you earn. Put the difference in a low-cost broad-based index fund. Leave it alone and let it grow over time.

Incorrectly predicting your future emotions.

Too many investors are confident they will be greedy when others are fearful. None assume they will be the fearful ones, even though somebody has to be, by definition.

Failing to realize how common volatility is.

You needn’t have been a genius to have done well in stocks over the past decade. You just had to not have panicked in 2008, when everyone around you was going crazy.

Trying to forecast what stocks will do next.

You have no control over what the market will do next. You have complete control over how you react to whatever it does.

[Lurkina.n.Learnin]

So are you gaga for Alibaba?

[expat_panama]

Chinese internet companies have done very well by me (CTRP, BIDU, for a while PWRD), but only after they’ve been listed long enough to show stable growth.

IPO’s may get lots of headlines, but they’re sure hard to predict. mho

[Lurkina.n.Learnin]

“IPO’s may get lots of headlines, but they’re sure hard to predict. mho”

Especially one as over hyped as this. That’s all they’ve been talking about all week.

[abb]

http://www.businessinsider.com/silver-gets-crushed-september-19-2014-9

Silver Is Getting Crushed

[1010RD]

Ping me when you do. Have you heard any discussion on the student debt drag on housing?

[Lurkina.n.Learnin]

Strong dollar, weak dollar. What do you guys think? Do the pros outweigh the cons? I am for a strong dollar myself.

The Return of King Dollar
http://www.freerepublic.com/focus/f-news/3206325/posts

[Wyatt's Torch]

I will. Some discussion on the subject. The Zelman lead analyst (the guys is extremely well researched) showed a slide that of 25-29 year olds living at home, more of them (23%) were WITHOUT student debt than those who had student debt (17%). 30-34 year olds with was 14% and without was 13% so no difference. for all of 25-34 year olds living at home 16% had student debt while 18% did not have student debt. Conclusion - no correlation to household formation.

[1010RD]

http://www.freerepublic.com/focus/f-news/3207135/posts

Have you seen the above? What else did the Zelman analyst say? I’m on pins and needles. ;-]

[1010RD]

There’s also going to be some legislative issues affecting RE:

GSE Reform – Fannie Mae / Freddie Mac were place in conservatorship as a result of single family subprime lending. During this time multifamily delinquencies were less than 1% but many in congress don’t understand that multifamily lending contributed little to the problems that caused the recession. Guidelines for taking Fannie and Freddie out of conservatorship without punishing multifamily are crucial.

Repeal of 1031 Tax Deferred Exchanges – Current proposals would eliminate IRS Section 1031 from the tax code and a majority of the citizens in our country simply view this tax code as a benefit to the wealthy without understanding the positive implications for our entire economy. NMHC is working to educate lawmakers on the value of redeploying capital and the number of jobs that would be affected.

Streamlining Government Financing – HUD and LIHTC financing is instrumental to the creation of additional rental units in our industry but the process is expensive and lengthy. Meeting with the new Secretary of HUD, Julian Castro, we received commitment to reduce the amount of time it will take to complete these processes.

Carried Interest – Carried Interest is currently taxed as capital gains and has been a fundamental part of real estate investment partnerships for decades. Some political forces would like to tax carried interest at ordinary income rates which could discourage real estate investment given that 41 percent of all investment partnerships are real estate related.

I suspect inertia. It’s just easier that way.