Replies to post #79666 on ajtj99's Market Pulse

[sylvester80]

The issue on inflation is if you only believe some numbers and not others. The fact that housing is up 100% in last few years may not be important to you. Same for property taxes, gas prices and commodity prices. However no matter what you believe about inflation, figures don't lie but liars do figure:

BTW, you have to wonder where all those profits from the recent housing boom went.... new plastic surgery, liposuction and boobs for the wife???? Me thinks that given the pricing pressures that the middle class has been feeling recently, any recession that is coupled by real job losses could easily and swiftly lead to a depression...

http://money.cnn.com/2006/02/23/pf/consumer_fedsurvey/index.htm

Debt, lower wages clip net worth growth
A Federal Reserve survey finds slowest increase in Americans' net worth in over a decade.

By Jeanne Sahadi, CNNMoney.com senior writer
February 27, 2006: 2:39 PM EST

NEW YORK (CNNMoney.com) – Americans' net worth grew between 2001 and 2004, but not nearly as strongly as it did between 1998 and 2001, according to the Federal Reserve's triennial Survey of Consumer Finances released Thursday.

The big reason: while household assets increased, debts – particularly mortgage debt -- rose considerably more.

Net worth: Median net worth rose 1.5 percent, to $93,100. The median is the point at which half of all households have a higher net worth and half have a lower net worth.

By contrast, between 1998 and 2001, the median net worth increased 10.3 percent.

The increase in net worth in the latest survey was due mostly to an increase in home ownership and an increase in housing prices.

Income: A decline in wages also helped account for the slow growth in net worth.

While the median income rose 1.6 percent, to $43,200, after adjusting for inflation, median wages fell 6.2 percent. Wages make up the largest part of family income.

Despite lower interest rates between 2001 and 2004, families spent more of their incomes paying off their debt.

The growth in income was the slowest since the Fed's 1992 survey, when median income actually fell.6.7 percent, to $35,100, between 1989 and 1992.

Savings: The percent of families who said they'd saved in the preceding year fell 3.1 percentage points, to 56.1 percent.

Similar to past surveys, 7 percent of families said their spending usually outpaces their income; 16.1 percent said they spend about what they make; 36.1 percent said they save income left over at the end of the year; and 40.8 percent said they save regularly.

Assets: The percentage of families who owned assets rose 1.2 percentage points to 97.9 percent.

The median value of all assets combined rose 10.3 percent to $172,900.

The survey breaks down assets into two categories: financial assets such as stocks and bonds, and non-financial assets such as homes.

The median value of financial assets fell 22.8 percent to $23,000.

Meanwhile, the median value of non-financial assets rose 22.2 percent to $147,800. (See correction below.)

Debt: The share of families with debt rose 1.3 percentage points to 76.4 percent.

Among families with debt of any kind -- including mortgages, other loans and credit cards -- the median level rose 33.9 percent to $55,300, far greater than the 9.5 percent increase seen between 1998 and 2001.

The median level of mortgage debt increased 27.3 percent to $95,000.

Stock ownership: The percentage of families investing in stocks, directly or indirectly through mutual funds, fell 3.3 percentage points, to 48.6 percent.

It's the first time the Fed has measured a decline in stock ownership, which had been on the rise since 1989, when the Fed began its first consumer finance survey.

The median value of stock-related holdings also fell, by 33.8 percent to $24,300.

[marwick]

Very well said, Ranger.

[ajtj99]

LR, using that reasoning, people will keep substituting their groceries down until their Lean Cousine is replaced by Tender Vittles.

[chainik]

I am mostly interested in gold, and for my investment purposes "inflation" should be defined "as continual decline in the purchasing power of money due to the increase in money supply" with the emphasis on "increase in money supply". As investor/speculator I really don't care about the prices of digital camcoders or PCs or "CPI" (which reminds me bs in "Pravda" 20 years ago). I don't care whether the rise in the prices of oil is "deflationary" or "inflationary" - some prices are likely to rise and some are likely to fall, and these changes are neither inflationary or deflationary, because they are not related to increase in money supply.

If M2 grows at 10%/year, this is a decrease in the purchasing power of money and, therefore, inflation by definition. During the last few years this money went into housing. I agree with you re "inflation" of the housing market. Not only does it pisses me off - it poses big danger for US economy.