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Flow Of Funds Report
Each fiscal quarter the Federal Reserve releases a report with the title “Flow of Funds Accounts of the United States”. On the 1st page of the current report we find the following:
Household net worth—the difference between
the value of assets and liabilities—was an estimated
$51.5 trillion at the end of the fourth quarter of 2008,
$5.1 trillion dollars less than in the preceding quarter.
For 2008 as a whole, household net worth fell $11.2 trillion.
This tells us that 1)generally, household net worth dropped by about 20% in 2008 and 2) half of THAT was lost in just the last three months of 2008. In a memo sent to clients, JPMorgan estimates consumers have lost another $2.5 Trillion dollars since the new year began.
Thanks to John Jansen at Across The Curve:
Here is an interesting excerpt from a note JPMorgan economists sent to clients on the Federal Reserve Flow of Funds data for Q4. It describes in gory detail the loss of wealth in the household sector.
‘The showstopper in today’s report was the larger-than-expected $5.1 trillion decline in household net worth. The 9% decline in wealth was easily the largest on record and pushes the much-watched wealth-to-income ratio for the household sector down to 4.83, the lowest since 95Q1. Since peaking in the second quarter of 2007, household wealth is down almost $13 trillion. Given where the S&P500 is now (around 740) and recent house price data, we estimate consumers have lost about another $2.5 trillion in the first quarter of the year. Household liabilities were down 2.1% on the quarter, reflecting declines in both mortgage credit and consumer credit. Homeowners’ equity in real estate as a percent of real estate values slipped to 43%, three years ago this number stood at 58.5%.’
Enjoy the rally while it lasts folks. The bottom is not in yet.
I am Jon, sliding down the slippery slope with you, and you, and you and you…