David, you absolutely correct that personal savings are not being properly accounted for.
More Americans are bypassing traditional passbook savings and CDs by slushing their money around between equities and money markets. Once they write that check to their brokerage, that's where it stays until withdrawn to be spent. If it isn't in stocks or mutual funds, it's in that money market account drawing 5-6%, which is better, and more liquid, than most other interest bearing instruments offered by traditional banks.
And that money can be readily re-deployed back into equities or bonds with the flick of a "enter" stroke on their trading accounts, or a phone call to their broker.
Now the bad side of this is that when you have an equity bubble like we have seen with the Nasdaq, those who are left holding the bag in certain stocks have seen their savings effectively wiped out, perhaps for good. But they are still pumping money into those 401K's and IRAs every year, if only to let it sit in that money market.
This is why I watch the dollar index so closely. Because money market accounts are used in FOREX trading, and short-term instruments, any influx in those funds from scared investors seem to distort the value of the dollar to the upside (when a weak economy would suggest a move to the downside for the USD).
Also, note that despite the US markets being up today, the USD is down from recent highs:
quotewatch.com
I believe this represents money flowing out of MM accounts into equities and thus any real rally in the markets will require a decline in the dollar (not a crash though).
Btw... there could be a number of reasons for higher real-estate prices, but one of the most sinister is this "smart-growth" policy that many communities are requiring. This limits new development within established infrastructure, forcing old buildings to be torn down to be replaced with new ones.
Hawk |
