Part of the puzzle as to why retail has not collapsed. Pig Men (especially) and Bullies have their only little private party going, selling stock. Remember, these are not "households", nor is it really "savings", that's the big fallacy. 77% of all stock is held by the top quintile. But this is the top 1% getting all the loot, monetizing stock in a huge ramp in part using borrowed money.Look at the numbers, you've witnessed the biggest financial ramp and loot in history.
from John Mauldin's column this weekend:
"So where," I asked Phillipa, "is all the strength in retail sales coming from?" The short answer is, because we are partying like it's 1999.
Bullish analysts would correctly point out that incomes are rising. Disposable income was up 6% in the third quarter, partly from rising incomes and partly from reduced tax payments. The third quarter was the first time in two years that income growth exceeded spending growth.
But income growth does not come close to explaining how we can see huge drops in Mortgage Equity Withdrawals, yet no apparent effect on sales. So where are we getting the cash? From savings. Phillipa writes:
"Our tax contacts in states prone to heavy exercise of stock options report a big upsurge this year. Individuals have been sellers of stocks forever, but the levels in the Q3 Flow of Funds report are at record highs. The first 3Qs of 2006 average $770B at an annualized rate ; in 2000 it was $630B, and no other year comes even close. It's currently 11% of DPI; previous peak was 9% in 2000.
"(Net financial investments, basically savings less borrowing, has been positive since 1952 when the series started. In the 1950s it was about 5% of DPI rose to its peak of 11% in 1982, went negative in 1999 and now is -9.7% of DPI. This is another way of saying the savings rate is negative, but the levels are stunning to us.)
"In Q3 households sold $166B in treasuries, $139B in corporate bonds, and $757B in stocks, totaling about $1.1 trillion, and net purchases of financial assets was an unusually low $250B. |
