Thursday, March 7, 2013

Wealth of U.S. Households is Back to Prior Highs in 2007 ... That's Good News for Home Owners, Stock Investors, Pension Plan Participants, 401(k) Participants, Government Workers and Everybody Else, Too

A newly released report from the Federal Reserve reveals that American household wealth at the end of 2012 was at its highest level since late 2007. Of course, it's increased nicely year-to-date in 2013 as well.

Stock price increases and home prices were the biggest factors in the rebound to 'normalcy.'

That said, to participate in the gains, the direct ownership of stocks or homes isn't required. By the same token, of course, having a good steady job, owning some shares of stock, living in our own home and having a substantial stake in an employer provided retirement plan are certainly nice things to have.

In any event, a wealthy society is what America is, always has been and always will be. And all Americans benefit from being part of that wealthy society. At least that's my view.

For example, an American family of four with an annual income of $22,000 or less is considered to be impoverished. We also say that in America a job paying $7.15 hourly isn't a living wage.

That's because America is rich. If you doubt this, just think about conditions in much of the rest of the world where people are forced to live on a few dollars a day and own nothing that they can call their own.

In other words, from time to time we should all take a few minutes to reflect on how very lucky we are to be part of a country where we're all owners of the American dream, where most families are able to own their own homes, and where almost all of us are favorably impacted by America's increasing wealth by participating in pension plans, 401(k)s or similar investment vehicles. And that goes for self employed, private and public sector employees alike.

The point is simply that increasing wealth in America is good for all Americans, and we must never allow the 'progressives' or class warfare proponents to convince us otherwise. They're flat out wrong about that.

Now for today's good news as contained in U.S. Household Wealth at Highest Level Since Late '07:

"The net worth of U.S. families rose by $1.17 trillion at the end of 2012 to the highest level since late 2007, as rising home values and gains in stock holdings boosted household balance sheets.

U.S. households' net worth—the value of homes, stocks and other investments minus debts and other liabilities—rose 1.8% to $66.07 trillion from October through December, the highest level since the fourth quarter of 2007, according to a Federal Reserve report released Thursday. The recession began in December of 2007 and ended in June 2009.

Households' net worth was up 9% at the end of 2012 compared with the fourth quarter of 2011, the latest sign Americans are repairing their balance sheets in the wake of the financial crisis.

{NOTE: With the rally in the stock market and increasing home prices so far this year, U.S. household wealth has probably increased again in just the first two plus months of 2013 by almost as much as it did in all of 2012.}

The (Fed's quarterly "Flow of Funds") report showed that the value of corporate equities and mutual funds owned by households rose over $150 billion, while the value of real estate owned by households climbed nearly $450 billion. . . .

The Dow is up 9.1% in 2013—suggesting further improvement in household balance sheets.

Americans also have much more equity in their homes. A measure of owners' equity in household real estate as a percentage of household real estate hit 46.6%, the highest since the first quarter of 2008.

The Fed report also showed that household debt grew at an annual rate of 2.4% in the fourth quarter, after contracting in the third quarter. Home mortgage debt shrank at an annual rate of only 0.8%, the lowest since the first quarter of 2009. Consumer credit expanded at an annual rate of 6.6%.

State and local government debt was down 3.7% in the fourth quarter. The federal government's debt jumped at an annual rate of 11.2%."

Summing Up

Here's the bottom line as I see it.

A rising tide may not lift all boats, but a sinking ship will drown us all.

The American tide is rising nicely again, and our ship didn't sink during the storm.

We're on the right track, sequester and all. And our politicians are even showing signs of adulthood and seriousness of purpose.

Now all we need is for the politicians to use some common sense and not screw up things any more than they have already.

If they'll start acting in the best interests of We the People, We the People will take the ball and run with it.

Led by private sector growth, energy independence, a smaller government, greater productivity, renewed global competitiveness and a better and improved educational system, we'll be fine.

And that includes all of us, and particularly our kids and grandkids. Now that's something for all of us to look forward to, isn't it?

And that's the way it should be for Americans. Always looking forward.

Because in America, the small circle always belongs on the left and the big one goes on the right.

(And for those of you who may be unfamiliar with America's proper placement of small and big circles, please see the earlier post of February 22 on Birthdays ............ .)

At least that's the way I see it.

Thanks. Bob.

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