The markets keep on going up and up and up. The Dow is up more than 2,000 points over the last 2 years. The Nasdaq is up more than 600 points in less than a year. With all this newly created wealth, where is the euphoria and spending ?
Companies are going public, getting bought, increasing dividends, but “The Wealth Effect” doesn’t seem to be anywhere to be found. No stories on CNBC with people bragging about the huge increases in their portfolios. No data that says consumer spending has acclerated in tandem with market increases.
Maybe people don’t trust the markets and have experienced giving back gains, causing them to be conservative….nah, this is the USA. We got it, we spend it.
So where is the money ? I’m curious to know.
the housing market is going down hill, gas is going up, and people really are spending too much. it\’s the american way of life!
Comment by matt + angie sloan -
You\’re talking about phantom money, not real money. Check out the Canadian vs. US Dollar chart here: http://finance.google.com/finance?q=CADUSD (use the 10-year timeframe). You\’ll see a similar trend with the Euro.
Much of that US \”wealth\” is being measured in dollars that are decreasing in real-world value.
Comment by James Dueck -
\”Small is beautiful\” strikes back. The money moves from big corporations to smaller and more flexible structures. If you look at the web companies: the technology/bandwith/hosting are much cheaper than a few years ago and the growth of inventories is faster. Look at youtube: they didn\’t had time (and probably didn\’t want) to go to stock exchange
Comment by Philippe -
I think that it is due to the fact this is a broad market rally and not a specific market segment. The pie pieces in this market are a lot smaller than the late 90\’s.
Also bragging about a 12% annual gain in your portfolio is not as exciting as bragging about a stock that you bought at $15 that is now trading at $150.
Comment by marc -
Couple of reasons on the stock market-
First, most people are just getting back to where they were in 2000, if that, given so many funds and individuals were tech heavy.
Second, adjusted for inflation, the markets are still well below the 2000 high. And inflation is under-reported since it doesn\’t count increases in food prices, energy prices, health care costs, etc.
Third, much of the market gain is margin debt, not new money. Margin debt is out ahead of the market gains and recently broke though the old 2000 high.
Fourth, people changed over to housing for their wealth effect, and that is now over – no more housing ATM.
Comment by ER -
I\’ve done well the past few years in international (usually through ETF). the bric countries are growing well: nationalistic policies with large economically growing population. the risks are the local corruption, etc, so I have not gone into some of the lesser opportunities like malaysia, etc. also, with sarbanes-oxley, i think even some of the startup stuff has moved out of the us to avoid the overhead.
i\’ve also done well in real estate funds.
for what it\’s worth….
Comment by mike yonker -
welcome to the world of capitalism
Comment by imran -
I know the answer. Its all in China.
Comment by Vijay -
For most people, their biggest single investment is their home, not the stock market.
But housing prices aren\’t going up. Investors who counted on housing prices going up are being forced to sell – which creates a bigger downward force on housing prices.
Housing is a local market. The places where housing was booming the most, where people were most offensively ebullient in the last upturn, as if they were morally superior to everybody else, are the places where housing has really dropped in value. I suspect the folks in the rest of the country think it\’s karma, and so they\’re less likely to dance in the streets. After all, living well is the best revenge….
And getting a second mortgage, so you have funds to stick in an overheated stock market? No way, Jay. Being stretched too thin is what makes a rubber band snap.
Comment by Paul Ding -
Where\’s the money Mark? You\’ve got it all. LOL! Just kidding.
Honestly, it\’s probably in Sweden or the Cayman Islands. Geneva anyone? Or perhaps, since we no longer deal in gold, it is no where to be found because it doesn not exist.
You heard me. It does not exist. Whatever your bank acount balance says is nice and dandy…..in theory, but because there is no gold to back it up (or something else tangible), it is an electronic entry….period. That is it.
So where is it? It\’s all in your head.
Comment by Erica -
I calculated that in the past year the dollar dropped about 7% against the euro, while the S&P 500 gained about 13%. So this comes out to a net gain of around 5% in real wealth. Whoopee!
Add to that the drop in real estate prices (most people who don\’t own basketball teams have more invested in their home than in the S&P or the Dow), out-of-control federal deficits, the continued threat of terrorism, upcoming expenses dealing with climate change, the memory of recent bubbles popping, and the fact that we have soldiers stuck in 2 distant guerrilla wars, and you can see why most people aren\’t feeling much wealthier.
Comment by WeeklyMG -
have you seen gas prices lately?
Comment by kevin d -
Kev, unless that\’s done in a very limited way you\’re talking about giving away free money… why not just do it directly? In many cases people who buy things they can\’t afford don\’t \”deserve\” to have them.
Comment by richard -
I think a large part of the increase in equity prices is do to the increase in stock buy back programs. There is an artificial restraint on supply. Otherwise, you\’re right Mark, we would be hearing about it.
Comment by Druce -
Hey.. if people are dropping $600 for an iPhone than the economy is better than expected. Foreclosures will occur with the current mortgage industry because the people who are in those homes shouldn\’t have been in them to begin with. Let the homes get foreclosed and let the buyers come in and buy them cheap. It\’s a market economy.
Comment by david amodt -
It has to do with the media. During the dot com boom when the stock market was flying high, the media pounced and reported it as \”Euphoric\” etc. Much of this is because they wanted to solidify Bill Clinton\’s legacy as someone who made the economy strong(This is arguable) and not someone who got BJ\’s by interns in the oval office (which they tried to pass off as normal).
The media today has reported on Bush\’s downfall so much that they are invested in it, to an extent. So, it is almost visceral for them not to report anything good going on during a Bush presidency. Also, notice how Bush\’s tax cut is not mentioned at all as a reason why we have had a long sustained boom and stock market comeback. This is because there would be a detrimental effect to any plan put forth by a democrat proposing tax increases.
Personally, most of my money in stocks is in a 401k and I wont see that for quite a while.
Comment by Josh -
I have been wondering the same thing lately. I know a person who is a serious stock market player and he hasn\’t made a lot of dough lately (he usually brags about it if he does, lol).
Comment by bill -
This country had better think about granting debt relief for its own citizens.
Whether people are being careless with credit, or can\’t keep up with rising costs of living and runnign up bills, this country is drowning in debt. It\’s hardly ever talked about when those want to know why the economy sucks.
Now, with the housing market in tatters in parts of the U.S., things are worse than ever for many.
Debt relief. Really.
Comment by Kev -
Our portfolios have just recently recovered from the dot com bubble and 9/11. It\’s too early to break out the champagne. The S&P and NASDAQ are far from their all time highs!!
Here\’s an unsolicited stock tip for the group, put a big chunk of your portfolio in Charter Communications!!
Comment by Taco -
Mark-
The data you can\’t find is there in the Retail Sales numbers.
http://www.census.gov/svsd/www/advtable.html
It\’s not one to one as a % increase, it never is. But the spending is there. Look at COH, RL, TIF sales. The high end retailers have done very well. I suspect that retail is going to slow soon as CCI seems to fall further and further coupled with GDP taking a big drop. One thing to realize is that this market\’s increases are not off of domestic earnings, they are international. Witness the CAT quarter and multiple others.
Comment by D. Echternach -
Guillerno, that just makes me wish Hillary was president. All these rich people dont care to report financial status on anything. It makes me wish they suddenly became broke!
Comment by Brandon Connell -
Actually, the reason why we don\’t see many stories about this on CNBC, etc. is because we have a Republican president.
If Hillary! were President, we\’d be hearing about the best economy ever, ad nauseum.
Comment by guillermo -
It\’s all a conspiracy! 🙂
Actually it is all on paper. It makes me think maybe the numbers are being inflated. If there are no spending increases and nobody bragging about their portfolio then the money is not really there. It is all an electronically inflated number to \”boost\” the economy perhaps?
Comment by Brandon Connell -