Market Update – August 23, 2012

2012 August 22
by SJ Leeds

Here are some of the stats / ideas that I found interesting today…


1. The Fed promises more pixie dust in the FOMC minutes.  “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.”


2. The CBO says that we have two basic choices: (A) we can eliminate the fiscal cliff (continuing the tax cuts and raising the deficit); or (B) we can go over the fiscal cliff (letting the tax cuts lapse and pushing us into recession, but the deficit will decrease).


3. Under Scenario A, the deficit would fall (just slightly) to $1.037 trillion (6.5% of GDP).  The unemployment rate would be 8%.  The economy would grow 1.7%.


4. Under Scenario B, the deficit would drop from $1.13 trillion to $641 billion.  This would reduce the deficit from 7.3% of GDP to 4%.  This would be the largest one-year reduction since 1969.  The economy would contract 2.9% in the first half of 2013 and by .5% over the entire year.  The unemployment rate would rise to 9.1%.


5. Sales of previously owned homes increased 2.3% in July (from June) and 10% YOY.


6. The market has been rallying on thin volume.  Average monthly volume is 21% lower than last year.  In the six weeks ending Aug. 8, the market has rallied by investors have taken $16.3 billion from stocks and added $32.2 billion to bonds.


7. Global issuance of high-yield bonds was $24.6 billion in July 2012.  This was an 88% increase over June and the highest volume of any July on record.  But, overall issuance for the year ($210.5 billion) is 19% lower than 2011.


8. A study showed that 40% of workers always (or usually) live paycheck-to-paycheck.  This is down from 46% during the start of the crisis (in 2008).  Only 23% of workers never rely on their next paycheck to make ends meet.


9. According to Pew Research, median household income has dropped from $72,956 in 2001 to $69,487 in 2010.  The median household net worth dropped from $129,582 to $93,150 during the same period.


10. The Fed showed median family net worth dropping from $126,400 (2007) to $77,300 in 2010.


11. Pew defines the middle class as households with income that range from 2/3 of the median to double the median.  This is $39K to $118K.  For the first time since WWII, middle class families finished the decade with lower incomes and poorer than they were ten years earlier.


12. In 2011, 51% of the nation fit into the middle class ranged defined by Pew.  In the eary 1970s, this was 61%.  More than half the families that left went to the upper class.  This reinforces the idea that we’re seeing more of a bifurcation of wealth.


13. For the first time in at least 40 years, the total income earned by the middle class (45%) fell behind the share earned by the upper class (46%).   Of course, this shouldn’t be surprising – the middle class is smaller and the upper class is larger.


14. Only 43% of respondents think their children will be richer than they are.  This was 51% in 2008.


15. Almost half of merchandise displayers (floor clerks) and 83% of clothing sales associates indicated have a bachelor degree.


16. Since resuming purchases in fiscal 2010, Best Buy has spent more than $2.9 billion to buy back 98.1 million shares at an average price of $29.94.  Shares now trade around $18.  (They should have bought a warranty with those shares.)


Have a great week.

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