The Great

Abdication
Danielle
DiMartino
Booth

Where Art Thou, Uncle Sam?

Price Discovery

Obfuscate:
Defined as:
To hide, to render unintelligible
confuse, muddle…
Latin root:
Obfuscatio – “to darken over”

The Great Moderation, Part II?

Wealth Recaptures Record Level
Household Net Worth (LHS)

80
70

Change in Household Net Worth
Q4 ‘02 – Q3 ’07:
$24 Trillion

700

Q1 ‘09 – Q1 ’15:

650

$29 Trillion

600

50
550
40
30

500

20
450
10
Q1-2015

Q3-2013

Q1-2012

Q3-2010

Q1-2009

Q3-2007

Q1-2006

Q3-2004

Q1-2003

Q3-2001

Q1-2000

Q3-1998

Q1-1997

Q3-1995

Q1-1994

Q3-1992

Q1-1991

Q3-1989

Q1-1988

Q3-1986

Q1-1985

Q3-1983

400
Q1-1982

0
Q3-1980

$ tn

60

%

90

Net Worth as % of Disposable Income (RHS)

May-1960
Nov-1962
May-1965
Nov-1967
May-1970
Nov-1972
May-1975
Nov-1977
May-1980
Nov-1982
May-1985
Nov-1987
May-1990
Nov-1992
May-1995
Nov-1997
May-2000
Nov-2002
May-2005
Nov-2007
May-2010
Nov-2012
May-2015

$ (000's)

Income Stagnates

Real Disposable Personal Income per Capita (SAAR, Chn.2009$)

45

40

35

30

25

20

15

10

5

0

Source: Haver Analytics, Bureau of Economic Analysis

Rebuilding Household Debt
Households: Liabilities: Consumer Credit (NSA, Bil.$)

14

Households: Liabilities: Home Mortgages (NSA, Bil.$)
12

8
6
4
2

Source: Haver Analytics, Flow of Funds

Q1-2015

Q3-2013

Q1-2012

Q3-2010

Q1-2009

Q3-2007

Q1-2006

Q3-2004

Q1-2003

Q3-2001

Q1-2000

Q3-1998

Q1-1997

Q3-1995

Q1-1994

Q3-1992

Q1-1991

Q3-1989

Q1-1988

Q3-1986

Q1-1985

Q3-1983

Q1-1982

0
Q3-1980

$ tn

10

Student Loan Debt
%
1.4

$

Proportion with Student Loans
(lhs)
Average Student Loan Balance
(rhs)

Total Student Loan Debt Outstanding
50

1.2

25,000

40

20,000

0.8

30

15,000

0.6

20

10,000

10

5,000

0.4
0.2
2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2015

2014

2013

2012

2011

2010

2009

2008

0
2003

0

0
2007

(Trillion)

1

Let Them Drive Cars!
Single Family Home Sales: US (SAAR, Thous) (LHS)
Vehicle Sales (SAAR, Mil.Units) (RHS)

8,000

20
18

7,000

16
6,000
14
5,000

12

4,000

10
8

3,000

6
2,000
4
1,000

2

Source: Bureau of Economic Analysis/Haver Analytics; HN1US: Census Bureau HX1US: National Association of Realtors

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

0
1975

0

Malinvestment
In Austrian business cycle theory, malinvestments
are badly allocated business investments made due
to the artificially low cost of credit. Central banks
are often blamed for causing malinvestments.
Malinvestment occurs when artificially low interest
rates mislead relative price signals which eventually
necessitates a corrective contraction. A boom
followed by a bust.

Falling Reward for Bond Risk
US 10-Year Term Premium %

2

1.5

1

0.5

0

Source: Federal Reserve Bank of New York

2015

2014

2013

2012

-0.5

U.S. Equity Market Dwarfs GDP
NYSE Market Cap: % of GDP

NYSE + NASDAQ Market Cap: %of GDP

200%

Q2 '00:
174 %

180%

Q2 '15:
149%

160%
140%
120%
100%
80%
60%
40%
20%

Source: Haver Analytics, World Federation of Exchanges, Bureau of Economic Analysis

Q2-2015

Q4-2007

Q2-2000

Q4-1992

Q2-1985

Q4-1977

Q2-1970

Q4-1962

Q2-1955

Q4-1947

0%

S&P 500 Buybacks vs Domestic Equity Mutual
Fund + Domestic Equity ETF Flows
S&P 500 Buybacks (bil. $)
Domestic Equity Mutual Fund + Domestic ETF Flows ($ billions)

600

400
300
200
100
-

Source: Haver Analytics and Citi Research US Equity Strategy

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

(100)
1998

Billions, US$

500

Commercial Real Estate Recovery Outpaces Housing
S&P/Case-Shiller

(Indexed Price 2002=100)

210

CPPI
Recovered:
Housing: 59%
Commercial: 128%

190

170

150

Peak-to-Trough
Housing: -35%
Commercial: -40%

130

110

Source: S&P/Case-Shiller, RCA, Morgan Stanley Research

Apr-15

Oct-14

Apr-14

Oct-13

Apr-13

Oct-12

Apr-12

Oct-11

Apr-11

Oct-10

Apr-10

Oct-09

Apr-09

Oct-08

Apr-08

Oct-07

Apr-07

Oct-06

Apr-06

Oct-05

Apr-05

Oct-04

Apr-04

Oct-03

Apr-03

Oct-02

Apr-02

90

Trump Towers
Single Family Starts/Multi Family Starts: Ratio
1000%
Oct '09:
821%

900%
800%
700%

Feb '06:
573%

600%
500%
400%

Jun '15
140%

300%
200%
100%

Source: Haver Analytics, Census Bureau

Jun-2015

Dec-2013

Jun-2012

Dec-2010

Jun-2009

Dec-2007

Jun-2006

Dec-2004

Jun-2003

Dec-2001

Jun-2000

Dec-1998

Jun-1997

Dec-1995

Jun-1994

Dec-1992

Jun-1991

0%

Investors Throwing in the Towel
First Time Buyers(LHS)
60%

Mar '11:
35%

50%

All Cash Purchases (RHS)
June '15:
22%
June 15:
30%

40%

40%
35%
30%
25%

30%

20%
15%

20%

10%
10%

5%
0%
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15

0%

Source: NAR

Will the Rental Revolution Continue?
Owners

Renters

14

10 Yr Change: Millions

12
10

Q1 '15:
8.6 M

8
6
4
2
0
-2
-4

Source: Haver Analytics, Census Bureau

Q1'15:
-1.2 M

Tuition and Fees + Room and Board
Public Four-Year

$45,000
$40,000
$35,000
$30,000

Private Nonprofit Four-Year

Year

Tuition and
Fees

Tuition and Fees +
Room and Board

2000

$15,518

$21,475

2015

$31,231

$42,419

$25,000
$20,000
$15,000
$10,000
$5,000

Source: CollegeBoard

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

$0

Not Saving One Thin Dime
50%
48%
46%
44%
42%
40%
38%
36%
1992

1995

1998

2001

2004

Source: FRB Survey of Consumer Finances, DB Global Markets Research

2007

2010

2013

Retirement Anyone?
Median Housing Debt for Families With Heads Age 65-74
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000

Source: Employee Benefit Research Institute, Survey of Consumer Finances

2013

2010

2007

2004

2001

1998

1995

1992

$-

The Great
Abdication
Danielle
DiMartino
Booth

Source: Haver Analytics, Census Bureau

Mar-2015

Sep-2012

Mar-2010

Sep-2007

Mar-2005

Sep-2002

Mar-2000

Sep-1997

3.0
3.0

2.5
2.5

2.0
2.0

1.5
1.5

1.0

0.5
1.0

0.0
0.5

-0.5
0.0

Units (Millions)

Net Household Formation (Thous)

Mar-1995

Sep-1992

Mar-1990

Sep-1987

Mar-1985

Sep-1982

Mar-1980

Sep-1977

Mar-1975

Sep-1972

Mar-1970

Sep-1967

Mar-1965

Units: Millions: 12 Mo. Rolling Sum

Hitting the Basement
Total Housing Starts: Units (RHS)

Cash at Fifteen-Year Low
Non-Financial Corporate Cash/Non-Financial Bonds Outstanding
45%

40%

Q1 ‘15
34.6%

35%

30%

25%

Note: Cash defined as checkable deposits, money market funds, and Time and
savings deposits

Q1-2015

Q1-2014

Q1-2013

Q1-2012

Q1-2011

Q1-2010

Q1-2009

Q1-2008

Q1-2007

Q1-2006

Q1-2005

Q1-2004

Q1-2003

Q1-2002

Q1-2001

Q1-2000

Q1-1999

Q1-1998

Q1-1997

Q1-1996

20%

Buy High, Sell Low! (On Margin)
Margin Debt/GDP
%
Q1: '00:
2.8%

3.0

Q2: ‘15:
2.9%

Q2: '07:
2.6%

2.5

2.0

1.5

1.0

0.5

Source: Haver Analytics, Bloomberg

Q2-2015

Q2-2013

Q2-2011

Q2-2009

Q2-2007

Q2-2005

Q2-2003

Q2-2001

Q2-1999

Q2-1997

Q2-1995

Q2-1993

Q2-1991

Q2-1989

Q2-1987

Q2-1985

Q2-1983

Q2-1981

0.0

Landlords Raise the Roof
CES: 25-34 Years of Age: Rented Dwellings Expenditures ($)
7000

CES: 25-34 Years of Age: Owned Dwellings Expenditures ($)
2013:
$5881

6000

2013:
$4560

4000
3000
2000
1000
0

1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

$/Yr

5000

Source: Bank of America Merrill Lynch

Fishing for the Truth

Source: Haver Analytics

Mar-15

Mar-14

Mar-13

Mar-12

Mar-11

Mar-10

Mar-09

Mar-08

Mar-07

Mar-06

Mar-05

Mar-04

Mar-03

Mar-02

Mar-01

Mar-00

Mar-99

Mar-98

Mar-97

Mar-96

Mar-95

Mar-94

Mar-93

Mar-92

Mar-91

Melrose Displaced
Rental Vacancy Rate: United States (%)

12

11

10

9

8

7

6

Buy Low, Fly High
100%
90%
80%
Highest Income
Quintile

70%
60%

4th Income
Quintile

50%
40%

3rd Income
Quintile

30%

2nd Income
Quintile

20%
10%

Lowest Income
Quintile

0%
'85

'92

'99

'06

'13

Corporate Headquarter Relocations to Texas
2010-Present

Energy:
Outsized Role in non-Residential Structures

Source: Bank of America, Merrill Lynch Global Research, Bureau of Economic Analysis

Inflation Persists Even as Energy Plummets
CRB Commodities Index

Annual Services Inflation
3.00%

3500
3400
3300
3200
3100
3000
2900
2800
2700
2600
2500

2.50%
2.00%
1.50%
1.00%
0.50%

Source: Haver Analytics

Dec-2014

Nov-2014

Oct-2014

Sep-2014

Aug-2014

Jul-2014

Jun-2014

May-2014

Apr-2014

Mar-2014

Feb-2014

Jan-2014

Dec-2013

0.00%

Location, Location, Location…
2014 Average

40

January 2015

35
30
25
20
15
10
5
0
-5

Richmond

Philly

NY

Kansas

Texas

Is Real Estate Next?
3,400

CRE Debt ($Bn)

100

Brent Crude ($/bbl, right)

90
2,900

80
70

2,400

60
1,900

50
40

1,400

30
20

900

10
400
Jan-84

0
Sep-86

Jun-89

Mar-92

Dec-94

Sep-97

Jun-00

Mar-03

Nov-05

CRE Prices Synchronous With Debt Financing
CRE Debt ($Bn)
NCREIF Price Index (right)

4,000

450

3,500

400

3,000

350

2,500
300
2,000
250
1,500
200

1,000

150

500
0
Jan-84

100
Jun-89

Dec-94

Jun-00

Nov-05

May-11

…And Then Oil Diverged Sharply
3,600

CRE Debt ($Bn)

120

Brent Crude ($/bbl, right)

110

3,400

100
3,200

90

3,000

80
70

2,800

60
2,600
2,400
Jan-11

50
40
Jul-11

Feb-12

Aug-12

Mar-13

Sep-13

Apr-14

Nov-14

Fastest Wage Growth Has Been in Oil Patch
15.3%
-0.02%

3.8%

2.9%

-3.0%

0.80%

US Wage Growth 2009-2014 -0.80%

3.4%

9.4%

2.5%

3.9%

Oil Futures Open Interest
3,250,000

2,250,000

1,250,000

Source: Bloomberg

03/01/20
15

03/01/20
10

03/01/20
05

03/01/20
00

03/01/19
95

250,000

S&P Earnings Estimate
S&P Annualized Quarterly Profit Estimate
$126
$137

Full Year Estimate for 2015
$140

$138
$136

$124

$135
$122

$131
$130

$120
$118

$125

$125
$123

$116

$122

$121
$121

$120

$114

$120
$119

$119
$117

$116

$115

$112
$110

$110
Q1 '13

Q2 '13

Q3 '13

Q4 '13

Q1 '14

Q2 '14

Q3 '14

Q4 '14

Q1 '15

Exposure to Office Properties with Oil
and Gas Tenants
2%
4%
3%
5%

4%
Texas
Colorado
California

61%
21%

Oklahoma
Pennsylvania
Louisiana
Other

Source: Morgan Stanley

Exposure to Eagle Ford & Permian Basin
5%
9%
Midland, TX

43%

16%

Williston, ND
Odessa, TX
Dickinson, ND
Laredo TX

27%

Source: Morgan Stanley

Dallas

Companies with $1B+ Market Cap

Companies $250M- $1B Market Cap

30%
52%

48%
70%

Houston

15%
52%
85%

48%

Private Fixed Assets
120

Net Stock: Private Fixed Assets: Quantity Index (2009=100)
Y/O/Y Growth (RHS)

%
5

4

100

3
80
2
60
1
40
0
20

-1

-2
1926
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013

0

Source: Haver Analytics

Average Daily Demand for Paper Oil
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
Jan 14 Jun 14

2013 Jun 14

2012 Jun 14

Source: CFTC; Bloomberg; Paradarch Advisors, LLC

2011 Jun 14

2010 Jun 14

2009Jun 14

QE1 Jun 14

Percentage of Families With Debt
Age 65-75

70%

Age 75+

60%
50%
40%
30%
20%
10%
0%
1992

1995

1998

2001

2004

Source: Employee Benefit Research Institute, Survey of Consumer Finances

2007

2010

2013

Sell Low, Buy High?
S&P 500 Announced Stock Buybacks Cumulative Total in Billions (LHS)
S&P Index (RHS)
2000

2500

2000
1500
QE3 Worries

Debt Ceiling

1500

1000
1000
Fiscal Cliff

500

500

0
01/01/2009
Source: Bloomberg

02/01/2010

03/01/2011

04/01/2012

04/01/2013

05/01/2014

0
06/01/2015

Consumer Credit (includes: auto loan, credit card,
student loan)
Home Mortgages
14

12

8

6

4

2

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

0
1999

(trillions)

10

Sub Prime Auto ABS Outstanding
40
35
30
25
20
15
10
5
0
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Corporate Relocations into Texas 2004-Present

Corporate Relocations out of Texas 2004-Present

Owners of less expensive homes are three times more likely to be
underwater than owners of expensive homes. In NY the ratio is five.
Bottom tier

Middle tier

Top tier

60
50
40
30
20
10
0
US

Atlanta

Chicago

Detroit

Los Angeles New York

Source: Zillow data as of 2014Q3, DB Global Markets Research

San
Washington
Francisco

Mortgage Origination
% GSE/FHA

60%

50%

40%

30%

20%
2000

2002

2004

2006

2008

2010

2012

2014

Sources: BofA Merrill Lynch Global Research, Fannie Mae, Freddie Mac, Gannie Mae, Intex, Fed

Mortgage Origination
% GSE/FHA (Sec)

100%

90%

80%

70%

60%

50%
2000

2002

2004

2006

2008

2010

2012

Sources: BofA Merrill Lynch Global Research, Fannie Mae, Freddie Mac, Gannie Mae, Intex, Fed

2014

US Syndicated Loan Volume
Leveraged

1200

I-Grade

Other

1000

600
400
200

Source: Loan Connector

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

0
2000

(in billions)

800

Shale Production States

National Aggregate ex Shale

5
4

Real GDP Growth

3
2
1
0
-1
-2
-3
-4
2006

2007

2008

Source: Bureau of Economic Analysis

2009

2010

2011

2012

2013

Shale Production States

National Aggregate ex Shale

Unemployment Rate, Change since Jan 2006

6
5
4
3
2
1
0
-1
2006

2007

2008

Source: Bureau of Labor Statistics

2009

2010

2011

2012

2013

2014

Shale Production States

National Aggregate ex Shale

11

10

Unemployment Rate

9

8

7

6

5

4
2006

2007

2008

Source: Bureau of Labor Statistics

2009

2010

2011

2012

2013

2014

Shale Production States

National Aggregate ex Shale

Electricity Generation, Annual Pct Change

6

4

2

0

-2

-4

-6
2006

2007

Source: Department of Energy

2008

2009

2010

2011

2012

Shale Production States

National Aggregate ex Shale and ex CA, AZ, FL, NV

8

Home Prices, Annual Pct Change

6
4
2
0
-2
-4
-6
-8
2006

2007

Source: Zillow Home Prices

2008

2009

2010

2011

2012

2013

2014

Shale Production States

National Aggregate ex Shale

Nonfarm Payrolls, Change since Jan 2006, mn

4

2

0

-2

-4

-6

-8
2006

2007

2008

Source: Bureau of Labor Statistics

2009

2010

2011

2012

2013

Shale Production States

Nonfarm Payrolls, Annual Pct Change

3

National Aggregate ex Shale

2
1
0
-1
-2
-3
-4
-5
2007

2008

Source: Bureau of Labor Statistics

2009

2010

2011

2012

2013

2014

Shale Production States

National Aggregate ex Shale

Hourly Wages, Inflation-adjusted, % Change

5

4

3

2

1

0

-1

-2
2007

2008

2009

Source: Bureau of Labor Statistics

2010

2011

2012

2013

2014

Forever Young
(length of post-WW2 expansions, months)

Source: National Bureau of Economic Research, Bureau of Economic Analysis

Renting in Multifamily Structures
70%
69%
68%
67%
66%
65%
64%
63%
62%
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Source: Census Bureau

26%

24%

1947-present
historic average
22%

20%

18%

16%

14%
1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1988 1992 1996 2000 2004 2008 2012
Source: National Bureau of Economic Research

PPI: Lumber (nsa)

240

PPI: Lumber (sa)

220
200
180
160
140

Source: Bureau of Labor Statistics

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

120

Tuition and Fees
$35,000

Private Nonprofit Four-Year

Public Four-Year

$30,000

Year

Tuition and
Fees

Tuition and Fees +
Room and Board

$25,000

2000

$15,518

$21,475

2015

$31,231

$42.419

$20,000
$15,000
$10,000
$5,000

1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015

$0

Source: CollegeBoard

Tuition and Fees
One-Year % Change (private-four year)
One-Year % Change (public four-year)

16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%

Source: CollegeBoard

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

0.0%

Tuition and Fees + Room and Board
One-Year % Change (private-four year)
One-Year % Change (public four-year)

10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%

Source: CollegeBoard

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

0.0%

Yields Down, Interest Expense Up?
Net Interest Paid as % GDP
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

Baa Bond Yield

12

Apr-05
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14

One Man’s Junk?
First Time Issuers: LTM Average Coupon (LHS)

First Time Issuers: LTM Average Rating (RHS)
16.0

11
15.5

10
15.0

9
14.5

8
14.0

7
13.5

6
13.0

The Incredible Shrinking Float
Avg. S&P 500
Market cap since
2005:

$11.9 trillion
S&P Buybacks
since Q4 2005:

$3.7 trillion

S&P 500 Buyback Boost
Buybacks:
$2.20
Organic: $1.50

$94.60

$98.30

Q3 2011

Q1 2013

Hitting the Basement
Annual Household Formation Δ:
(000's)

2000

Total Number of Households (Thous)

1800
1600
1400
1200
1000
800
600
400
200
0

Source: Bank of America Merrill Lynch

792

Source: Haver Analytics

2015-Q5

2013-Q3

2012-Q1

2010-Q3

2009-Q1

2007-Q3

2006-Q1

2004-Q3

2003-Q1

2001-Q3

2000-Q1

Fed Funds Target (RHS)

16

14

12
8

10

6

8
4

6

4
2

2
0

Fed Funds Target: %

Real GDP (LHS)

1998-Q3

1997-Q1

1995-Q3

1994-Q1

1992-Q3

18

1991-Q1

1989-Q3

1988-Q1

1986-Q3

1985-Q1

1983-Q3

GDP (tn)

$4.5 Trillion and Counting
12

10

Malinvestment
In 1940, Ludwig von Mises wrote, "The popularity of inflation
and credit expansion, the ultimate source of the repeated
attempts to render people prosperous by credit expansion, and
thus the cause of the cyclical fluctuations of business, manifests
itself clearly in the customary terminology. The boom is called
good business, prosperity, and upswing. Its unavoidable
aftermath, the readjustment of conditions to the real data of the
market, is called crisis, slump, bad business, depression.
People rebel against the insight that the disturbing element is to
be seen in the malinvestment and the overconsumption of the
boom period and that such an artificially induced boom is
doomed. They are looking for the philosophers' stone to make it
last."

Confidence in Eye of Holder
S&P 500 Index (LHS)
Consumer Confidence: Household Income <15K (RHS)
Consumer Confidence: Household Income 50K+ (RHS)

2500

160
140
120
100

1500

80
1000

60
40

500
20
0

0
'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

Consumer Confidence Index

S&P 500 Index

2000

A Zero Sum Game?
Fed Funds Target

%
5.0

4.0

3.0

2.0

1.0

0.0
Jun-07

Jun-08

Source: Haver Analytics

Jun-09

Jun-10

Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

The Disappearing American Dream
Median income

Median net worth
660

Mean income

100

560
$ (000's): Chained 2013

90
$ (000's): Chained 2013

Mean net worth

80
90%
income
gap

70
60

60% income
gap

50

460
360

660%
wealth
gap

400%
wealth
gap

260
160

40
60

30
'89

'92

'95

'98

'01

'04

'07

'10

'13

'89

'92

'95

'98

'01

'04

'07

'10

'13

Is Risk Being Rewarded?
5 Yr Cumulative Default Rate

%
80
70
60
50

75%

40
30

48%

20
10
0

25%
11%
BB
Source: Alliance Bernstein, Barclays

B

CCC

CC to C

Let Them Drive (Used) Cars!
Year-on-year, % change

Used Motor Vehicles

40

30

20

10

0

-10

-20

-30
Nov-94

Nov-98

Nov-02

Nov-06

Nov-10

Nov-14

U.S. Nonfinancial Debt Scales Fresh Heights
%

US: Nonfinancial Corporations Debt Outstanding as a % of SAAR GDP (%)

50
Q1 '15:
43.6%

45
40
35
30
25

Sep-52
Mar-55
Sep-57
Mar-60
Sep-62
Mar-65
Sep-67
Mar-70
Sep-72
Mar-75
Sep-77
Mar-80
Sep-82
Mar-85
Sep-87
Mar-90
Sep-92
Mar-95
Sep-97
Mar-00
Sep-02
Mar-05
Sep-07
Mar-10
Sep-12
Mar-15

20

Source: Haver Analytics, Federal Reserve Board

U.S. Nonfinancial Debt Scales Fresh Heights
%

US: Nonfinancial Corporations Debt Outstanding as a % of SAAR GDP (%)

50
Q1 '15:
43.6%

45
40
35
30
25

Sep-52
Mar-55
Sep-57
Mar-60
Sep-62
Mar-65
Sep-67
Mar-70
Sep-72
Mar-75
Sep-77
Mar-80
Sep-82
Mar-85
Sep-87
Mar-90
Sep-92
Mar-95
Sep-97
Mar-00
Sep-02
Mar-05
Sep-07
Mar-10
Sep-12
Mar-15

20

Source: Haver Analytics, Federal Reserve Board

Fixed Income Yields Relative to Pension Needs
Junk Reative to Pension Need

Investment-Grade Relative to Pension Need

Fed Fund Target Relative to Pension Need

15

10

5

0

-5

-10
'00

'02

'04

Source: IBM, Bloomberg, ML, CS

'06

'08

'10

'12

'14

Insult Meets Injury
%

%

Proportion of Homes with Negative Equity

35

35

30

30

30

Majority of Homes with
Negative Equity are in
the Bottom Tier

25
25
20

18

20
15
11

15

10
5

10

0

5

Zillow: Percent of
Zillow: Percent of
Zillow: Percent of
Homes with Negative Homes with Negative Homes with Negative
Equity - Bottom Tier Equity - Middle Tier
Equity - Top Tier

0
'10

'11

'12

'13

'14

Source: Standard and Poors

Dec-14

Mar-14

Jun-13

Sep-12

Dec-11

Mar-11

Jun-10

Sep-09

Dec-08

Mar-08

Jun-07

2100
250

1600
200

1100
150

600
100

100
50

-400
0

$ bn

SPX (LHS)

Sep-06

Dec-05

Mar-05

Jun-04

Sep-03

Dec-02

Mar-02

Jun-01

Sep-00

Dec-99

Mar-99

Jun-98

Index

Stocks & Buybacks: A Happy Couple
Share Buybacks + Div (RHS)

Inflation
The Cost of Education
Then…(1982)

Now… (2015)

• Textbook: Principles of
Economics by Greg
Mankiw
• Textbook price: $20.00
• Minimum Wage: $3.35
• Number of hours
worked to afford the
book: 6 hours

• Textbook: Principles of
Economics by Greg
Mankiw
• Textbook price: $250.00
• Minimum Wage: $7.14
• Number of hours worked
to afford the book: 35
hours

Income by Decile
900

$ (000's)

800
700

90-100th%

600

80-89th%
60-79th%

500

40-59th%
400

20-39th%
300

<20th%
200
100
0
'89

'92

'95

'98

'01

'04

'07

'10

'13