The Great

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
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
$-
The Great
Abdication
Danielle
DiMartino
Booth
Mar-2015
Sep-2012
Mar-2010
Sep-2007
Mar-2005
Sep-2002
Mar-2000
Sep-1997
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
0.5
1.0
0.0
0.5
-0.5
0.0
Units (Millions)
Net Household Formation (Thous)
Mar-1995
Sep-1992
Mar-1990
Sep-1987
Mar-1985
Sep-1982
Mar-1980
Sep-1977
Mar-1975
Sep-1972
Mar-1970
Sep-1967
Mar-1965
Units: Millions: 12 Mo. Rolling Sum
Hitting the Basement
Total Housing Starts: Units (RHS)
Cash at Fifteen-Year Low
Non-Financial Corporate Cash/Non-Financial Bonds Outstanding
45%
40%
Q1 ‘15
34.6%
35%
30%
25%
Note: Cash defined as checkable deposits, money market funds, and Time and
savings deposits
Q1-2015
Q1-2014
Q1-2013
Q1-2012
Q1-2011
Q1-2010
Q1-2009
Q1-2008
Q1-2007
Q1-2006
Q1-2005
Q1-2004
Q1-2003
Q1-2002
Q1-2001
Q1-2000
Q1-1999
Q1-1998
Q1-1997
Q1-1996
20%
Buy High, Sell Low! (On Margin)
Margin Debt/GDP
%
Q1: '00:
2.8%
3.0
Q2: ‘15:
2.9%
Q2: '07:
2.6%
2.5
2.0
1.5
1.0
0.5
Source: Haver Analytics, Bloomberg
Q2-2015
Q2-2013
Q2-2011
Q2-2009
Q2-2007
Q2-2005
Q2-2003
Q2-2001
Q2-1999
Q2-1997
Q2-1995
Q2-1993
Q2-1991
Q2-1989
Q2-1987
Q2-1985
Q2-1983
Q2-1981
0.0
Landlords Raise the Roof
CES: 25-34 Years of Age: Rented Dwellings Expenditures ($)
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
$/Yr
5000
Source: Bank of America Merrill Lynch
Fishing for the Truth
Source: Haver Analytics
Mar-15
Mar-14
Mar-13
Mar-12
Mar-11
Mar-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Mar-04
Mar-03
Mar-02
Mar-01
Mar-00
Mar-99
Mar-98
Mar-97
Mar-96
Mar-95
Mar-94
Mar-93
Mar-92
Mar-91
Melrose Displaced
Rental Vacancy Rate: United States (%)
12
11
10
9
8
7
6
Buy Low, Fly High
100%
90%
80%
Highest Income
Quintile
70%
60%
4th Income
Quintile
50%
40%
3rd Income
Quintile
30%
2nd Income
Quintile
20%
10%
Lowest Income
Quintile
0%
'85
'92
'99
'06
'13
Corporate Headquarter Relocations to Texas
2010-Present
Energy:
Outsized Role in non-Residential Structures
Source: Bank of America, Merrill Lynch Global Research, Bureau of Economic Analysis
Inflation Persists Even as Energy Plummets
CRB Commodities Index
Annual Services Inflation
3.00%
3500
3400
3300
3200
3100
3000
2900
2800
2700
2600
2500
2.50%
2.00%
1.50%
1.00%
0.50%
Dec-2014
Nov-2014
Oct-2014
Sep-2014
Aug-2014
Jul-2014
Jun-2014
May-2014
Apr-2014
Mar-2014
Feb-2014
Jan-2014
Dec-2013
0.00%
Location, Location, Location…
2014 Average
40
January 2015
35
30
25
20
15
10
5
0
-5
Richmond
Philly
NY
Kansas
Texas
Is Real Estate Next?
3,400
CRE Debt ($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
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
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
11
10
Unemployment Rate
9
8
7
6
5
4
2006
2007
2008
2009
2010
2011
2012
2013
2014
Electricity Generation, Annual Pct Change
6
4
2
0
-2
-4
-6
2006
2007
Source: Department of Energy
2008
2009
2010
2011
2012
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
Nonfarm Payrolls, Change since Jan 2006, mn
4
2
0
-2
-4
-6
-8
2006
2007
2008
2009
2010
2011
2012
2013
Nonfarm Payrolls, Annual Pct Change
3
2
1
0
-1
-2
-3
-4
-5
2007
2008
2009
2010
2011
2012
2013
2014
Hourly Wages, Inflation-adjusted, % Change
5
4
3
2
1
0
-1
-2
2007
2008
2009
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
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
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%
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%
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
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
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

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