Thursday, November 20, 2014

Do You Believe in Parabola Fairies?

The following chart shows the 1-year moving average of nonfinancial corporate equities divided by household net worth.

Click to enlarge.

When I say parabola fairies, I only mean the benevolent and friendly blue and red parabola fairies, of course. Nobody would willingly wish to believe in the malevolent and malicious purple parabola fairy which died off in the 1970s.

Let's zoom in for a closer look at the health of our red parabola fairy.

Click to enlarge.

It's looking good! Started off a bit choppy but we're right on trend! I predict that it will continue to look good as long as everyone continues to believe in parabola fairies!

October 23, 2014
Revenge of the mom and pop investors

Individual investors have returned to the stock market in a very big way. But they are putting their money into plain vanilla, no frills, passive corners of the investing world.

In today’s column, my very first for Fortune, I’d like to officially welcome you back to the stock market. According to the Federal Reserve’s latest Z.1 release, it’s official—you’re in again. In fact, you’re just about as in as you’ve ever been.

That's true. As seen in my first chart, only the dotcom bubble seems to surpass it.

If this seems ominous, it shouldn’t. The economy itself has become increasingly financialized over the years and American retirement has become much more dependent on investable assets. Viewed through this prism, stock market participation rates for households should be close to historical peaks.

I know this is your very first column, so I just have three questions for you.

1. If mom and pop is already back in "the stock market in a very big way" as you say, then where will the additional parabolic stock market growth come from?

2. If "American retirement has become much more dependent on investable assets" as you say, then would it stand to reason that soon-to-be retirees might need to cash out some of these investable assets in order to live?

3. How about those underfunded pension funds? Will they need to cash out too at some point? I mean, the pension funds will need to pay pensions. Right? Maybe I'm missing something.

No, no, no. I should not have asked these questions! I do not wish to harm the red parabola fairy with my lack of faith! Just because the purple and blue parabola fairies are no longer with us (painful agonizing deaths), it does not mean that the red parabola fairy will someday share the same fate!

Source Data:
St. Louis Fed: Custom Chart


Anonymous said...

Dude, The Fed's got the red parabola fairy back. No worries!

Stagflationary Mark said...


I sure hope you're right! One missed letter and all investors will have is...

Red parabola hairy back!

Nobody wants that. ;)

Stagflationary Mark said...

The Fed's Plan

1. Keep unemployment dropping parabolically to spur growth.

2. Keep stock market rising parabolically based on that growth.

3. When unemployment rate reaches 0%, think up new plan.

What could possibly go wrong?

dearieme said...

The disaster awaiting the pension funds is going to be pretty horrible. Alas, my wife and I depend on the same one for our pensions.

Stagflationary Mark said...


The pensions are dependable!