Tuesday, June 19, 2012

Real Household Net Worth per Capita

I was sent the following link through a private email today.

June 19, 2012
Net Worth Implosion: It's Not Just Housing

A CNNMoney analysis of new Census Bureau data shows that if you strip out the effects of the housing collapse, median household net worth still fell by 25% between 2005 and 2010. The decline was driven largely by the plummeting stock market, which devastated Americans' portfolios and retirement accounts.

Overall, median household net worth declined 35% to $66,740 in 2010.

Now check out the following chart.

Click to enlarge.

Note that the average real net worth per capita (as seen in the chart as the blue line) is roughly 3x more than the median real net worth per capita (as seen in the article). Apparently the wealth does not trickle down all that much. Who knew?

May 29, 2012
6 Simple Reasons Why You Shouldn't Buy a Home

For most Americans, a home becomes the largest investment in their portfolio. Ridiculously large. After all, how many people with a $100,000 home also own $900,000 worth of stocks (meaning the home is a reasonable 10% of their entire portfolio)?

Not many.

As seen in the chart above, the "average" person has almost exactly 10% of their net worth in their home. That said, I would agree that most don't. The "average" person isn't at all typical. We don't all have a little bit of billionaire within us screaming to get out.

If you can convince yourself to get over this mental hurdle and instead rent a home, then invest extra money in the market's best stocks. You'll be wealthier, freer, and happier in 30 years.

That strategy definitely worked great in the last century. For a variety of reasons, I have a serious concern that it won't extrapolate forward well though. That's why I would recommend the following to boost your chances.

1. Invent a time machine.
2. Travel 30 years into the future.
3. Write down the best performing stocks over the past 30 years.
4. Travel back in time to the present.
5. Invest in the market's best stocks!

And as a side note, I do not expect to be "freer" in 30 years. I don't know what to do about that. Are there any companies offering Patriot Act insurance?

Source Data:
St. Louis Fed: Custom Chart


dd said...

So the answer to our problems is Claude Van Damme's Time Cop?

Stagflationary Mark said...


Here goes the pension.

mab said...

And as a side note, I do not expect to be "freer" in 30 years.

The majority have been pwned for the past thirty years. It looks as though they be getting pwnd AND drwnd in the near future:


I wonder if they'll paint the drones black like the helicopters. At least that would make me feel a little better.

Stagflationary Mark said...


Please allow me to puntificate.

We could drone on about the future, but what's the breaking point?