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Two recent Wall Street Journal articles point to similar problems in both the housing and stock markets: although prices are up relative to late 2008/2009, liquidity has suffered noticeable decreases.
It would seem that government policies aimed at propping up nominal prices in both markets have succeeded, in the short term. (Although not without consequence.)
Not coincidentally, IRS statistics on all top wealthholders show that 70% of the increases in wealth enjoyed by all top wealthholders between 1992 and 2004 (most recent data available, and prior to the market peaks) can be attributed to securities (55%) and real estate (15%). The data on real estate include all debts and mortgages (-5%), which partially masks the increase in nominal asset prices.
Consolidation of net wealth also occurred during this span, increasing from $1.34 billion to $3.74 billion per wealthholder. In other words, although the net worth increased 106%; this increase was shared by 26% fewer individuals.
Inflation and other policy-induced asset bubbles have clearly benefited the wealthy, and it should be clear to the layman that the Occupy Wall Street protests are misdirected. Instead they should be excoriating people like Paul Krugman, who continue to advocate for persistent inflation, eroding the value of their paychecks and savings.
WSJ: Traders Warn of Market Cracks (Oct 18, 2011)
Hedge-fund traders and mutual-fund managers say it has become increasingly tough to trade an individual stock without causing a big swing in its price. That’s led many large investors to step back from the market instead of risking being stung by the trading difficulties.
The problem is a lack of liquidity—a term that refers to the ease of getting a trade done at an acceptable price.
Markets depend on there being many offers to buy and sell a particular stock, across a range of prices. But as investors have gotten nervous, many of those offers have dried up.
WSJ: Slim Pickings Are Latest Headache for Home Sales (Oct 17, 2011)
The housing market, which has struggled with an oversupply of homes for years, is facing a new problem: a lack of attractive inventory…
The report is the latest sign of how the U.S. housing market can’t seem to catch a break. While falling inventories are typically a sign of health, because reduced competition can boost prices, that isn’t the case right now.
Instead, real-estate agents say, people are pulling their homes off the market rather than try to sell them at today’s discounted prices.
According to Ken Koenen (author of the article linked below), banks foreclose on a home and report a relatively low “transfer value”, on which they are taxed at the state level (despite that they likely received market offers above the transfer value). They report the “fair market value”, a much higher amount, on a 1099-A to the previous owner. The banks show a capital loss equal to the difference between their final foreclosure sale price (often lower than the transfer price) and the fair market value, which they can use to offset other gains (ex. stock market transactions); and therefore federal taxes. Is he wrong? Comment!
BrokerAgentSocial.com: The Bankster’s Latest Tricks by Ken Koenen on June 14, 2011