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How Average Are You?. How Average Are You?. Believe God exists (80%) Larry, Mo, Curly (& Schemp) (89%) Legislative, Judicial, & Executive (20%) Does NOT have a college degree (65%) Take a bath or shower (10.4 minute shower, daily) Own stocks?( 50/50). Live in same state (60%)

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how average are you1
How Average Are You?

Believe God exists (80%)

Larry, Mo, Curly (& Schemp) (89%)

Legislative, Judicial, & Executive (20%)

Does NOT have a college degree (65%)

Take a bath or shower

(10.4 minute shower, daily)

Own stocks?( 50/50)

Live in same state (60%)

Have 2 children

Eat 3 lb’s of PB per year

Do NOT floss regularly (90%)

Exercise once a week

Recycle (50%)

Shop At Walmart at least Annually (80%)

selected average statistics
Selected “Average” Statistics

Drinks 55 gallons of soda a year

Does not wash his hands properly after using public restrooms

Throws away more than 100 lbs of food per year

25% of Americans over 18 abstain from alcohol for life

69% of Americans go to the movie theater at least annually

the average american federal reserve survey of consumer finance
The Average AmericanFederal Reserve Survey of Consumer Finance

2001 2004 2007 2009

Median Family Inc $42.2k $44.3k $50.2k $49.7k

College Degree 34.0% 36.6% 35.3%

Cred. Card Bal. 44.4% 46.2% 47.8% 43.2%

Amount of Bal. $2.0k $2.4k $3.0k $3.3k

Of those 45-54

Own Ret. Acct. 63.4% 57.7% 68% 68.2%

Amount in it $51.1k $61.0k $81.4k $73k

percent of workers by total amount of retirement savings 2011
Percent of Workers by Total Amount of Retirement Savings 2011

Source: Employee Benefit Research Institute, HS Dent Research

percent of workers and retirees by total amount of retirement savings 2011
Percent of Workers and Retirees by Total Amount of Retirement Savings 2011

Source: Employee Benefit Research Institute, HS Dent Research

percent of workers and retirees by total amount of retirement savings 20111
Percent of Workers and Retirees by Total Amount of Retirement Savings 2011

Source: Employee Benefit Research Institute, HS Dent Research

the s curve
The S-Curve

Innovation

Growth

Maturity

100

90%

99%

99.9%

90

80

70

60

50

50%

40

30

20

10

1%

.1%

10%

0

Percent Adoption

the s curve in cars
The S-Curve in Cars

Percent of Urban Households

1900

1907

1942

1921

1935

1914

1928

Assembly Line

Installment Financing

90% Urban Adoption

Cars only for the Rich

Model T Design

mobile phone s curve
Mobile Phone S-Curve

Innovation

Growth

Maturity

100

90

80

70

60

50

40

30

20

10

0

90%

86%

2007

82%

2006

73%

77%

2005

63%

2004

58%

50%

2003

Percent of Households

2002

47%

2000

13%

10%

1995

2%

1%

1990

2001

1994

2008

Time

Source: Forrester, Census Bureau

internet s curve
Internet S-Curve

Innovation

Growth

Maturity

100

90

80

70

60

50

40

30

20

10

0

83%

74%

79%

2009

73%

2007

71%

2006

2005

67%

2004

66%

2003

61%

2002

50%

2001

Percent of Households

31%

1999

22%

1998

17%

10%

1997

2000

2007

1993

Time

Source: Pew Internet

broadband s curve
Broadband S-Curve

Innovation

Growth

Maturity

100

90

80

70

60

50

40

30

20

10

0

90%

91%

2009

80%

2007

63%

2006

50%

Percent of Households

37%

2004

22%

2002

10%

2000.5

2008.5

2004.5

Time

Source: Pew Internet

digital camera s curve
Digital Camera S-Curve

Innovation

Growth

Maturity

100

90

80

70

60

50

40

30

20

10

0

90%

77%

2009

62%

2007

60%

2005

Percent of Households

43%

2003

10%

1997

2004

2011

Time

Source: Infotrends, Consumer Electronics Association

high definition tv s curve
High-Definition TV S-Curve

Innovation

Growth

Maturity

100

90

80

70

60

50

40

30

20

10

0

90%

53%

2009

50%

Percent of Households

35%

2008

23%

2007

10%

3%

2009

2005

2013

2001

Time

Source: CTAM

car gps systems s curve
Car GPS Systems S-Curve

Innovation

Growth

Maturity

100

90

80

70

60

50

40

30

20

10

0

90%

99%

50%

Percent of Households

17%

3%

2009

10%

0.9%

1%

2003

2018

2008

2013

2002

2005

Time

Source: Masterlink

s curves
S-Curves

Source: NY Times

s curves1
S-Curves

Innovations follow a curved pattern of acceptance, or “lifecycle”

Industry supplies on a different cycle

Many innovations are moving through the second half of their growth phase, and will peak near the end of the decade

Innovations tend to be developed by the young

quantity of money formula for inflation
Quantity of Money Formula for Inflation

MV=PY

M=Money Supply P=General Price Level

V=Velocity Y=Real Income

inflation indicator
Inflation Indicator

Source: U.S. Census Bureau and U.S. Bureau of Labor and Statistics

u s inflation year over year change
U.S. InflationYear-Over-Year Change

Source: Calculated Risk Blog

inflation forecast
Inflation Forecast

20 Year-Olds

on a 3-Year Lag

Minus 63 Year-Olds

Inflation

Annual Inflation (%)

Annual Labor Force Growth

Source: U.S. Census Bureau and U.S. Bureau of Labor and Statistics

inflation
Inflation

Inflation, in a stable financial system, is based on people and workforce growth

Changes in labor force can be used to forecast inflationary pressures

Tremendous changes are coming

inflation fears are misguided it s deflation that will hurt
Inflation Fears Are MisguidedIt’s DEFLATION That Will Hurt!

With the US government doubling the asset base at the Federal Reserve and pumping trillions of dollars into the economy, everyone is worried about inflation – too many dollars chasing too few goods.

It’s understandable, but wrong. If the economy remained constant, this would make sense. But we are changing, and the changes will eventually mean deflation, not inflation. Unfortunately, deflation hurts a lot more!

when the us crashed the v dropped dramatically
When the US Crashed, the “V” dropped dramatically

MV=PY

M=Money Supply P=General Price Level

V=Velocity Y=Real Income

Quantity of Money Formula for Inflation

the value of m is the size of the money supply
The Value of “M” Is the Size of the Money Supply

Get your arms around how money is created

Printing press – the US Government creates out of thin air

Lending – banks and other institutions create out of thin air through fractional reserve, short borrowing versus long lending

it hasn t worked so now fed is printing dollars again
It Hasn’t Worked, So Now Fed Is Printing Dollars…Again!

The Federal Reserve controls the printing presses of the US

The Fed does NOT have a bank account. Any purchase they make (like of securities in the marketplace) is done with newly printed dollars

The first $1.5 trillion didn’t restart economy, but it did cause dollar devaluation. The current $600 billion plan seems to be following suit.

tug of war between the forces of money creation
Tug of War Between The Forces of Money Creation

Why is the sheer force of printing money not working to the level the govt wants?

Because at the same time, we are busy destroying money in other places.

lending dollars into existence fractional reserve
Lending Dollars Into Existence(fractional reserve)

Banks are required to hold a percentage of deposits (a fraction), they lend out the rest. If they do not lend, they do not collect interest and cannot pay their depositors.

If a deposit is made for $1,000, the bank can lend $900, thereby “creating” $900 out of thin air. But the other side of the journal entry of the loan to the borrower, is the note that the borrower owes back to the bank.

total u s debt 2008
Total U.S. Debt - 2008

Government

$14Trn

Financial

$17Trn

Corporate

$11Trn

Consumer

$14Trn

Total:

$56 Trn !

Source: Federal Reserve Flow of Funds Report

money creation works both ways
Money “Creation” Works Both Ways

But it is already taking place, just not at the Fed.

When any debtor either pays back a loan created through fractional reserve, or has a loan canceled (foreclosure, modification, etc.) then money supply has been contracted.

Go back to the $1,000 deposit with the $900 loan. Money supply went from $1,000 to $1,900 when counting both the deposit and the loan. If the borrower of the new $900 pays off the loan, then money supply shrinks back to just $1,000.

This is going on at a rapid pace as we pay down debts and see massive liquidations, bankruptcies, and foreclosures.

change in u s debt outstanding 2000 2010

Change in U.S. Debt Outstanding 2000 - 2010

Source: Federal Reserve Flow of Funds Report (FRB Z1), including Domestic Financial Sector

the money supply fight
The Money Supply Fight

The Fed Is Pouring Money In

Amount of Money in the Economy

While Borrowers and Lenders are Leaking Money Out

combining generational spending trends inflation and interest rates
Combining Generational Spending Trends, Inflation, and Interest Rates

40 year generations

Predictable consumer spending

Workforce pressure on inflation

Ebb & flow of interest rates

simple four season economic cycle two forty year generation boom bust cycles
Simple Four Season Economic CycleTwo Forty-Year Generation Boom/Bust Cycles

Generation Spending Boom

Stocks/ Economy

Summer

Spring

Fall

Winter

simple four season economic cycle eighty years in modern times
Simple Four Season Economic CycleEighty Years in Modern Times

Consumer Prices/ Inflation

Generation Spending Boom

Stocks/ Economy

Summer

Spring

Fall

Winter

efficient frontier 1970 2007
Efficient Frontier, 1970-2007

1970-2007

Source: Advisory World, HS Dent

Source: Advisory World, HS Dent

efficient frontier 1970 2007 and 1970s
Efficient Frontier, 1970-2007and 1970s

1970-2007

1970s

Source: Advisory World, HS Dent

Source: Advisory World, HS Dent

efficient frontier 1970 2007 and 1970s 1980s
Efficient Frontier, 1970-2007and 1970s, 1980s

1980s

1970-2007

1970s

Source: Advisory World, HS Dent

Source: Advisory World, HS Dent

efficient frontier 1970 2007 and 1970s 1980s 1990s
Efficient Frontier, 1970-2007and 1970s, 1980s, 1990s

1990s

1980s

1970-2007

1970s

Source: Advisory World, HS Dent

Source: Advisory World, HS Dent

efficient frontier 1970 2007 and 1970s 1980s 1990s 2000s
Efficient Frontier, 1970-2007and 1970s, 1980s, 1990s, 2000s

1990s

Return (%)

1980s

1970-2007

1970s

2000s

Article #5 MPT/Markowitz

Source: Advisory World, HS Dent

Source: Advisory World, HS Dent

immigration not job hunting
Immigration,NOT JOB HUNTING

Historically, immigrants moved here to stay

Now, immigrants come for work, no intention of staying

immigration to the united states 1820 2006
Immigration to the United States 1820-2006

Article #7 & 8 Economy

Source: U.S. Department of Homeland Security

white and hispanic populations by age
White and Hispanic Populations by Age

Source: US Census Bureau, 2000 Census

movers to different state young vs old 2000 to 2005
Movers to Different State: Young vs. Old 2000 to 2005

3.5x

In Thousands

Source: US Census Bureau

state population growth
State Population Growth

Source: New York Times

united van lines migration patterns 2007
United Van Lines Migration Patterns 2007

Source: United Van Lines, via Unigroup, Inc.

united van lines migration patterns 2009
United Van Lines Migration Patterns 2009

Source: United Van Lines, via Unigroup, Inc.

top 10 outbound states 2009
Top 10 Outbound States2009

Source: United Van Lines, via Unigroup, Inc.

top 10 inbound states 2009
Top 10 Inbound States2009

Source: United Van Lines, via Unigroup, Inc.

top 10 inbound states 20091
Top 10 Inbound States2009

Source: United Van Lines, via Unigroup, Inc.

lack of mobility from downturn
Lack of Mobility from Downturn

NYT April 23, 2009

Slump Creates Lack of Mobility for Americans

By SAM ROBERTS

“Stranded by the nationwide slump in housing and jobs, fewer Americans are moving, the Census Bureau said Wednesday.

The bureau found that the number of people who changed residences declined to 35.2 million from March 2007 to March 2008, the lowest number since 1962, when the nation had 120 million fewer people.”

long term house prices vs inflation
Long Term House Prices vs. Inflation

Source: Robert J. Shiller, Irrational Exuberance, 2nd Edition, Princeton University Press, 2005.

real estate spending cycles
Real Estate Spending Cycles

Vacation Homes

46-50

Resorts

Trade-Up Homes

54

37-42

Vacation / Retirement Homes

29-33

Spending

63-65

26

Starter Homes

21

18

Apartments / Shopping Centers

Offices

Colleges

20

24

28

32

36

40

44

48

52

56

60

64

68

Age

long term house prices vs inflation1
Long Term House Prices vs. Inflation

Source: Robert J. Shiller, Irrational Exuberance, 2nd Edition, Princeton University Press, 2005.

slide73

Long Term House Prices vs. Inflation

Source: Robert J. Shiller, Irrational Exuberance, 2nd Edition, Princeton University Press, 2005.

borrowing power of a typical home purchaser
Borrowing Power of a Typical Home Purchaser

Pre-Tax Income

Borrowing Power

2.8 times

Source: Amherst Securities

average us home prices case shiller 10 city hpi jan 1994 jan 2011
Average US Home PricesCase-Shiller 10 City HPI: Jan 1994 – Jan 2011

-33%

Seasonally Adjusted In Thousands

-55%

-65%

Source: Standard & Poor’s Case-Shiller US 10-City Home Price Index

rising mortgage defaults
Rising Mortgage Defaults

First Time Defaults

Inventory Overhang

Liquidations

mortgage resets trigger for the next financial meltdown
Mortgage ResetsTrigger for the Next Financial Meltdown

9/2011

10/2010

Source: Loan Performance, Amherst Securities

average us home prices case shiller 20 city hpi jan 2000 jan 2011
Average US Home PricesCase-Shiller 20 City HPI: Jan 2000 – Jan 2011

Seasonally Adjusted In Thousands

Source: Standard & Poor’s Case-Shiller US 20-City Home Price Index

new home sales january 1963 february 2011
New Home SalesJanuary 1963 – February 2011

Seasonally Adjusted In Thousands

Source: US Census Bureau

defaults and lost homes 2000 2012 est
Defaults and Lost Homes2000 – 2012 (est.)

New Push on Mortgage Relief, WSJ, 11/30/09, A3