Yours truly had a memorable series of exchanges with MarketWatch Washington Bureau Chief Rex Nutting roughly 18 months ago. At one point, he appeared to reveal an expectation (otherwise, why provide a graph of it?) that home prices might actually fall like the NASDAQ did from 2000-2002 -- which, for the record, was almost 78%, from a peak of 5048 in March 2000 to a trough of 1114 in October 2002). He also described the housing market, which was still advancing nicely, as "in a free-fall."
Given the history, we shouldn't be surprised that Nutting pounced on the Fed's latest household net worth report, producing the following (link requires free registration):
Darn it, this is really weak:
- The headline assumes that Americans on the whole were poor even before the fourth quarter drop in household net worth (you can't get "poorer" unless you were "poor" already). This is beyond ridiculous and crosses the line into insulting our intelligence. Poor? Americans are clearly the richest "poor" people in human history. My math shows that the average person in America is worth $190,000 ($57.7 trillion divided by a population of 303 million).
- The subheadline ("net worth down 3.6% in fourth quarter") is flat-out wrong; the text of the article itself tells us that the drop is a "3.6% annual rate." But what's with the annualizing, anyway? The drop in household net worth during the quarter was 0.91%; the only reason to annualize it as Nutting did is to make the decline look worse than it really was.
- Later in the article (not pictured), Nutting got hung up in his terminology underwear, as he erroneously described one-quarter changes in quarter-ending balance-sheet amounts as "annualized" (e.g., total household assets, home-equity loans).
Nutting does make a valid point: The 3.4% increase in household net worth during 2007 is less than the year's reported 4.1% inflation, meaning that real net worth indeed declined during last year. But though he referenced debt growth that took place between 2003 and 2005 (see last paragraph pictured), he "somehow" never got around to telling us what happened to real net worth during the previous 4 years.
So I will, first showing current-dollar results, followed by those same results adjusted for infation, expressed in 2007 dollars:
Real household net worth increased almost 28% between 2002 and 2006, before falling back a "whopping" 0.7% in 2007.
Poorer, schmoorer, Rex.
Cross-posted in slightly expanded form at BizzyBlog.com.
—Tom Blumer is president of a training and development company in Mason, Ohio, and is a contributing editor to NewsBusters
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An aside, Tom.
March 8, 2008 - 13:38 ET by Gary HallHeadlines in the LA Times today ("add fuel for a recesson") - with links to other stories (food for the bears.) Yesterday, ABC "titled" a video spot on line as "U.S. Suffers Record Job Losses" - Certainly not a truthful headline, is it?
What is really striking is the contrast in how the MSM has downplayed or hyped up, respectively the positive and negative economic trends in recent years and more recently, as compared to how they played up the collapsing markets and economic fallout back in the 2000 election year cycle.
I like to reflect on it as this. Using the words of a progressive (socialist) economist, noted and loved by the media, Dean Baker who wrote in early 1999:
Later in 2000 he asked the rhetorical question:
"ya tell them that Bush did it." Naturally enough, the MSM did what they always do; they convinced the voters that all of that pain and all that went with it, was because of President Bush and his policies (would have been the same play for any Republican coming in).
With the economy progressing towards tanking as the election cycle of 2000 trudged forward, the MSM almost completly kept the politics out of it. For the 2008 election cycle, the MSM started pushing the economy to fail over the course of the past couple of years (although, according to them - it never purred in this cycle anyway) and now, they have successfully made the election almost entirely about the politics of the economy. Quite a strike contrast in media coverage. gary
Helped along ....
March 8, 2008 - 14:53 ET by Tom Blumerin 2000 by positive GDP reports that "somehow" got adjusted way down in subsequent years. IIRC, 3Q00 before the election was 2.2%. It ended up years later at -0.5%. Other indicators (ISM, etc.) were very weak, but "somehow" GDP was OK.
Yes true enough, Tom..
March 8, 2008 - 17:07 ET by Gary HallYes true enough, Tom.. we havn't seen negative a GDP number yet here either, but the word recession is suddenly a household term.
With the media as the real issue here, as 2000 went along following the official March Dot.com crash (the broad market was already 2 years past it's top), a lot of indicators weren't just weak, they either had been or were heading south most of the year. There were waves of mass layoffs, as companies started reducing orders, laying off EE's, and finally closing their doors. While true that the big hit on jobs would not become major news until (oh, I'm guessing here) March or April of 2001, that was still simply the fallout from the trickle down from bubble burst. In the end millions would lose their jobs - I suspect hundreds (many major) of companies closed their doors. And of course the impact on the budget "surplus projections" would be enormous, as tax recepts immediately dried up on the state and federal level. gary