The Fed's Survey of Wealth and Income Is Out: How'd You Do?

Publish date:

The Fed released the Survey of Consumer Finances data through 2010 yesterday, and the big story is that median family net worth declined 39% from $126,400 in 2007 to $77,300 in 2010, with median income declining 8% from $49.6K to $45.8K. There is probably something housing-wealth-effect-related to say about this.

But my own reaction to things like this is of course a competitive one; I flip through the charts thinking either "whew, still doing okay on this one" or "remind me why I became a blogger again?" For these purposes I recommend in particular Table 4 on page 17 of the report to see where you stand in the net worth league table. Households headed by under-35-year-olds had mean and median net worth of $65,300 and $9,300 in 2010, which if you work in the financial industry should I'm guessing make you feel special (or old); other numbers you might consider are college grads (mean/median net worth of $978K and $195K) and the top 10% of households by income* (mean/median of $2.9mm and $1.2mm which, let me tell you, blogging has non-financial rewards, or something).

Two quick things. First, how can you read this and not think about the battle between rentiers and proletarians? Very easily is probably your answer but I found this interesting:

This is best read in conjunction with actual income data, which I've thrown together here (readable form here):

So, not to get too tendentious or anything, but lots of people argue that the Fed should be taking steps to further reduce interest rates to spur employment, and lots of other people argue that the Fed should be taking steps to raise interest rates to protect savers. The above gives you a really rough guide to who's winning. Fed Funds never went below 4.25% in 2007; since 2009 it's been around epsilon, and across the wealth spectrum people have seen reductions in interest income. Of around two hundred bucks, at the median, or twenty-five hundred bucks, for the top 10%. Meanwhile real wages are down by thousands of dollars across the top 75%, with all but the wealthiest losing more in wage income than they are in interest. Not a guide to monetary policy but maybe helpful in keeping boosting-employment-versus-screwing-retirees debates in perspective.

The second thing is ... are you not weirded out by your fellow Americans' investment choices?

I'd focus you in particular on the columns for "Stocks," meaning direct investments (outside of 401ks) in individual stocks, and "Pooled investment funds," meaning all (non-MMF) mutual funds (stocks and all flavors of bonds). Here is a thing the Fed says:

The direct ownership of publicly traded stocks is more widespread than the direct ownership of bonds, but, as with bonds, it is also concentrated among high-income and highwealth families. The overall share of families with any such stock holdings declined 2.8 percentage points from 2007 to 2010, to 15.1 percent, thereby continuing a decrease observed since direct stock ownership peaked in the 2001 SCF at 21.3 percent (data not shown in the tables). Across demographic groups, declines in ownership were more common than increases, with the noticeable exception of families in the top decile of net worth, for whom ownership rose 2.5 percentage points.

So, fine, but still is it not odd that twice as many median earners have individual stocks as own mutual funds?** Much of this is I suppose employee stock ownership (35% of stock owners own their employer's stock) but not all of it:

Loosely speaking, then, the "typical" household investor owns a single-digit number of individual stocks directly, the opposite of what I take to be the normal advice about cheap diversification through index funds. I suppose that many of those investors would have cause to regret that decision over the last five years, if they weren't so preoccupied with their lost housing wealth.

Survey of Consumer Finances [Federal Reserve, pdf]
Family Net Worth Drops to Level of Early ’90s, Fed Says [NYT]

* That top 10%, btw, has a median income of $212K, versus $120K for the next decile; you do the math on the cutoffs.

** There's an annoying table (page 30) of median value of holdings for families holding each asset class, which shows people owning a lot more pooled vehicles than stocks, but that is hard to compare because of the wider stock ownership. For instance, in the 20-39.9th income percentile, median stock ownership for stock owners is $8K and median mutual fund ownership for mutual fund owners is $38K, but there are almost twice as many stock owners so, whatever. Also for the 0-20th percentile its also $38K for mutual funds and $20K for stocks, which just seems obviously statistical-artifact-y.