Stock brokers coax a tough crowd: Millennials

Online brokerages are trying to convince a generation of young investors, scared off by their parents' harrowing experiences with stocks, that's it's safe for them to play.

Several leading online brokerages, including TD Ameritrade and Fidelity Investments, are testing new technologies and tools designed in part to appeal to members of the Millennial generation. Millennials, also known as Generation Y, are people born from 1981 on up until 2000.

Read more...Stock brokers coax a tough crowd: Millennials

Investing attitudes help rich get richer

After five tough years, the nation’s wealth has finally pushed above the former pre-recession peak. Household net worth in 2013 has topped $70 trillion for the first time, exceeding the old 2007 mark by more than $2 trillion, the Federal Reserve reported last month.

That’s the good news. The bad news is that the gains haven’t been shared by everyone, with the rich-poor divide widening. One study, by the Pew Research Center, estimates that the 7 percent of most-affluent households saw a 28 percent jump in wealth from 2009 to 2011, while everyone else got 4 percent poorer.

Why are affluent households doing better than the nation overall? Many factors are at play. In part, it’s a result of higher salaries and income generally. But there might also be attitudinal differences, including the ways wealthy people deal with risk and how they approach investing.

Read more...Investing attitudes help rich get richer

Fed reports U.S. families lost 39% of worth in recession

WASHINGTON - The recent recession wiped out nearly two decades of Americans' wealth, according to government data released Monday, with middle-class families bearing the brunt of the decline.

The Federal Reserve said the median net worth of families plunged 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on a par with where they were back in 1992.

The data represent one of the most detailed looks to date of how the economic downturn altered the landscape of family finance. Over a span of three years, Americans watched progress that took almost a generation to accumulate evaporate. The promise of retirement built on the inevitable rise of the stock market proved illusory for most. Homeownership, once heralded as a pathway to wealth, became an albatross.

Those findings underscore both the depth of the wounds of the financial crisis and how far many families remain from healing. If the recession set Americans back 20 years, economists say, the road forward is sure to be a long one. And, so far, the country has seen only a halting recovery.

"It's hard to overstate how serious the collapse in the economy was," said Mark Zandi, chief economist for Moody's Analytics. "We were in free fall."

The recession caused the greatest upheaval among the middle class.

Only roughly half of middle-class Americans remained on the same economic rung during the downturn, the Fed found. Their median net worth -- the value of assets such as homes, cars and stocks minus any debt -- suffered the biggest drops. The wealthiest families, by contrast, actually saw their median net worth rise slightly.

Americans have tried to rebalance the family budget but have found it difficult to reverse the damage.

The survey indicated that fewer families are carrying credit-card balances and that those who do have less debt. The median balance dropped 16 percent, from $3,100 in 2007 to $2,600 in 2010. The Fed also found that the percentage of Americans who don't have any debt at all rose to a quarter of families.

But that progress was undermined by other factors, leaving the median level of family debt unchanged. The report said more families reported taking out education loans. Nearly 11 percent said they were at least 60 days late paying a bill, up from 7 percent in 2007. And the percentage of families saddled with debts greater than 40 percent of their income stayed the same.

Not only were Americans still facing significant debts, they were making less money. Median income fell nearly 8 percent, to $45,800, in 2010. The median value of stock-market-based retirement accounts declined 6 percent, to $44,000.

But it was the implosion of the housing market that inflicted much of the pain. The value of Americans' stake in their homes fell by 42 percent from 2007 to 2010 to just $55,000, according to the Fed.

The poorest families suffered the biggest loss of wealth from the drop in real-estate prices. But middle-class Americans rely on housing for a larger part of their net worth. For some, it accounts for just over half of their assets. That means every step downward is felt more acutely.

Rakesh Kochhar, an economist at the Pew Research Center, calls this phenomenon the "reverse-wealth effect." As consumers watched the value of their homes rise during the boom, they felt more confident spending money even if they did not actually cash in on the gains. Now, the moribund housing market has made many Americans wary of spending, even if their losses are just on paper.

According to the Fed survey, that paper wealth -- or what is officially called unrealized capital gains -- shrank 11 percent to about a quarter of American's assets.

The findings track research Kochhar released last year that showed a dramatic drop in household wealth during the recession, particularly among minorities. That study found record high disparities in wealth among Whites, Blacks and Hispanics. "It was turning the clock back quite a bit," Kochhar said.

Although there have been some signs that the recovery has picked up steam -- housing prices have begun to stabilize, and unemployment has fallen -- Fed economists said those improvements largely do not change the survey results.

by Washington Post Jun 11, 2012




Fed reports U.S. families lost 39% of worth in recession

Fed reports U.S. families lost 39% of worth in recession

WASHINGTON - The recent recession wiped out nearly two decades of Americans' wealth, according to government data released Monday, with middle-class families bearing the brunt of the decline.

The Federal Reserve said the median net worth of families plunged 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on a par with where they were back in 1992.

The data represent one of the most detailed looks to date of how the economic downturn altered the landscape of family finance. Over a span of three years, Americans watched progress that took almost a generation to accumulate evaporate. The promise of retirement built on the inevitable rise of the stock market proved illusory for most. Homeownership, once heralded as a pathway to wealth, became an albatross.

Those findings underscore both the depth of the wounds of the financial crisis and how far many families remain from healing. If the recession set Americans back 20 years, economists say, the road forward is sure to be a long one. And, so far, the country has seen only a halting recovery.

"It's hard to overstate how serious the collapse in the economy was," said Mark Zandi, chief economist for Moody's Analytics. "We were in free fall."

The recession caused the greatest upheaval among the middle class.

Only roughly half of middle-class Americans remained on the same economic rung during the downturn, the Fed found. Their median net worth -- the value of assets such as homes, cars and stocks minus any debt -- suffered the biggest drops. The wealthiest families, by contrast, actually saw their median net worth rise slightly.

Americans have tried to rebalance the family budget but have found it difficult to reverse the damage.

The survey indicated that fewer families are carrying credit-card balances and that those who do have less debt. The median balance dropped 16 percent, from $3,100 in 2007 to $2,600 in 2010. The Fed also found that the percentage of Americans who don't have any debt at all rose to a quarter of families.

But that progress was undermined by other factors, leaving the median level of family debt unchanged. The report said more families reported taking out education loans. Nearly 11 percent said they were at least 60 days late paying a bill, up from 7 percent in 2007. And the percentage of families saddled with debts greater than 40 percent of their income stayed the same.

Not only were Americans still facing significant debts, they were making less money. Median income fell nearly 8 percent, to $45,800, in 2010. The median value of stock-market-based retirement accounts declined 6 percent, to $44,000.

But it was the implosion of the housing market that inflicted much of the pain. The value of Americans' stake in their homes fell by 42 percent from 2007 to 2010 to just $55,000, according to the Fed.

The poorest families suffered the biggest loss of wealth from the drop in real-estate prices. But middle-class Americans rely on housing for a larger part of their net worth. For some, it accounts for just over half of their assets. That means every step downward is felt more acutely.

Rakesh Kochhar, an economist at the Pew Research Center, calls this phenomenon the "reverse-wealth effect." As consumers watched the value of their homes rise during the boom, they felt more confident spending money even if they did not actually cash in on the gains. Now, the moribund housing market has made many Americans wary of spending, even if their losses are just on paper.

According to the Fed survey, that paper wealth -- or what is officially called unrealized capital gains -- shrank 11 percent to about a quarter of American's assets.

The findings track research Kochhar released last year that showed a dramatic drop in household wealth during the recession, particularly among minorities. That study found record high disparities in wealth among Whites, Blacks and Hispanics. "It was turning the clock back quite a bit," Kochhar said.

Although there have been some signs that the recovery has picked up steam -- housing prices have begun to stabilize, and unemployment has fallen -- Fed economists said those improvements largely do not change the survey results.

by Washington Post Jun 11, 2012




Fed reports U.S. families lost 39% of worth in recession

Fed reports U.S. families lost 39% of worth in recession

WASHINGTON - The recent recession wiped out nearly two decades of Americans' wealth, according to government data released Monday, with middle-class families bearing the brunt of the decline.

The Federal Reserve said the median net worth of families plunged 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on a par with where they were back in 1992.

The data represent one of the most detailed looks to date of how the economic downturn altered the landscape of family finance. Over a span of three years, Americans watched progress that took almost a generation to accumulate evaporate. The promise of retirement built on the inevitable rise of the stock market proved illusory for most. Homeownership, once heralded as a pathway to wealth, became an albatross.

Those findings underscore both the depth of the wounds of the financial crisis and how far many families remain from healing. If the recession set Americans back 20 years, economists say, the road forward is sure to be a long one. And, so far, the country has seen only a halting recovery.

"It's hard to overstate how serious the collapse in the economy was," said Mark Zandi, chief economist for Moody's Analytics. "We were in free fall."

The recession caused the greatest upheaval among the middle class.

Only roughly half of middle-class Americans remained on the same economic rung during the downturn, the Fed found. Their median net worth -- the value of assets such as homes, cars and stocks minus any debt -- suffered the biggest drops. The wealthiest families, by contrast, actually saw their median net worth rise slightly.

Americans have tried to rebalance the family budget but have found it difficult to reverse the damage.

The survey indicated that fewer families are carrying credit-card balances and that those who do have less debt. The median balance dropped 16 percent, from $3,100 in 2007 to $2,600 in 2010. The Fed also found that the percentage of Americans who don't have any debt at all rose to a quarter of families.

But that progress was undermined by other factors, leaving the median level of family debt unchanged. The report said more families reported taking out education loans. Nearly 11 percent said they were at least 60 days late paying a bill, up from 7 percent in 2007. And the percentage of families saddled with debts greater than 40 percent of their income stayed the same.

Not only were Americans still facing significant debts, they were making less money. Median income fell nearly 8 percent, to $45,800, in 2010. The median value of stock-market-based retirement accounts declined 6 percent, to $44,000.

But it was the implosion of the housing market that inflicted much of the pain. The value of Americans' stake in their homes fell by 42 percent from 2007 to 2010 to just $55,000, according to the Fed.

The poorest families suffered the biggest loss of wealth from the drop in real-estate prices. But middle-class Americans rely on housing for a larger part of their net worth. For some, it accounts for just over half of their assets. That means every step downward is felt more acutely.

Rakesh Kochhar, an economist at the Pew Research Center, calls this phenomenon the "reverse-wealth effect." As consumers watched the value of their homes rise during the boom, they felt more confident spending money even if they did not actually cash in on the gains. Now, the moribund housing market has made many Americans wary of spending, even if their losses are just on paper.

According to the Fed survey, that paper wealth -- or what is officially called unrealized capital gains -- shrank 11 percent to about a quarter of American's assets.

The findings track research Kochhar released last year that showed a dramatic drop in household wealth during the recession, particularly among minorities. That study found record high disparities in wealth among Whites, Blacks and Hispanics. "It was turning the clock back quite a bit," Kochhar said.

Although there have been some signs that the recovery has picked up steam -- housing prices have begun to stabilize, and unemployment has fallen -- Fed economists said those improvements largely do not change the survey results.

by Washington Post Jun 11, 2012




Fed reports U.S. families lost 39% of worth in recession

Fed reports U.S. families lost 39% of worth in recession

WASHINGTON - The recent recession wiped out nearly two decades of Americans' wealth, according to government data released Monday, with middle-class families bearing the brunt of the decline.

The Federal Reserve said the median net worth of families plunged 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on a par with where they were back in 1992.

The data represent one of the most detailed looks to date of how the economic downturn altered the landscape of family finance. Over a span of three years, Americans watched progress that took almost a generation to accumulate evaporate. The promise of retirement built on the inevitable rise of the stock market proved illusory for most. Homeownership, once heralded as a pathway to wealth, became an albatross.

Those findings underscore both the depth of the wounds of the financial crisis and how far many families remain from healing. If the recession set Americans back 20 years, economists say, the road forward is sure to be a long one. And, so far, the country has seen only a halting recovery.

"It's hard to overstate how serious the collapse in the economy was," said Mark Zandi, chief economist for Moody's Analytics. "We were in free fall."

The recession caused the greatest upheaval among the middle class.

Only roughly half of middle-class Americans remained on the same economic rung during the downturn, the Fed found. Their median net worth -- the value of assets such as homes, cars and stocks minus any debt -- suffered the biggest drops. The wealthiest families, by contrast, actually saw their median net worth rise slightly.

Americans have tried to rebalance the family budget but have found it difficult to reverse the damage.

The survey indicated that fewer families are carrying credit-card balances and that those who do have less debt. The median balance dropped 16 percent, from $3,100 in 2007 to $2,600 in 2010. The Fed also found that the percentage of Americans who don't have any debt at all rose to a quarter of families.

But that progress was undermined by other factors, leaving the median level of family debt unchanged. The report said more families reported taking out education loans. Nearly 11 percent said they were at least 60 days late paying a bill, up from 7 percent in 2007. And the percentage of families saddled with debts greater than 40 percent of their income stayed the same.

Not only were Americans still facing significant debts, they were making less money. Median income fell nearly 8 percent, to $45,800, in 2010. The median value of stock-market-based retirement accounts declined 6 percent, to $44,000.

But it was the implosion of the housing market that inflicted much of the pain. The value of Americans' stake in their homes fell by 42 percent from 2007 to 2010 to just $55,000, according to the Fed.

The poorest families suffered the biggest loss of wealth from the drop in real-estate prices. But middle-class Americans rely on housing for a larger part of their net worth. For some, it accounts for just over half of their assets. That means every step downward is felt more acutely.

Rakesh Kochhar, an economist at the Pew Research Center, calls this phenomenon the "reverse-wealth effect." As consumers watched the value of their homes rise during the boom, they felt more confident spending money even if they did not actually cash in on the gains. Now, the moribund housing market has made many Americans wary of spending, even if their losses are just on paper.

According to the Fed survey, that paper wealth -- or what is officially called unrealized capital gains -- shrank 11 percent to about a quarter of American's assets.

The findings track research Kochhar released last year that showed a dramatic drop in household wealth during the recession, particularly among minorities. That study found record high disparities in wealth among Whites, Blacks and Hispanics. "It was turning the clock back quite a bit," Kochhar said.

Although there have been some signs that the recovery has picked up steam -- housing prices have begun to stabilize, and unemployment has fallen -- Fed economists said those improvements largely do not change the survey results.

by Washington Post Jun 11, 2012




Fed reports U.S. families lost 39% of worth in recession

The Dangers of High-Speed Trading - US Business News - CNBC

Arbitrage potential at the speed of light at 11 millisecond between NYSE and CME...

Comstock | Getty Images


Eric Scott Hunsader has gone completely down the rabbit hole, and he doesn’t like what he’s finding there.

Hunsader is the CEO of a Chicago-based market analytics firm that specializes in high-frequency trading — super fast trades executed at the speed of light that can alter asset prices faster than human beings can react to the changes.

Based on his own analysis, Hunsader has come to a startling conclusion: Markets today are even more susceptible to sudden failure than they were two years ago during the “flash crash,” which brought the stock market down by about 1,000 points in mere minutes.

That’s because a new breed of trader armed with hundreds of millions of dollars to deploy is trading so fast—and with such spikes in volume—that he can dry up liquidity in an instant, causing severe price swings.

To explain to a lay person, Hunsader offers up two examples of the kinds of trades he’s seeing. The first happened less than a minute before the April Jobs report was released by the Department of Labor in Washington.

That report is traditionally one of the most dramatic market-moving events of each month. As a result, traders tend to lie low in the minute or so before the number comes out at 8:30 a.m. on the first Friday of each month, so they don’t get caught when the market changes.

But Hunsader argues that he’s seeing a small group of high speed traders who aren’t lying low. In fact, they’re taking advantage of the regular and predictable lull in the market to pop high speed trades in order to intentionally create a several hundred millisecond burst of volatility, and then execute follow-on trades to profit from that.

To understand what happens, you have to go inside just one second of trading and look at the way markets move at speeds that can be almost imperceptible to human beings.

On May 4, Hunsader says, he spotted those traders just before the April number was released. At 8:29:20 and about 200 milliseconds, he says, someone — he has no way of knowing who — executed a trade in the five year T-note futures market worth about $150 million.

A chart of that single second in the market shows that prices are relatively stable until the trade. And just after that, for the rest of the second, prices spike, and gyrate up and down as other automated high speed computers react to the trade.

Hunsader says he doesn’t know exactly how the traders make money off the volatility that they create, but he suspects they’re making other trades in the milliseconds following their market moving trade that take advantage of the relationships between this market and others that are impacted by it.

The traders that move first, and fastest, win, he says.

“It’s like two guys running in the woods, and they see a bear and one guy drops down and puts his shoes on and the other guy says, ‘what are you doing that for, you can’t outrun a bear,’” Hunsader says. “And the guy goes, ‘I don’t have to outrun the bear, I just have to outrun you.’”

On another occasion, Hunsader says he saw traders taking advantage of something as fundamental as the speed of light.

Because trades are executed by fiber-optic cable, the fastest they can travel—and the fastest anything in the universe can travel—is the speed of light. But even at that speed, it takes about 11 milliseconds for information from exchanges based in New York to get to exchanges based in Chicago. And that provides an opportunity for arbitrage for those who can move fast enough.

“Recently, they put in this new high speed line between Chicago and New York,” Hunsader says. “Essentially (they) drilled through mountains to shave a few milliseconds — thousandths of seconds — off, getting it down to 11 milliseconds. But I think somebody’s figured out how to get it to zero milliseconds.”

And the way they do that, in effect, became clear on May 3, Hunsader argues.

At 9:59:11 and about 620 milliseconds, someone executed a trade in Chicago, purchasing about 1,300 ES contracts for about $70 million. That happened to come in a lull just before two economic indicators were to be released at 10 a.m. that day.

At the exact same millisecond, 9:59:11 and about 620 milliseconds, Hunsader says, another trade was executed: Somebody bought 260,000 shares of a closely correlated product, SPY, for about $36 million.

Hunsader has no way of knowing for sure it was the same person executing both trades. But he says he sees same millisecond trades happening in both cities in related products often enough that he doesn’t think it can be pure coincidence.

In fact, he says, someone placing big orders in related products in both cities would gain a valuable advantage: for 11 milliseconds, they would be the only ones in the world who knew what happened in both markets.

By the time Chicago received the information about what happened in New York, and New York received the information about what happened in Chicago, Hunsader says, the traders who execute such trades would have a relatively long time to position themselves for the predictable fallout. And that’s a profit opportunity.

“The speed of light is fast,” Hunsader says, “But it’s not as fast as the high frequency traders would like it to be.”

The trick is, you have to have a super-fast computer and $100 million in deployable cash to make it work.

Hunsader says he sees these trades happening so frequently, in fact, that he advises individual investors not to make any trades at all between 9:58 and 10:02 a.m. Eastern, since many economic reports are released at exactly 10 a.m.

The high speed, high volume trading he’s seeing can cause asset prices to gap by small increments — so that if you’re executing a trade at that minute and a high speed trader is jamming data lines at the same time, you might not get the deal at the price you thought when you pressed the button to process the trade.

What’s more, Hunsader says, this kind of trading is causing market instability—to the extent that the right set of circumstances could set off a cascade much worse than the flash crash of 2010.

“You might hear, ‘we’re doing fine, now,’” Hunsader says. “Well, yes, everything will be just fine as long as, as the news is sunshine-y happy. If you get a shock to system, you’re going to see very quickly just how undercapacity we are.”

Not everybody sees high speed trading as dangerous, of course. CNBC spoke to Jim Overdahl, a vice president at NERA Economic Consulting, who argued that high frequency trades are an important tool for professional traders.

“I think the bottom line argument on the benefits of high-frequency trading: it’s a risk management tool for professional traders,” Oberdhal said. “It allows them to quickly revise their quotes and offer better quotes because they’re able to manage the risk of being picked off by better informed trader or traders with superior information about order flow or market moving news.”

by Eamon Javers CNBC May 15, 2012


The Dangers of High-Speed Trading - US Business News - CNBC

The Dangers of High-Speed Trading - US Business News - CNBC

Arbitrage potential at the speed of light at 11 millisecond between NYSE and CME...

Comstock | Getty Images


Eric Scott Hunsader has gone completely down the rabbit hole, and he doesn’t like what he’s finding there.

Hunsader is the CEO of a Chicago-based market analytics firm that specializes in high-frequency trading — super fast trades executed at the speed of light that can alter asset prices faster than human beings can react to the changes.

Based on his own analysis, Hunsader has come to a startling conclusion: Markets today are even more susceptible to sudden failure than they were two years ago during the “flash crash,” which brought the stock market down by about 1,000 points in mere minutes.

That’s because a new breed of trader armed with hundreds of millions of dollars to deploy is trading so fast—and with such spikes in volume—that he can dry up liquidity in an instant, causing severe price swings.

To explain to a lay person, Hunsader offers up two examples of the kinds of trades he’s seeing. The first happened less than a minute before the April Jobs report was released by the Department of Labor in Washington.

That report is traditionally one of the most dramatic market-moving events of each month. As a result, traders tend to lie low in the minute or so before the number comes out at 8:30 a.m. on the first Friday of each month, so they don’t get caught when the market changes.

But Hunsader argues that he’s seeing a small group of high speed traders who aren’t lying low. In fact, they’re taking advantage of the regular and predictable lull in the market to pop high speed trades in order to intentionally create a several hundred millisecond burst of volatility, and then execute follow-on trades to profit from that.

To understand what happens, you have to go inside just one second of trading and look at the way markets move at speeds that can be almost imperceptible to human beings.

On May 4, Hunsader says, he spotted those traders just before the April number was released. At 8:29:20 and about 200 milliseconds, he says, someone — he has no way of knowing who — executed a trade in the five year T-note futures market worth about $150 million.

A chart of that single second in the market shows that prices are relatively stable until the trade. And just after that, for the rest of the second, prices spike, and gyrate up and down as other automated high speed computers react to the trade.

Hunsader says he doesn’t know exactly how the traders make money off the volatility that they create, but he suspects they’re making other trades in the milliseconds following their market moving trade that take advantage of the relationships between this market and others that are impacted by it.

The traders that move first, and fastest, win, he says.

“It’s like two guys running in the woods, and they see a bear and one guy drops down and puts his shoes on and the other guy says, ‘what are you doing that for, you can’t outrun a bear,’” Hunsader says. “And the guy goes, ‘I don’t have to outrun the bear, I just have to outrun you.’”

On another occasion, Hunsader says he saw traders taking advantage of something as fundamental as the speed of light.

Because trades are executed by fiber-optic cable, the fastest they can travel—and the fastest anything in the universe can travel—is the speed of light. But even at that speed, it takes about 11 milliseconds for information from exchanges based in New York to get to exchanges based in Chicago. And that provides an opportunity for arbitrage for those who can move fast enough.

“Recently, they put in this new high speed line between Chicago and New York,” Hunsader says. “Essentially (they) drilled through mountains to shave a few milliseconds — thousandths of seconds — off, getting it down to 11 milliseconds. But I think somebody’s figured out how to get it to zero milliseconds.”

And the way they do that, in effect, became clear on May 3, Hunsader argues.

At 9:59:11 and about 620 milliseconds, someone executed a trade in Chicago, purchasing about 1,300 ES contracts for about $70 million. That happened to come in a lull just before two economic indicators were to be released at 10 a.m. that day.

At the exact same millisecond, 9:59:11 and about 620 milliseconds, Hunsader says, another trade was executed: Somebody bought 260,000 shares of a closely correlated product, SPY, for about $36 million.

Hunsader has no way of knowing for sure it was the same person executing both trades. But he says he sees same millisecond trades happening in both cities in related products often enough that he doesn’t think it can be pure coincidence.

In fact, he says, someone placing big orders in related products in both cities would gain a valuable advantage: for 11 milliseconds, they would be the only ones in the world who knew what happened in both markets.

By the time Chicago received the information about what happened in New York, and New York received the information about what happened in Chicago, Hunsader says, the traders who execute such trades would have a relatively long time to position themselves for the predictable fallout. And that’s a profit opportunity.

“The speed of light is fast,” Hunsader says, “But it’s not as fast as the high frequency traders would like it to be.”

The trick is, you have to have a super-fast computer and $100 million in deployable cash to make it work.

Hunsader says he sees these trades happening so frequently, in fact, that he advises individual investors not to make any trades at all between 9:58 and 10:02 a.m. Eastern, since many economic reports are released at exactly 10 a.m.

The high speed, high volume trading he’s seeing can cause asset prices to gap by small increments — so that if you’re executing a trade at that minute and a high speed trader is jamming data lines at the same time, you might not get the deal at the price you thought when you pressed the button to process the trade.

What’s more, Hunsader says, this kind of trading is causing market instability—to the extent that the right set of circumstances could set off a cascade much worse than the flash crash of 2010.

“You might hear, ‘we’re doing fine, now,’” Hunsader says. “Well, yes, everything will be just fine as long as, as the news is sunshine-y happy. If you get a shock to system, you’re going to see very quickly just how undercapacity we are.”

Not everybody sees high speed trading as dangerous, of course. CNBC spoke to Jim Overdahl, a vice president at NERA Economic Consulting, who argued that high frequency trades are an important tool for professional traders.

“I think the bottom line argument on the benefits of high-frequency trading: it’s a risk management tool for professional traders,” Oberdhal said. “It allows them to quickly revise their quotes and offer better quotes because they’re able to manage the risk of being picked off by better informed trader or traders with superior information about order flow or market moving news.”

by Eamon Javers CNBC May 15, 2012


The Dangers of High-Speed Trading - US Business News - CNBC

The Dangers of High-Speed Trading - US Business News - CNBC

Arbitrage potential at the speed of light at 11 millisecond between NYSE and CME...

Comstock | Getty Images


Eric Scott Hunsader has gone completely down the rabbit hole, and he doesn’t like what he’s finding there.

Hunsader is the CEO of a Chicago-based market analytics firm that specializes in high-frequency trading — super fast trades executed at the speed of light that can alter asset prices faster than human beings can react to the changes.

Based on his own analysis, Hunsader has come to a startling conclusion: Markets today are even more susceptible to sudden failure than they were two years ago during the “flash crash,” which brought the stock market down by about 1,000 points in mere minutes.

That’s because a new breed of trader armed with hundreds of millions of dollars to deploy is trading so fast—and with such spikes in volume—that he can dry up liquidity in an instant, causing severe price swings.

To explain to a lay person, Hunsader offers up two examples of the kinds of trades he’s seeing. The first happened less than a minute before the April Jobs report was released by the Department of Labor in Washington.

That report is traditionally one of the most dramatic market-moving events of each month. As a result, traders tend to lie low in the minute or so before the number comes out at 8:30 a.m. on the first Friday of each month, so they don’t get caught when the market changes.

But Hunsader argues that he’s seeing a small group of high speed traders who aren’t lying low. In fact, they’re taking advantage of the regular and predictable lull in the market to pop high speed trades in order to intentionally create a several hundred millisecond burst of volatility, and then execute follow-on trades to profit from that.

To understand what happens, you have to go inside just one second of trading and look at the way markets move at speeds that can be almost imperceptible to human beings.

On May 4, Hunsader says, he spotted those traders just before the April number was released. At 8:29:20 and about 200 milliseconds, he says, someone — he has no way of knowing who — executed a trade in the five year T-note futures market worth about $150 million.

A chart of that single second in the market shows that prices are relatively stable until the trade. And just after that, for the rest of the second, prices spike, and gyrate up and down as other automated high speed computers react to the trade.

Hunsader says he doesn’t know exactly how the traders make money off the volatility that they create, but he suspects they’re making other trades in the milliseconds following their market moving trade that take advantage of the relationships between this market and others that are impacted by it.

The traders that move first, and fastest, win, he says.

“It’s like two guys running in the woods, and they see a bear and one guy drops down and puts his shoes on and the other guy says, ‘what are you doing that for, you can’t outrun a bear,’” Hunsader says. “And the guy goes, ‘I don’t have to outrun the bear, I just have to outrun you.’”

On another occasion, Hunsader says he saw traders taking advantage of something as fundamental as the speed of light.

Because trades are executed by fiber-optic cable, the fastest they can travel—and the fastest anything in the universe can travel—is the speed of light. But even at that speed, it takes about 11 milliseconds for information from exchanges based in New York to get to exchanges based in Chicago. And that provides an opportunity for arbitrage for those who can move fast enough.

“Recently, they put in this new high speed line between Chicago and New York,” Hunsader says. “Essentially (they) drilled through mountains to shave a few milliseconds — thousandths of seconds — off, getting it down to 11 milliseconds. But I think somebody’s figured out how to get it to zero milliseconds.”

And the way they do that, in effect, became clear on May 3, Hunsader argues.

At 9:59:11 and about 620 milliseconds, someone executed a trade in Chicago, purchasing about 1,300 ES contracts for about $70 million. That happened to come in a lull just before two economic indicators were to be released at 10 a.m. that day.

At the exact same millisecond, 9:59:11 and about 620 milliseconds, Hunsader says, another trade was executed: Somebody bought 260,000 shares of a closely correlated product, SPY, for about $36 million.

Hunsader has no way of knowing for sure it was the same person executing both trades. But he says he sees same millisecond trades happening in both cities in related products often enough that he doesn’t think it can be pure coincidence.

In fact, he says, someone placing big orders in related products in both cities would gain a valuable advantage: for 11 milliseconds, they would be the only ones in the world who knew what happened in both markets.

By the time Chicago received the information about what happened in New York, and New York received the information about what happened in Chicago, Hunsader says, the traders who execute such trades would have a relatively long time to position themselves for the predictable fallout. And that’s a profit opportunity.

“The speed of light is fast,” Hunsader says, “But it’s not as fast as the high frequency traders would like it to be.”

The trick is, you have to have a super-fast computer and $100 million in deployable cash to make it work.

Hunsader says he sees these trades happening so frequently, in fact, that he advises individual investors not to make any trades at all between 9:58 and 10:02 a.m. Eastern, since many economic reports are released at exactly 10 a.m.

The high speed, high volume trading he’s seeing can cause asset prices to gap by small increments — so that if you’re executing a trade at that minute and a high speed trader is jamming data lines at the same time, you might not get the deal at the price you thought when you pressed the button to process the trade.

What’s more, Hunsader says, this kind of trading is causing market instability—to the extent that the right set of circumstances could set off a cascade much worse than the flash crash of 2010.

“You might hear, ‘we’re doing fine, now,’” Hunsader says. “Well, yes, everything will be just fine as long as, as the news is sunshine-y happy. If you get a shock to system, you’re going to see very quickly just how undercapacity we are.”

Not everybody sees high speed trading as dangerous, of course. CNBC spoke to Jim Overdahl, a vice president at NERA Economic Consulting, who argued that high frequency trades are an important tool for professional traders.

“I think the bottom line argument on the benefits of high-frequency trading: it’s a risk management tool for professional traders,” Oberdhal said. “It allows them to quickly revise their quotes and offer better quotes because they’re able to manage the risk of being picked off by better informed trader or traders with superior information about order flow or market moving news.”

by Eamon Javers CNBC May 15, 2012


The Dangers of High-Speed Trading - US Business News - CNBC

The Dangers of High-Speed Trading - US Business News - CNBC

Arbitrage potential at the speed of light at 11 millisecond between NYSE and CME...

Comstock | Getty Images


Eric Scott Hunsader has gone completely down the rabbit hole, and he doesn’t like what he’s finding there.

Hunsader is the CEO of a Chicago-based market analytics firm that specializes in high-frequency trading — super fast trades executed at the speed of light that can alter asset prices faster than human beings can react to the changes.

Based on his own analysis, Hunsader has come to a startling conclusion: Markets today are even more susceptible to sudden failure than they were two years ago during the “flash crash,” which brought the stock market down by about 1,000 points in mere minutes.

That’s because a new breed of trader armed with hundreds of millions of dollars to deploy is trading so fast—and with such spikes in volume—that he can dry up liquidity in an instant, causing severe price swings.

To explain to a lay person, Hunsader offers up two examples of the kinds of trades he’s seeing. The first happened less than a minute before the April Jobs report was released by the Department of Labor in Washington.

That report is traditionally one of the most dramatic market-moving events of each month. As a result, traders tend to lie low in the minute or so before the number comes out at 8:30 a.m. on the first Friday of each month, so they don’t get caught when the market changes.

But Hunsader argues that he’s seeing a small group of high speed traders who aren’t lying low. In fact, they’re taking advantage of the regular and predictable lull in the market to pop high speed trades in order to intentionally create a several hundred millisecond burst of volatility, and then execute follow-on trades to profit from that.

To understand what happens, you have to go inside just one second of trading and look at the way markets move at speeds that can be almost imperceptible to human beings.

On May 4, Hunsader says, he spotted those traders just before the April number was released. At 8:29:20 and about 200 milliseconds, he says, someone — he has no way of knowing who — executed a trade in the five year T-note futures market worth about $150 million.

A chart of that single second in the market shows that prices are relatively stable until the trade. And just after that, for the rest of the second, prices spike, and gyrate up and down as other automated high speed computers react to the trade.

Hunsader says he doesn’t know exactly how the traders make money off the volatility that they create, but he suspects they’re making other trades in the milliseconds following their market moving trade that take advantage of the relationships between this market and others that are impacted by it.

The traders that move first, and fastest, win, he says.

“It’s like two guys running in the woods, and they see a bear and one guy drops down and puts his shoes on and the other guy says, ‘what are you doing that for, you can’t outrun a bear,’” Hunsader says. “And the guy goes, ‘I don’t have to outrun the bear, I just have to outrun you.’”

On another occasion, Hunsader says he saw traders taking advantage of something as fundamental as the speed of light.

Because trades are executed by fiber-optic cable, the fastest they can travel—and the fastest anything in the universe can travel—is the speed of light. But even at that speed, it takes about 11 milliseconds for information from exchanges based in New York to get to exchanges based in Chicago. And that provides an opportunity for arbitrage for those who can move fast enough.

“Recently, they put in this new high speed line between Chicago and New York,” Hunsader says. “Essentially (they) drilled through mountains to shave a few milliseconds — thousandths of seconds — off, getting it down to 11 milliseconds. But I think somebody’s figured out how to get it to zero milliseconds.”

And the way they do that, in effect, became clear on May 3, Hunsader argues.

At 9:59:11 and about 620 milliseconds, someone executed a trade in Chicago, purchasing about 1,300 ES contracts for about $70 million. That happened to come in a lull just before two economic indicators were to be released at 10 a.m. that day.

At the exact same millisecond, 9:59:11 and about 620 milliseconds, Hunsader says, another trade was executed: Somebody bought 260,000 shares of a closely correlated product, SPY, for about $36 million.

Hunsader has no way of knowing for sure it was the same person executing both trades. But he says he sees same millisecond trades happening in both cities in related products often enough that he doesn’t think it can be pure coincidence.

In fact, he says, someone placing big orders in related products in both cities would gain a valuable advantage: for 11 milliseconds, they would be the only ones in the world who knew what happened in both markets.

By the time Chicago received the information about what happened in New York, and New York received the information about what happened in Chicago, Hunsader says, the traders who execute such trades would have a relatively long time to position themselves for the predictable fallout. And that’s a profit opportunity.

“The speed of light is fast,” Hunsader says, “But it’s not as fast as the high frequency traders would like it to be.”

The trick is, you have to have a super-fast computer and $100 million in deployable cash to make it work.

Hunsader says he sees these trades happening so frequently, in fact, that he advises individual investors not to make any trades at all between 9:58 and 10:02 a.m. Eastern, since many economic reports are released at exactly 10 a.m.

The high speed, high volume trading he’s seeing can cause asset prices to gap by small increments — so that if you’re executing a trade at that minute and a high speed trader is jamming data lines at the same time, you might not get the deal at the price you thought when you pressed the button to process the trade.

What’s more, Hunsader says, this kind of trading is causing market instability—to the extent that the right set of circumstances could set off a cascade much worse than the flash crash of 2010.

“You might hear, ‘we’re doing fine, now,’” Hunsader says. “Well, yes, everything will be just fine as long as, as the news is sunshine-y happy. If you get a shock to system, you’re going to see very quickly just how undercapacity we are.”

Not everybody sees high speed trading as dangerous, of course. CNBC spoke to Jim Overdahl, a vice president at NERA Economic Consulting, who argued that high frequency trades are an important tool for professional traders.

“I think the bottom line argument on the benefits of high-frequency trading: it’s a risk management tool for professional traders,” Oberdhal said. “It allows them to quickly revise their quotes and offer better quotes because they’re able to manage the risk of being picked off by better informed trader or traders with superior information about order flow or market moving news.”

by Eamon Javers CNBC May 15, 2012


The Dangers of High-Speed Trading - US Business News - CNBC

The Dangers of High-Speed Trading - US Business News - CNBC

Arbitrage potential at the speed of light at 11 millisecond between NYSE and CME...

Comstock | Getty Images


Eric Scott Hunsader has gone completely down the rabbit hole, and he doesn’t like what he’s finding there.

Hunsader is the CEO of a Chicago-based market analytics firm that specializes in high-frequency trading — super fast trades executed at the speed of light that can alter asset prices faster than human beings can react to the changes.

Based on his own analysis, Hunsader has come to a startling conclusion: Markets today are even more susceptible to sudden failure than they were two years ago during the “flash crash,” which brought the stock market down by about 1,000 points in mere minutes.

That’s because a new breed of trader armed with hundreds of millions of dollars to deploy is trading so fast—and with such spikes in volume—that he can dry up liquidity in an instant, causing severe price swings.

To explain to a lay person, Hunsader offers up two examples of the kinds of trades he’s seeing. The first happened less than a minute before the April Jobs report was released by the Department of Labor in Washington.

That report is traditionally one of the most dramatic market-moving events of each month. As a result, traders tend to lie low in the minute or so before the number comes out at 8:30 a.m. on the first Friday of each month, so they don’t get caught when the market changes.

But Hunsader argues that he’s seeing a small group of high speed traders who aren’t lying low. In fact, they’re taking advantage of the regular and predictable lull in the market to pop high speed trades in order to intentionally create a several hundred millisecond burst of volatility, and then execute follow-on trades to profit from that.

To understand what happens, you have to go inside just one second of trading and look at the way markets move at speeds that can be almost imperceptible to human beings.

On May 4, Hunsader says, he spotted those traders just before the April number was released. At 8:29:20 and about 200 milliseconds, he says, someone — he has no way of knowing who — executed a trade in the five year T-note futures market worth about $150 million.

A chart of that single second in the market shows that prices are relatively stable until the trade. And just after that, for the rest of the second, prices spike, and gyrate up and down as other automated high speed computers react to the trade.

Hunsader says he doesn’t know exactly how the traders make money off the volatility that they create, but he suspects they’re making other trades in the milliseconds following their market moving trade that take advantage of the relationships between this market and others that are impacted by it.

The traders that move first, and fastest, win, he says.

“It’s like two guys running in the woods, and they see a bear and one guy drops down and puts his shoes on and the other guy says, ‘what are you doing that for, you can’t outrun a bear,’” Hunsader says. “And the guy goes, ‘I don’t have to outrun the bear, I just have to outrun you.’”

On another occasion, Hunsader says he saw traders taking advantage of something as fundamental as the speed of light.

Because trades are executed by fiber-optic cable, the fastest they can travel—and the fastest anything in the universe can travel—is the speed of light. But even at that speed, it takes about 11 milliseconds for information from exchanges based in New York to get to exchanges based in Chicago. And that provides an opportunity for arbitrage for those who can move fast enough.

“Recently, they put in this new high speed line between Chicago and New York,” Hunsader says. “Essentially (they) drilled through mountains to shave a few milliseconds — thousandths of seconds — off, getting it down to 11 milliseconds. But I think somebody’s figured out how to get it to zero milliseconds.”

And the way they do that, in effect, became clear on May 3, Hunsader argues.

At 9:59:11 and about 620 milliseconds, someone executed a trade in Chicago, purchasing about 1,300 ES contracts for about $70 million. That happened to come in a lull just before two economic indicators were to be released at 10 a.m. that day.

At the exact same millisecond, 9:59:11 and about 620 milliseconds, Hunsader says, another trade was executed: Somebody bought 260,000 shares of a closely correlated product, SPY, for about $36 million.

Hunsader has no way of knowing for sure it was the same person executing both trades. But he says he sees same millisecond trades happening in both cities in related products often enough that he doesn’t think it can be pure coincidence.

In fact, he says, someone placing big orders in related products in both cities would gain a valuable advantage: for 11 milliseconds, they would be the only ones in the world who knew what happened in both markets.

By the time Chicago received the information about what happened in New York, and New York received the information about what happened in Chicago, Hunsader says, the traders who execute such trades would have a relatively long time to position themselves for the predictable fallout. And that’s a profit opportunity.

“The speed of light is fast,” Hunsader says, “But it’s not as fast as the high frequency traders would like it to be.”

The trick is, you have to have a super-fast computer and $100 million in deployable cash to make it work.

Hunsader says he sees these trades happening so frequently, in fact, that he advises individual investors not to make any trades at all between 9:58 and 10:02 a.m. Eastern, since many economic reports are released at exactly 10 a.m.

The high speed, high volume trading he’s seeing can cause asset prices to gap by small increments — so that if you’re executing a trade at that minute and a high speed trader is jamming data lines at the same time, you might not get the deal at the price you thought when you pressed the button to process the trade.

What’s more, Hunsader says, this kind of trading is causing market instability—to the extent that the right set of circumstances could set off a cascade much worse than the flash crash of 2010.

“You might hear, ‘we’re doing fine, now,’” Hunsader says. “Well, yes, everything will be just fine as long as, as the news is sunshine-y happy. If you get a shock to system, you’re going to see very quickly just how undercapacity we are.”

Not everybody sees high speed trading as dangerous, of course. CNBC spoke to Jim Overdahl, a vice president at NERA Economic Consulting, who argued that high frequency trades are an important tool for professional traders.

“I think the bottom line argument on the benefits of high-frequency trading: it’s a risk management tool for professional traders,” Oberdhal said. “It allows them to quickly revise their quotes and offer better quotes because they’re able to manage the risk of being picked off by better informed trader or traders with superior information about order flow or market moving news.”

by Eamon Javers CNBC May 15, 2012


The Dangers of High-Speed Trading - US Business News - CNBC

The Dangers of High-Speed Trading - US Business News - CNBC

Arbitrage potential at the speed of light at 11 millisecond between NYSE and CME...

Comstock | Getty Images


Eric Scott Hunsader has gone completely down the rabbit hole, and he doesn’t like what he’s finding there.

Hunsader is the CEO of a Chicago-based market analytics firm that specializes in high-frequency trading — super fast trades executed at the speed of light that can alter asset prices faster than human beings can react to the changes.

Based on his own analysis, Hunsader has come to a startling conclusion: Markets today are even more susceptible to sudden failure than they were two years ago during the “flash crash,” which brought the stock market down by about 1,000 points in mere minutes.

That’s because a new breed of trader armed with hundreds of millions of dollars to deploy is trading so fast—and with such spikes in volume—that he can dry up liquidity in an instant, causing severe price swings.

To explain to a lay person, Hunsader offers up two examples of the kinds of trades he’s seeing. The first happened less than a minute before the April Jobs report was released by the Department of Labor in Washington.

That report is traditionally one of the most dramatic market-moving events of each month. As a result, traders tend to lie low in the minute or so before the number comes out at 8:30 a.m. on the first Friday of each month, so they don’t get caught when the market changes.

But Hunsader argues that he’s seeing a small group of high speed traders who aren’t lying low. In fact, they’re taking advantage of the regular and predictable lull in the market to pop high speed trades in order to intentionally create a several hundred millisecond burst of volatility, and then execute follow-on trades to profit from that.

To understand what happens, you have to go inside just one second of trading and look at the way markets move at speeds that can be almost imperceptible to human beings.

On May 4, Hunsader says, he spotted those traders just before the April number was released. At 8:29:20 and about 200 milliseconds, he says, someone — he has no way of knowing who — executed a trade in the five year T-note futures market worth about $150 million.

A chart of that single second in the market shows that prices are relatively stable until the trade. And just after that, for the rest of the second, prices spike, and gyrate up and down as other automated high speed computers react to the trade.

Hunsader says he doesn’t know exactly how the traders make money off the volatility that they create, but he suspects they’re making other trades in the milliseconds following their market moving trade that take advantage of the relationships between this market and others that are impacted by it.

The traders that move first, and fastest, win, he says.

“It’s like two guys running in the woods, and they see a bear and one guy drops down and puts his shoes on and the other guy says, ‘what are you doing that for, you can’t outrun a bear,’” Hunsader says. “And the guy goes, ‘I don’t have to outrun the bear, I just have to outrun you.’”

On another occasion, Hunsader says he saw traders taking advantage of something as fundamental as the speed of light.

Because trades are executed by fiber-optic cable, the fastest they can travel—and the fastest anything in the universe can travel—is the speed of light. But even at that speed, it takes about 11 milliseconds for information from exchanges based in New York to get to exchanges based in Chicago. And that provides an opportunity for arbitrage for those who can move fast enough.

“Recently, they put in this new high speed line between Chicago and New York,” Hunsader says. “Essentially (they) drilled through mountains to shave a few milliseconds — thousandths of seconds — off, getting it down to 11 milliseconds. But I think somebody’s figured out how to get it to zero milliseconds.”

And the way they do that, in effect, became clear on May 3, Hunsader argues.

At 9:59:11 and about 620 milliseconds, someone executed a trade in Chicago, purchasing about 1,300 ES contracts for about $70 million. That happened to come in a lull just before two economic indicators were to be released at 10 a.m. that day.

At the exact same millisecond, 9:59:11 and about 620 milliseconds, Hunsader says, another trade was executed: Somebody bought 260,000 shares of a closely correlated product, SPY, for about $36 million.

Hunsader has no way of knowing for sure it was the same person executing both trades. But he says he sees same millisecond trades happening in both cities in related products often enough that he doesn’t think it can be pure coincidence.

In fact, he says, someone placing big orders in related products in both cities would gain a valuable advantage: for 11 milliseconds, they would be the only ones in the world who knew what happened in both markets.

By the time Chicago received the information about what happened in New York, and New York received the information about what happened in Chicago, Hunsader says, the traders who execute such trades would have a relatively long time to position themselves for the predictable fallout. And that’s a profit opportunity.

“The speed of light is fast,” Hunsader says, “But it’s not as fast as the high frequency traders would like it to be.”

The trick is, you have to have a super-fast computer and $100 million in deployable cash to make it work.

Hunsader says he sees these trades happening so frequently, in fact, that he advises individual investors not to make any trades at all between 9:58 and 10:02 a.m. Eastern, since many economic reports are released at exactly 10 a.m.

The high speed, high volume trading he’s seeing can cause asset prices to gap by small increments — so that if you’re executing a trade at that minute and a high speed trader is jamming data lines at the same time, you might not get the deal at the price you thought when you pressed the button to process the trade.

What’s more, Hunsader says, this kind of trading is causing market instability—to the extent that the right set of circumstances could set off a cascade much worse than the flash crash of 2010.

“You might hear, ‘we’re doing fine, now,’” Hunsader says. “Well, yes, everything will be just fine as long as, as the news is sunshine-y happy. If you get a shock to system, you’re going to see very quickly just how undercapacity we are.”

Not everybody sees high speed trading as dangerous, of course. CNBC spoke to Jim Overdahl, a vice president at NERA Economic Consulting, who argued that high frequency trades are an important tool for professional traders.

“I think the bottom line argument on the benefits of high-frequency trading: it’s a risk management tool for professional traders,” Oberdhal said. “It allows them to quickly revise their quotes and offer better quotes because they’re able to manage the risk of being picked off by better informed trader or traders with superior information about order flow or market moving news.”

by Eamon Javers CNBC May 15, 2012


The Dangers of High-Speed Trading - US Business News - CNBC

U.S. household wealth takes biggest hit since 2008

WASHINGTON -- Americans' wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value.

At the same time, corporations increased their cash stockpiles to record levels.

Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the October-December quarter of 2008 and was the second straight quarterly decline.

Household wealth, or net worth, is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.

The value of Americans' stock portfolios fell 5.2 percent last quarter. Home values dropped 0.6 percent.

Lower net worth can hurt the economy. When people feel poorer, they spend less. That slows growth. Businesses typically then cut back on hiring and expansion.

Corporations held a record $2.1 trillion in cash at the end of September.

Stock market declines have held back Americans' long, slow quest to recover losses from the 2008 financial meltdown.

The Standard & Poor's 500 stock index tumbled about 14 percent in the July-September period, ending a streak of four straight quarterly increases. The decline was driven by worries about Europe's debt crisis and the U.S. economy.

Stocks have rebounded about 10 percent since last quarter ended. But the S&P index is still down about 20 percent from its peak four years ago.

Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.

Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.

The average balance in company-run retirement plans managed by Fidelity Investments, the largest workplace savings plan provider, dropped nearly 12 percent in the July-September period.

Thanks largely to workers' added contributions and company matches, about 92 percent of people who have company-run retirement savings plans now have more money in their accounts than at the market top in October 2007, according to the Employee Benefit Research Institute in Washington.

A rise in housing prices would help increase net worth by increasing home equity. But that still hasn't happened.

Home values have fallen sharply since the Great Recession began in December 2007, and people have less equity in their homes. Home values fell to $16.1 trillion in the July-September period, down from nearly $21 trillion in 2007, before the recession began.

Most economists expect prices to fall further, as banks resume foreclosing on millions of homes with past-due mortgages. Many foreclosures have been delayed because of a government investigation into mortgage lending practices.

When their declining wealth is combined with stagnant incomes, many Americans are less likely to spend. That's a drag on the economy, since consumer spending accounts for 70 percent of economic activity.

Average household income, adjusted for inflation, fell 6.4 percent last year from 2007, the year before the recession, the Census Bureau said this week.

The Fed's quarterly report documents wealth, debt and savings for corporations, governments and households. It covers most of the financial transactions that take place in the United States.

by Derek Kravitz AP Business Writers Dec. 8, 2011 12:17 PM



U.S. household wealth takes biggest hit since 2008

U.S. household wealth takes biggest hit since 2008

WASHINGTON -- Americans' wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value.

At the same time, corporations increased their cash stockpiles to record levels.

Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the October-December quarter of 2008 and was the second straight quarterly decline.

Household wealth, or net worth, is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.

The value of Americans' stock portfolios fell 5.2 percent last quarter. Home values dropped 0.6 percent.

Lower net worth can hurt the economy. When people feel poorer, they spend less. That slows growth. Businesses typically then cut back on hiring and expansion.

Corporations held a record $2.1 trillion in cash at the end of September.

Stock market declines have held back Americans' long, slow quest to recover losses from the 2008 financial meltdown.

The Standard & Poor's 500 stock index tumbled about 14 percent in the July-September period, ending a streak of four straight quarterly increases. The decline was driven by worries about Europe's debt crisis and the U.S. economy.

Stocks have rebounded about 10 percent since last quarter ended. But the S&P index is still down about 20 percent from its peak four years ago.

Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.

Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.

The average balance in company-run retirement plans managed by Fidelity Investments, the largest workplace savings plan provider, dropped nearly 12 percent in the July-September period.

Thanks largely to workers' added contributions and company matches, about 92 percent of people who have company-run retirement savings plans now have more money in their accounts than at the market top in October 2007, according to the Employee Benefit Research Institute in Washington.

A rise in housing prices would help increase net worth by increasing home equity. But that still hasn't happened.

Home values have fallen sharply since the Great Recession began in December 2007, and people have less equity in their homes. Home values fell to $16.1 trillion in the July-September period, down from nearly $21 trillion in 2007, before the recession began.

Most economists expect prices to fall further, as banks resume foreclosing on millions of homes with past-due mortgages. Many foreclosures have been delayed because of a government investigation into mortgage lending practices.

When their declining wealth is combined with stagnant incomes, many Americans are less likely to spend. That's a drag on the economy, since consumer spending accounts for 70 percent of economic activity.

Average household income, adjusted for inflation, fell 6.4 percent last year from 2007, the year before the recession, the Census Bureau said this week.

The Fed's quarterly report documents wealth, debt and savings for corporations, governments and households. It covers most of the financial transactions that take place in the United States.

by Derek Kravitz AP Business Writers Dec. 8, 2011 12:17 PM



U.S. household wealth takes biggest hit since 2008

U.S. household wealth takes biggest hit since 2008

WASHINGTON -- Americans' wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value.

At the same time, corporations increased their cash stockpiles to record levels.

Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the October-December quarter of 2008 and was the second straight quarterly decline.

Household wealth, or net worth, is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.

The value of Americans' stock portfolios fell 5.2 percent last quarter. Home values dropped 0.6 percent.

Lower net worth can hurt the economy. When people feel poorer, they spend less. That slows growth. Businesses typically then cut back on hiring and expansion.

Corporations held a record $2.1 trillion in cash at the end of September.

Stock market declines have held back Americans' long, slow quest to recover losses from the 2008 financial meltdown.

The Standard & Poor's 500 stock index tumbled about 14 percent in the July-September period, ending a streak of four straight quarterly increases. The decline was driven by worries about Europe's debt crisis and the U.S. economy.

Stocks have rebounded about 10 percent since last quarter ended. But the S&P index is still down about 20 percent from its peak four years ago.

Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.

Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.

The average balance in company-run retirement plans managed by Fidelity Investments, the largest workplace savings plan provider, dropped nearly 12 percent in the July-September period.

Thanks largely to workers' added contributions and company matches, about 92 percent of people who have company-run retirement savings plans now have more money in their accounts than at the market top in October 2007, according to the Employee Benefit Research Institute in Washington.

A rise in housing prices would help increase net worth by increasing home equity. But that still hasn't happened.

Home values have fallen sharply since the Great Recession began in December 2007, and people have less equity in their homes. Home values fell to $16.1 trillion in the July-September period, down from nearly $21 trillion in 2007, before the recession began.

Most economists expect prices to fall further, as banks resume foreclosing on millions of homes with past-due mortgages. Many foreclosures have been delayed because of a government investigation into mortgage lending practices.

When their declining wealth is combined with stagnant incomes, many Americans are less likely to spend. That's a drag on the economy, since consumer spending accounts for 70 percent of economic activity.

Average household income, adjusted for inflation, fell 6.4 percent last year from 2007, the year before the recession, the Census Bureau said this week.

The Fed's quarterly report documents wealth, debt and savings for corporations, governments and households. It covers most of the financial transactions that take place in the United States.

by Derek Kravitz AP Business Writers Dec. 8, 2011 12:17 PM



U.S. household wealth takes biggest hit since 2008

U.S. household wealth takes biggest hit since 2008

WASHINGTON -- Americans' wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value.

At the same time, corporations increased their cash stockpiles to record levels.

Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the October-December quarter of 2008 and was the second straight quarterly decline.

Household wealth, or net worth, is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.

The value of Americans' stock portfolios fell 5.2 percent last quarter. Home values dropped 0.6 percent.

Lower net worth can hurt the economy. When people feel poorer, they spend less. That slows growth. Businesses typically then cut back on hiring and expansion.

Corporations held a record $2.1 trillion in cash at the end of September.

Stock market declines have held back Americans' long, slow quest to recover losses from the 2008 financial meltdown.

The Standard & Poor's 500 stock index tumbled about 14 percent in the July-September period, ending a streak of four straight quarterly increases. The decline was driven by worries about Europe's debt crisis and the U.S. economy.

Stocks have rebounded about 10 percent since last quarter ended. But the S&P index is still down about 20 percent from its peak four years ago.

Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.

Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.

The average balance in company-run retirement plans managed by Fidelity Investments, the largest workplace savings plan provider, dropped nearly 12 percent in the July-September period.

Thanks largely to workers' added contributions and company matches, about 92 percent of people who have company-run retirement savings plans now have more money in their accounts than at the market top in October 2007, according to the Employee Benefit Research Institute in Washington.

A rise in housing prices would help increase net worth by increasing home equity. But that still hasn't happened.

Home values have fallen sharply since the Great Recession began in December 2007, and people have less equity in their homes. Home values fell to $16.1 trillion in the July-September period, down from nearly $21 trillion in 2007, before the recession began.

Most economists expect prices to fall further, as banks resume foreclosing on millions of homes with past-due mortgages. Many foreclosures have been delayed because of a government investigation into mortgage lending practices.

When their declining wealth is combined with stagnant incomes, many Americans are less likely to spend. That's a drag on the economy, since consumer spending accounts for 70 percent of economic activity.

Average household income, adjusted for inflation, fell 6.4 percent last year from 2007, the year before the recession, the Census Bureau said this week.

The Fed's quarterly report documents wealth, debt and savings for corporations, governments and households. It covers most of the financial transactions that take place in the United States.

by Derek Kravitz AP Business Writers Dec. 8, 2011 12:17 PM



U.S. household wealth takes biggest hit since 2008

U.S. household wealth takes biggest hit since 2008

WASHINGTON -- Americans' wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value.

At the same time, corporations increased their cash stockpiles to record levels.

Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the October-December quarter of 2008 and was the second straight quarterly decline.

Household wealth, or net worth, is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.

The value of Americans' stock portfolios fell 5.2 percent last quarter. Home values dropped 0.6 percent.

Lower net worth can hurt the economy. When people feel poorer, they spend less. That slows growth. Businesses typically then cut back on hiring and expansion.

Corporations held a record $2.1 trillion in cash at the end of September.

Stock market declines have held back Americans' long, slow quest to recover losses from the 2008 financial meltdown.

The Standard & Poor's 500 stock index tumbled about 14 percent in the July-September period, ending a streak of four straight quarterly increases. The decline was driven by worries about Europe's debt crisis and the U.S. economy.

Stocks have rebounded about 10 percent since last quarter ended. But the S&P index is still down about 20 percent from its peak four years ago.

Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.

Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.

The average balance in company-run retirement plans managed by Fidelity Investments, the largest workplace savings plan provider, dropped nearly 12 percent in the July-September period.

Thanks largely to workers' added contributions and company matches, about 92 percent of people who have company-run retirement savings plans now have more money in their accounts than at the market top in October 2007, according to the Employee Benefit Research Institute in Washington.

A rise in housing prices would help increase net worth by increasing home equity. But that still hasn't happened.

Home values have fallen sharply since the Great Recession began in December 2007, and people have less equity in their homes. Home values fell to $16.1 trillion in the July-September period, down from nearly $21 trillion in 2007, before the recession began.

Most economists expect prices to fall further, as banks resume foreclosing on millions of homes with past-due mortgages. Many foreclosures have been delayed because of a government investigation into mortgage lending practices.

When their declining wealth is combined with stagnant incomes, many Americans are less likely to spend. That's a drag on the economy, since consumer spending accounts for 70 percent of economic activity.

Average household income, adjusted for inflation, fell 6.4 percent last year from 2007, the year before the recession, the Census Bureau said this week.

The Fed's quarterly report documents wealth, debt and savings for corporations, governments and households. It covers most of the financial transactions that take place in the United States.

by Derek Kravitz AP Business Writers Dec. 8, 2011 12:17 PM



U.S. household wealth takes biggest hit since 2008

U.S. household wealth takes biggest hit since 2008

WASHINGTON -- Americans' wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value.

At the same time, corporations increased their cash stockpiles to record levels.

Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the October-December quarter of 2008 and was the second straight quarterly decline.

Household wealth, or net worth, is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.

The value of Americans' stock portfolios fell 5.2 percent last quarter. Home values dropped 0.6 percent.

Lower net worth can hurt the economy. When people feel poorer, they spend less. That slows growth. Businesses typically then cut back on hiring and expansion.

Corporations held a record $2.1 trillion in cash at the end of September.

Stock market declines have held back Americans' long, slow quest to recover losses from the 2008 financial meltdown.

The Standard & Poor's 500 stock index tumbled about 14 percent in the July-September period, ending a streak of four straight quarterly increases. The decline was driven by worries about Europe's debt crisis and the U.S. economy.

Stocks have rebounded about 10 percent since last quarter ended. But the S&P index is still down about 20 percent from its peak four years ago.

Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.

Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.

The average balance in company-run retirement plans managed by Fidelity Investments, the largest workplace savings plan provider, dropped nearly 12 percent in the July-September period.

Thanks largely to workers' added contributions and company matches, about 92 percent of people who have company-run retirement savings plans now have more money in their accounts than at the market top in October 2007, according to the Employee Benefit Research Institute in Washington.

A rise in housing prices would help increase net worth by increasing home equity. But that still hasn't happened.

Home values have fallen sharply since the Great Recession began in December 2007, and people have less equity in their homes. Home values fell to $16.1 trillion in the July-September period, down from nearly $21 trillion in 2007, before the recession began.

Most economists expect prices to fall further, as banks resume foreclosing on millions of homes with past-due mortgages. Many foreclosures have been delayed because of a government investigation into mortgage lending practices.

When their declining wealth is combined with stagnant incomes, many Americans are less likely to spend. That's a drag on the economy, since consumer spending accounts for 70 percent of economic activity.

Average household income, adjusted for inflation, fell 6.4 percent last year from 2007, the year before the recession, the Census Bureau said this week.

The Fed's quarterly report documents wealth, debt and savings for corporations, governments and households. It covers most of the financial transactions that take place in the United States.

by Derek Kravitz AP Business Writers Dec. 8, 2011 12:17 PM



U.S. household wealth takes biggest hit since 2008

U.S. household wealth takes biggest hit since 2008

WASHINGTON -- Americans' wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value.

At the same time, corporations increased their cash stockpiles to record levels.

Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the October-December quarter of 2008 and was the second straight quarterly decline.

Household wealth, or net worth, is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.

The value of Americans' stock portfolios fell 5.2 percent last quarter. Home values dropped 0.6 percent.

Lower net worth can hurt the economy. When people feel poorer, they spend less. That slows growth. Businesses typically then cut back on hiring and expansion.

Corporations held a record $2.1 trillion in cash at the end of September.

Stock market declines have held back Americans' long, slow quest to recover losses from the 2008 financial meltdown.

The Standard & Poor's 500 stock index tumbled about 14 percent in the July-September period, ending a streak of four straight quarterly increases. The decline was driven by worries about Europe's debt crisis and the U.S. economy.

Stocks have rebounded about 10 percent since last quarter ended. But the S&P index is still down about 20 percent from its peak four years ago.

Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.

Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.

The average balance in company-run retirement plans managed by Fidelity Investments, the largest workplace savings plan provider, dropped nearly 12 percent in the July-September period.

Thanks largely to workers' added contributions and company matches, about 92 percent of people who have company-run retirement savings plans now have more money in their accounts than at the market top in October 2007, according to the Employee Benefit Research Institute in Washington.

A rise in housing prices would help increase net worth by increasing home equity. But that still hasn't happened.

Home values have fallen sharply since the Great Recession began in December 2007, and people have less equity in their homes. Home values fell to $16.1 trillion in the July-September period, down from nearly $21 trillion in 2007, before the recession began.

Most economists expect prices to fall further, as banks resume foreclosing on millions of homes with past-due mortgages. Many foreclosures have been delayed because of a government investigation into mortgage lending practices.

When their declining wealth is combined with stagnant incomes, many Americans are less likely to spend. That's a drag on the economy, since consumer spending accounts for 70 percent of economic activity.

Average household income, adjusted for inflation, fell 6.4 percent last year from 2007, the year before the recession, the Census Bureau said this week.

The Fed's quarterly report documents wealth, debt and savings for corporations, governments and households. It covers most of the financial transactions that take place in the United States.

by Derek Kravitz AP Business Writers Dec. 8, 2011 12:17 PM



U.S. household wealth takes biggest hit since 2008