Northern Trust’s Paul Kasriel weighs in on the shrinking supply of U.S. equities (which, at least last year, translated into higher prices) and the outlook for U.S. consumer spending (bad).
According to Kasriel, corporations (and private-equity folks) "retired" a net $548 billion of equity in 2006, a record in both nominal terms and as a percentage of GDP. (See Daily Global Commentary, March 8, Chart 1).
Kasriel also remains colorfully bearish about consumer spending trends, noting that the rate at which households are raiding their home-equity piggy-banks is now slowing dramatically (Chart 3). U.S. households, meanwhile, have been net sellers of equities (Chart 2)–perhaps because they need the cash to finance their current spending habits. So U.S. stock-market bulls had better hope that U.S. corporations, private-equity firms, and foreign investors continue to scarf up the stocks that U.S. households are jettisoning, or both consumer spending and the stock market are likely to dive.
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