July 17, 2013 Update

DJIA:15,452 S&P 500:1,676 NASDAQ:3,599 Gold:$1,288 Oil:$105.75 EURO:$1.31 YEN:99.69

On The Perception of Personal Prosperity

Being an aggressive opportunist, I like to think that I believe in the American Dream. I would like to view myself as someone who would root for the immigrant to leave their hometown, to work hard, and to encourage them to buy the ultimate perceived symbol of success: a home. But in reality, I do not think I should be encouraging an optimistic risk taker to place confidence in a stale concept, and not because I think they’ll fail. On the contrary, I question the perception of personal prosperity and way in which the idealistic and close-minded image of success that the American Dream promotes is inbred around the world. I believe that the theory may, in fact, distort consumer judgement and unintentionally promote financial irresponsibility. For example, there are only two reasons why a consumer would feel more comfortable to increase their spending- either the person’s wealth has  increased, or they see themselves as wealthier. Since the 2008 global financial crisis, property values have been on the rise. And as the value of a home increases, so has the perception of personal wealth and, consequently, the rate at which individuals consume. There is a direct correlation between home prices and consumer spending, and I do not think this is at all coincidental. Because Americans are inbred to believe that a home is a symbol of their success, I believe a rise in property values causes many people to perceive themselves as more prosperous than they may actually be. During the height of the housing market, people borrowed against their homes in order to repay their loans and increase investments. When the housing market crashed and the credit crisis commenced, the value of people’s homes rapidly declined and many households went underwater. I think that because of the attitude the American Dream encourages, when the housing market was booming people mis-perceived the fruits of their achievements explaining why they felt comfortable borrowing against their "success," and became overconfident in their individual triumphs and personal potential. Lately there has been a lot of debate over the wealth effect, and how it is not what it use to be (since a rally in the housing market is not encouraging Americans to spend as generously as they use to; even with a ballooned equity market). However, I have to question if this is really something to complain about. Whether we want to admit it, the perception of success that the American Dream promises was a cause of the 2008 financial crisis; owning a home is clearly not the mark of success people perceive it to be. Before rooting and encouraging global citizens to move to fulfill the American Dream, maybe, as a country, we should reevaluate our perception of prosperity and recreate the concept of what living the American Dream is all about. 

Domestic News

• Market Update Futures are trading down as the market awaits Bernanke’s Humphrey Hawkins testimony. 
• Bernanke will testify before lawmakers at 10:00, investors will be listening for any hints of a plan for tapering. His prepared remarks will be released at 8:30. 
• MBA Mortgage applications came in at -2.6% compared to last week’s -4.0%. 

International Updates

Asia

• Market Update Traded mostly up in quiet trading ahead of Bernanke’s semi-annual monetary policy report to Congress, which is expected to calm fears.

Europe

• Market Update Markets were flat to higher ahead of Bernanke’s testimony. 
• U.K. unemployment fell to 7.8% in March-May from 8% in December-February.

Commodities & Forex

• Oil prices declined among with most precious metals.
• The dollar made subtle moves across the board.