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Is Alt-A the New Subprime?, Part 1

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They're bigger, badder, and right around the corner.

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Editor's Note: This is the first part of a 2-part article. Part 2 can be found here.

This week, we look at the housing market in some detail. When can we expect it to turn around?

Part of the problem is that a new wave of foreclosures is coming due, and this time it's not subprime. And that means more problems for the large financial companies. Also, as predicted here, consumer spending is taking a hit, since consumers are finding it increasingly difficult to get credit and a deteriorating labor market is dragging down total spending.

There are some very interesting details in the data that was released this week, and we take a quick peek at the outlook for inflation. What's in the pipeline, so to speak? It should make for an interesting letter.

The Headwinds to Growing Your Wealth

One thing that I find interesting in our research is the difficult headwinds people are going to have in their efforts to grow their investment portfolios.

In The Millionaire Next Door, published in 1996, Thomas Stanley and William Danko revealed that 3.5 million households in America (out of a total 100 million households) had a net worth of $1 million or more. Millionaire households accounted for nearly half of all private wealth in America.

During the 10-year period from 1996 through 2005, the authors projected the wealth held by American households to grow nearly 6 times faster than the household population. The authors write that "by the year 2005 the total net worth of American households will be $27.7 trillion, or more than 20% higher than in 1996."

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