U.S. millionaires say $7 mln not enough to be rich

A million dollars ain't what it used to be.

More than four out of ten American millionaires say they do not feel rich. Indeed many would need to have at least $7.5 million in order to feel they were truly rich, according to a Fidelity Investments survey.

Some 42 percent of the more than 1,000 millionaires surveyed by Fidelity said they did not feel wealthy. Respondents had at least $1 million in investable assets, excluding any real estate or retirement accounts.

"Every person in the survey is wealthy," said Sanjiv Mirchandani, president of National Financial, a unit of Fidelity. "But they are still worried about outliving their assets."

The average age of respondents was 56 years old with a mean of $3.5 million of investable assets. The threshold for "rich" rose with age.

"They compare themselves to their peer group ... and they are also thinking about the long period they will have in retirement and want more assets" to fund their lifestyle, said Michael Durbin, president of Fidelity Institutional Wealth Services.

Still, millionaires are slightly more optimistic now than they were in 2009, when 46 percent did not feel wealthy.

Respondents were also more optimistic about the U.S. economy. While they thought the current U.S. economy remained very weak, they think it will improve by the end of this year.

Fidelity noted the wealthiest 5 percent of Americans hold more than 55 percent of the nation's wealth.

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http://www.reuters.com/article/2011/03/14/uk-fidelity-survey-idUSLNE72D03820110314

Bank of America: Probably Still Screwed

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Brian Moynihan looked and sounded confident this morning as he closed out his first year as President and CEO of Bank of America.

This is quite a feat considering that Bank of America [BAC 14.25 -0.29 (-1.99%) ] posted a fourth-quarter net loss of $1.24 billion, or 16 cents a share. Analysts had expected the bank to earn 14 cents a share.

Revenue, which analysts had predicted would come in at $25 billion, was down 11% to just $22.7 billion. The $3 billion mortgage repurchase provision Bank of America announced just 3 weeks ago has grown to $4.1 billion. The bank took an additional $2 billion charge on the declining value of Countrywide.

Bank of America is trying to sell the market on the idea that last quarter—in fact all of 2010—saw a close to its troubles.

“Last year was a necessary repair and rebuilding year," Moynihan said. "Our results reflect the progress we are making at putting legacy—primarily mortgage-related-issues behind us.”

On CNBC’s Squawk Box, Moynihan said that the mortgage-related charges “won’t be recurring.” He even said that the bank would like to start raise its dividend in the second half of 2011.

The bank put an upward number of $10 billion on mortgage repurchase liability, but noted that theoretically the number could be as low as zero.

The “we put that behind us” line seems to be working. DealBook said the losses underscore “the still lingering effects of the mortgage mess.” Any number of other stories relate the losses to the acquisition of Countrywide and those “legacy” loans from 2005-2008, the worst years of the housing bubble.

I’m not so sure the problems at Bank of America are all in the past. Let’s focus on Bank of America’s mortgage lending. Now everyone knows the old story line about mortgages that goes like this: following the credit crunch of 2008, mortgage lending was much tighter, underwriting standards much better, and mortgage quality much higher.

The problem is that there is very little evidence to support this. In fact, we have lots of anecdotal evidence that the mortgage pool of 2009 might be nearly as toxic as those from the worst years of the housing bubble.

Let’s run through some data points on 2009:

* The mortgage volume was GIGANTIC. Around $2 trillion of home loans were made in 2009, the majority of them by the largest banks. That’s not really that far behind 2007’s volume of $2.4 trillion.
* Bank of America was the second largest mortgage lender in 2009, behind Wells Fargo. Its volume was up 116% over the previous year. Meanwhile, Citigroup and JP Morgan were pulling back, allowing the size of their mortgage business to shrink.
* Freddie Mac recently conducted a review of a sampling mortgages sold to it by Citigroup, and discovered that mortgages in the sample from 2009 had a 32% defect rate. It’s highly likely that other banks, including Bank of America, had similarly flawed mortgage processes in 2009.
* The recent robo-signing scandal has demonstrated that banks had pitiful internal controls over the foreclosure process as late as October of 2010. There’s good reason to suspect that the mortgage origination and purchase process is still broken too.
* The government intervened heavily in the housing market by putting in place a home buyer tax credit that allowed some buyers to pay for their downpayments with the tax credit. Essentially, some of these people put no money into their houses. We have no good estimate about how large this problem might be.
* The growth of the balance sheets of the FHA, Fannie, and Freddie took a lot of the immediate risk out of lending—risk that could return if the government mortgage companies start demanding that banks repurchase loans or cancelling insurance.

So far, the mortgages from 2009 have been performing well. But they are only one year old—and during much of that year home prices were appreciating. If home prices dip again, many of these borrowers will find themselves with declining equity and increasing reasons to default. Legal backlash against foreclosures has made it possible for many homeowners to stay in their homes for a very, very long time after they stop paying.

In short, we may soon discover that the home loans made in 2009 were far worse than is currently appreciated. And Bank of America was the second biggest lender in that market. The “lingering” mortgage mess may wind up lingering a lot longer than anyone thinks.

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http://www.cnbc.com/id/41195932

Lack of Hiring to Restrain U.S. Economy in 2011, Survey Shows

The economy in the U.S. will fail to strengthen in 2011 as companies limit hiring and consumers curb spending, a survey showed.

Gross domestic product will increase 2.6 percent next year after growing 2.7 percent in 2010, according to the median forecast of 51 economists surveyed by the National Association for Business Economics from Oct. 21 to Nov. 4.

“Growth is expected to be moderate,” Richard Wobbekind, president of the group and associate dean of the Leeds School of Business at the University of Colorado-Boulder, said in a statement. “Panelists remain concerned about high levels of federal debt, a continuing high level of unemployment, increased business regulation and rising commodity prices.”

A diminishing need to replenish inventories, the winding down of government stimulus and households’ drive to pay off debt will restrain growth, the survey showed. The economists polled said the world’s largest economy will add fewer jobs than they predicted last month.

Employment next year will climb by 136,000 a month on average, down from the 153,000 they projected in October, the survey showed. This month’s canvass was completed before the Labor Department reported on Nov. 5 that employers added 151,000 workers to payrolls last month, beating the median estimate of economists surveyed by Bloomberg News.

The unemployment rate will be 9.4 percent or higher through the middle of 2011 before dropping to 9.2 percent by the end of next year, according to economists surveyed.

Consumer spending will expand 1.7 percent in 2010 and 2.4 percent in 2011, the survey showed. Median projections in October for this year and next were 1.5 percent and 2.3 percent, respectively.

Inflation Forecast

Respondents also said inflation in 2011 will remain below the Federal Reserve’s estimates. Economists forecast the central bank’s preferred inflation gauge, the personal consumption expenditures price index excluding food and energy, will rise 1.3 percent next year after a 1.1 percent gain in 2010. Fed policy makers have a long-run inflation forecast of 1.7 percent to 2 percent, the level they see as consistent with achieving legislative mandates for maximum employment and stable prices.

About one-third of those surveyed said a Fed decision to buy more Treasury securities could diminish the risk of deflation, and another third said the action could increase the risk of “undesirable” inflation. Policy makers on Nov. 3 announced a plan to buy another $600 billion in government debt through June.

The Fed’s so-called quantitative easing program will not prevent borrowing costs from rising, the survey showed. The yield on the 10-year Treasury note will increase every quarter next year, finishing at 3.25 percent by the end of 2011. The yield at the end of the third quarter this year was 2.51 percent.

The biggest threat to the economy was “excessive federal debt,” according to those surveyed, exceeding concern over unemployment and either inflation or deflation, the report said.

The U.S. deficit will narrow to $1.1 trillion in 2011 from $1.3 trillion this year, according to the median forecast.

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http://www.bloomberg.com/news/2010-11-22/lack-of-hiring-to-limit-growth-in-u-s-next-year-economists-survey-shows.html