Durables, Cash, Money Markets, Govt. Securities, and Other Stuff
Yesterday, we looked at the five main places people hold wealth. But, in the net worth diagram on that post, there is a sixth item labeled other assets:
This is a pretty big chunk! And, as has always been the case whenever I bucket some things into an other category, someone always asks, “what’s in other?” So, here are four components, which are somewhat small on their own but do add up to make this other category pretty sizeable, starting with consumer durables:
Durables are things that are supposed to last a while, like a dishwasher. Is it any wonder that it has exploded during the pandemic, when everyone has been stuck at home and buying new stuff to survive being indoors all the time?
Next up is checkable deposits and currency - basically, cash:
This has also exploded during the pandemic due to stimulus. A lot of it hasn’t been spent yet.
Another thing like cash is money market shares, which is also in an elevated spot:
One critical point I’d like to make about this time series is that some people may believe that the market will be supported by all the cash out there sitting on the sidelines even if there is a downturn. Looking at the rise in cash on the sidelines prior to the dot-com bubble and the Financial Crisis, it doesn’t seem to be the case that investors are going to rush into a falling market just because they have some extra money to use.
Next, we have government and municipal securities, which has likely fallen over the last few years because this investment class has done pretty poorly compared to stocks and other things:
Finally, there is the other other category. And, before you ask me “what’s in other other?” it mostly has corporate and foreign bonds, asset-categorized loans and advances, and life insurance:
There you have it! Including yesterday, ten different categories of where people hold their wealth in terms of assets. Though, we will probably just focus on the first five from yesterday most of the time. After all, it’s where most of the wealth is.