The other part of this lecture is about professional money managers. This is different from investment banker or commercial banker. We're talking about people who invests other people's money by taking over the management of their portfolio. So they deal with a public. Now you could say a commercial bank is like a money manager, because it's taking your money as a deposit and it's investing it in something, loans or mortgages. But we're talking more about, now we're talking about people who invest, who take your money in a different way. And invested in stocks and bonds or other normal investable assets in the open market. Not necessarily public, they could be private. So I wanted to just first look at what it is that Americans hold. America is probably typical of advanced countries today. So this is the total assets of US households. Now unfortunately, the Federal Reserve that computes this statistics puts nonprofits in with households. That's because they're like households, they're not owed by anybody, so what do you make of them so. But almost all of these is households. So it just tells you where the money is. So the total is, this is in billions, so this is $101 trillion. So that's the total assets of Americans. If you divide that by the population, I think that's about, that's on the next slide actually, it's about 270,000 per person. So this is a rich country, I think you'd say, if you average person owns $270,000. Another way of putting it is, take a traditional family of four, okay, that's four persons. The traditional family of four, mom, dad, two kids, is now a minority of the US population, but they're still there, so. But let's take that traditional family. That says they have over $1 million. If you do it this way, calculation, you divide 101 trillion by 320 million and multiply by 4, you get $1 million. So the typical household is a millionaire. $1 million isn't what it used to be. On the other hand, we're living pretty well. But I have to qualify that, you remember we have great income inequality in the United States. So that's the average household. The median household would be much lower than that and the bottom ten percentile would have assets of just about zero. But anyway, let's look at this average where it is. So the Federal Reserve in table of B-101 computes totals of assets held. So you just get an idea of what people own. So about a quarter of that $100 trillion is real estate, people own homes. This is the value of the homes, it's not subtracting the mortgage yet, because people owe money. But we're just looking at the assets now on a balance sheet. So that's the biggest single thing I guess, homes. People own their homes. They also own interest in pension funds. This is a big business, it's almost as big as your house. That is, when you take your first job, they will probably tell you that we will be contributing to a pension fund for you. Or promising to pay you if, well we're going to talk about pension funds in a minute. That amounts to about $20 trillion. Now equity in non-corporate business. That's an estimate. Lots of people have businesses and they're not corporate, they're not traded on any stock exchange, but they've tried to value them. And they assume these businesses together are worth about over 10 trillion. And then stocks, now these are stocks owned directly by the public. It's 13 trillion, it's about half of what they own in household. Now again, this would be very limited among the bottom half of the population. There's a certain, it's wealthy people typically who own stocks. Or the other time, people who like it, who are interested in investing. Deposits are about the same, but they're distributed to lower income people more. Bank deposits, that's about 10 trillion. Mutual funds are coming back to that, is an indirect ownership of stocks and bonds. That's 8 trillion. Consumer durables, this is your car, your living room furniture, I don't know what else. Everything you own, Durable item that we don't normally value. But they put a value on it. It's about 5 trillion. Government bonds, treasury securities, not so much. Your grandmother may have given you a savings bond as a Christmas present, but it's not worth much, right? The public is just not into buying them directly, but they're bought indirectly. It's in their pension funds and mutual funds. Most people just don't get into buying government bonds, even corporate bonds, they are even small, look at that, it's only 296 billion. So the typical household is not owning corporate issued bonds. They are a little bit higher on municipal bonds, they'll own them directly. Municipal bonds are bonds issued by local governments and they have the advantage that they're tax free. So wealthy people, particularly who are in high tax brackets, like these and they will own them directly. Life insurance is another $1 trillion. People have life insurance policies with cash values, and other, I didn't fill that in, but that's what people own. So anyway, today when we're talking about pension funds, mutual funds, what else, yeah, well pension funds and mutual funds. We're talking about something like close to $30 trillion which is managed by institutional investors. So, I have to talk about liabilities. Those were the assets, but they also owe money. So this is again from the Federal Reserve the same table. Home mortgages, almost $10 trillion, so that is, you have a, what did we say, a 25 trillion for real estate minus 10 trillion, so it's about 15 trillion in net worth invested in houses. Now consumer credit is another liability. These are things that you owe, you owe on the mortgage and you owe on your credit card, or it could be another kind of consumer credit like when you buy furniture from a store they would give you on instalment. That's only 3.5 trillion. Loans that people take out at banks, not so big, 1.5 trillion, and not counting mortgages. Most loans are in the form of mortgages, but you can get a vacation loan or a college loan as you my have had some of you. The total liabilities are 14.5 trillion. So the difference between assets and liabilities is 86 trillion. So that won't bring us up to $1 million per household. I was doing it just assets and not considering the liability.
