Posts Tagged ‘consumer credit’

CONSUMER CREDIT CONTINUES TO CONTRACT

CONSUMER CREDIT CONTINUES TO CONTRACT

Courtesy of The Pragmatic Capitalist 

Consumer credit contracted $3.6B in July.  In short, the year over year rate is improving, but the bottom line is that consumer credit continues to contract as the de-leveraging continues at the household level (via Econoday):

“Consumer credit outstanding in June contracted $1.3 billion-but at least it was at a slower pace than in recent months. Credit in May fell $5.3 billion while April dropped a particularly severe $14.9 billion. Simply, the consumer sector is showing weak demand for loans combined with tight bank lending and heavy charge offs by banks.”

CC CONSUMER CREDIT CONTINUES TO CONTRACT


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An Avoidable Depression

An Avoidable Depression

Great DepressionCourtesy of MIKE WHITNEY at CounterPunch

The economy has gone from bad to worse. On Friday the Commerce Department reported that GDP had slipped from 3.7% to 2.4% in one quarter. Now that depleted stockpiles have been rebuilt and fiscal stimulus is running out, activity will continue to sputter increasing the likelihood of a double dip recession. Consumer credit and spending have taken a sharp downturn and data released on Tuesday show that the personal savings rate has soared to 6.4%. Mushrooming savings indicate that household deleveraging is ongoing which will reduce spending and further exacerbate the second-half slowdown. The jobs situation is equally grim; 8 million jobs have been lost since the beginning of the recession, but policymakers on Capital Hill and at the Fed refuse to initiate government programs or provide funding that will put the country back to work. Long-term "structural" unemployment is here to stay.

The stock market has continued its highwire act due to corporate earnings reports that surprised to the upside. 75% of S&P companies beat analysts estimates which helped send shares higher on low volume. Corporate profits increased but revenues fell; companies laid off workers and trimmed expenses to fatten the bottom line. Profitability has been maintained even though the overall size of the pie has shrunk. Stocks rallied on what is essentially bad news.

This is from ABC News:

"Consumer confidence matched its low for the year this week, with the ABC News Consumer Comfort Index extending a steep 9-point, six-week drop from what had been its 2010 high….The weekly index, based on Americans’ views of the national economy, the buying climate and their personal finances, stands at -50 on its scale of +100 to -100, just 4 points from its lowest on record in nearly 25 years of weekly polls…It’s in effect the death zone for consumer sentiment."

Consumer confidence has plunged due to persistent high unemployment, flat-lining personal incomes, and falling home prices. Ordinary working people do not care about the budget deficits; that’s a myth propagated by the right wing think tanks. They care about jobs, wages, and providing for their families. Congress’s unwillingness to address the problems that face the middle class has led to an erosion of confidence in government. This is from the Wall Street Journal:

"The lackluster job market continued to weigh on confidence. The share of


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Consumer Credit: Yuck

Consumer Credit: Yuck

Courtesy of Karl Denninger at The Market Ticker 

There’s nothing here that I like:

Consumer credit increased at an annual rate of 1/2 percent in April 2010.  Revolving credit decreased at an annual rate of 12 percent, and nonrevolving credit increased at an annual rate of 7 percent.

Yeah yeah.

In dollars, non-revolving loans went from $1.5925 trillion to $1.602 trillion, an increase of $10 billion.  But revolving (credit card) debt decreased $8 billion from $846.5 to $838.

The previous values were revised (negatively) as well.

To put this in chart terms in percentages:

Yeah, ok, the rate of change has leveled out in the credit card space and turned up a tiny bit in the non-revolving.  But in dollars it looks like this:

Nice little hook there eh? 

The consumer continues to say "screw that!" on more spending - especially spending that goes on plastic.

Believe whatever you want about the magic market pumpers, the numbers do not lie, and it appears the stock market is figuring it out too, with RTH (Retail Holders) down to just under 93 from $108 just a couple of months ago, a loss of 14%.

"Here it comes!"


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PARTS OF THIS MARKET ARE LOOKING IRRATIONAL

PARTS OF THIS MARKET ARE LOOKING IRRATIONAL

Courtesy of The Pragmatic Capitalist 

I haven’t thought the 75%+ rally was particularly irrational over the course of the last 12 months.  Surprised by the strength?  Absolutely.  But irrational, no.  As of late, we’ve begun to see signs that the consumer is back, but the equity action implies that the consumer is not only back, but ready to break records.  In late 2006 I wrote a letter that said:

“So here we sit with a relatively healthy economy, signs of inflation and record housing prices. Sounds pretty good, right? Not so fast. The markets could certainly move higher if housing doesn’t collapse, but we see very few scenarios in which that can happen.  When the housing market slows consumers will spend less and businesses will begin to suffer. The US economy will then fall into a recession and European and Asian countries will quickly follow suit as the world’s greatest consumers wilt under the environment of low liquidity and higher debt….The credit driven housing bubble remains the greatest risk to the equity markets at this time.”

I said the market was due for a potentially crippling recession as the yield curve inverted, consumer balance sheets were turned upside down, and a housing bubble was brewing.  Just days before the market crashed in 2008 I said the market had all the ingredients for a crash.  In late 2008 I said the market had overreacted and would likely revert towards the mean in 2009 for a total return of 18%.

The day before the market bottom in March 2009 I said government intervention would likely generate an equity rally.  But I did not come close to predicting that we were on the precipice of a 75% 12 month move.  Not even close.  On the other hand, I have never thought the move was particularly irrational and didn’t fight the tape through 2009.

I was very constructive on the market heading into 2010 and maintained that stimulus, strong earnings and an accommodative Fed would result in higher stock prices in H1.  I point this out not because I am trying to toot my own horn or gloss over my many imperfections (many can be emphasized), but overall I have been able to not only foresee the macro mechanics driving the market, but have also done a fine job translating that into…
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Mortgage Debt as a Percentage of Consumer Credit. You Have Officially Entered Hell.

Mortgage Debt as a Percentage of Consumer Credit. You Have Officially Entered Hell.

Courtesy of Paco Ahlgren at Bottom Violation

mortgage, consumer, credit, debt, bernanke, fannie, freddie, housing, collapse, recoverySee the green part of the graph? That’s home mortgage debt up until 2008.

See the blue part? That’s consumer credit.

Call me mathematical, but what’s wrong with this picture? More importantly, what propaganda machine continues to succeed in preventing the breathing portion of humanity from recognizing that the government sponsored and encouraged lending in the home mortgage industry for decades, and this is what happened.

Stated another way: The government not only caused this, it encouraged it. This has nothing to do with market action. This is pure, politically-motivated manipulation. For those of you still so mind-numb that you remain skeptical, ask yourself this: why is the commercial mortgage market still solvent? Answer? Because it doesn’t have government sponsorship.

 


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Retail sales rise – don’t get too excited

Retail sales rise – don’t get too excited

Courtesy of Tim Iacono at The Mess That Greenspan

The Commerce Department reported higher retail sales in January, the third increase in the last four months, as American consumers continue to open their wallets after one of the sharpest contractions in spending since the Great Depression.

IMAGE Following an upwardly revised decline of 0.1 percent in December, overall sales adjusted for seasonal variations rose 0.5 percent in January and the gains were broad-based with a full nine of 13 categories posting increases.

After rising 0.1 percent in December, auto sales were unchanged last month and, excluding autos, overall sales were up 0.6 percent following a decline of 0.2 percent. Excluding both automobile sales and sales at gasoline stations, January saw an increase of 0.6 percent after a decline of 0.3 percent in December. 

Best Buy Raises Earnings Estimate

On a year-over-year basis, overall retail sales were up 4.7 percent and, excluding autos, sales rose 4.6 percent. As these figures are not adjusted for inflation and when considering the level of sales one year ago (see chart above), the recent data loses some of its luster, particularly when considering which components contributed most to the increase in sales over that time. 

Sales of food and clothing, aided by government assistance to a degree never seen before, continued to rise at about the rate of inflation, but, with unemployment still quite high, incomes flat or falling, and consumer credit collapsing as it has over the last year, it’s hard to see how spending in the U.S. will rebound to anywhere near the levels seen during the middle of the last decade absent the hefty contributions from discretionary spending.

Moreover, as we move further into 2010, the year-over-year comparisons will become increasingly difficult since the worst of the spending slowdown occurred in late-2008 and early-2009.

For example, from last January, gasoline station sales rose 29 percent and this was due exclusively to higher prices since the average price at the pump was about 50 percent higher than a year ago. Other categories posting the biggest gains were sales at nonstore retailers that rose 12.4 percent and auto sales that were 6.7 percent higher than immediately after the virtual shutdown…
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Consumer Credit: Awful

Consumer Credit: Awful

Courtesy of Karl Denninger at The Market Ticker

Plant shoots

Where are my green shoots?

Consumer credit decreased at an annual rate of 6 percent in the third quarter of 2009.  Revolving credit decreased at an annual rate of 10 percent, and nonrevolving credit decreased at an annual rate of 3-3/4 percent.  In September, consumer credit decreased at an annual rate of 7-1/4 percent.

Yuck.

Here’s the graphical representation.

Nothing good in here.  The non-revolving flattened out some in September (gee, you think "cash for clunkers" might have influenced August and September?) but revolving credit – that is, credit cards – continues its base jump without any appreciable change in slope.

Here’s the longer-term view:

 

We are a credit-based system, as are all modern monetary systems.   No meaningful economic recovery can or will occur until the consumer has purged his balance sheet of the inappropriate debt he has and is once again able to earn and borrow.

FOOD

If we supposedly exited the recession on or before September, it sure isn’t apparent in this report.  You can put a fork in that line of garbage – it’s done.

PS: The next update of the Z1, due out in a couple of months, should be interesting….. especially the "Ponzi Finance" indicator….

 


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Three Yahoo Tech Tickers: Deflation, Gold, Stock Market

Three Yahoo Tech Tickers: Deflation, Gold, Stock Market

Courtesy of Mish

I was on three Tech Ticker segments yesterday with Henry Blodget and Aaron Task.

Tech Ticker – Inflation or Deflation?

Inflation or Deflation? "It’s Definitely Deflation," Mish Says

Ask an economist about their biggest concern about the U.S. economy and you’re likely to get one of two starkly different answers: America is either about to be swamped by a major bout of inflation or decimated by deflation.

Count Mike "Mish" Shedlock of Sitka Pacific Capital among the deflationistas.

While some consumer prices are rising and the Fed is printing money like crazy, Shedlock says deflation is "definitely" a greater threat than inflation.

People looking at prices are completely missing the mark," says Shedlock. "Consumer credit is falling, banks aren’t lending, and we’ve got bank failures at a massive rate. These are the same kind of conditions as in the Great Depression."

Indeed, bank lending has tumbled and the Fed reports consumer credit has shrunk for seven consecutive months and was down 5.8% on an annualized basis in August, the most recent month available.

…..

Tech Ticker – Ignore The Euphoria

Dow Breaks 10,000: Don’t Get Caught Up in "Euphoria", Mish Warns

The Dow Jones Industrial Average closed above 10,000 today for the first time in a year, and more than a decade after first breaking the mark. Since hitting lows in March, the Dow is up an astounding 50%, while the S&P 500 has gained 60%.

Before you get your broker on the phone or start trading that dormant online brokerage account, take heed of this warning from Mike “Mish” Shedlock, the blogger behind MISH’S Global Economic Trend Analysis: "Five years from now, I think its quite likely the Dow is not going to be much more than 10,000," he says.

Why so negative?

"We’ve still not solved any of those structural problems" in the housing, banking and debt markets, that caused last year’s crisis, he claims.

Shedlock’s advice: ignore the euphoria, and "take some chips off the table. Now’s just not a good time to be invested."

Shedlock, also an investment advisor representative for SitkaPacific Capital Management, thinks investors are better positioned in gold and cash.

Tech Ticker – Thoughts On Gold

Exploding Gold Prices Have Nothing To Do With


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UNPRECEDENTED PLUNGE IN CONSUMER CREDIT CONTINUES

UNPRECEDENTED PLUNGE IN CONSUMER CREDIT CONTINUES

Courtesy of The Pragmatic Capitalist

Consumer credit fell 13% year over year in a sure sign that the deleveraging cycle is alive and well.  Consumers are paring back on credit in an unprecedented fashion.

 UNPRECEDENTED PLUNGE IN CONSUMER CREDIT CONTINUES

Those who are curious as to why this recession is different from past recessions need look no further than the following chart.  You’ll notice that consumer credit is falling at a rate that has never been seen before. In fact, consumer credit declined marginally during the 1991 recession and actually climbed throughout the 2001 recession.   Why is this important?  An economy that is based on a fractional reserve banking system has trouble expanding if the debt in the system does not continually expand.  Consumers are still deleveraging and that means a robust and sustainable recovery is unlikely to occur.

 UNPRECEDENTED PLUNGE IN CONSUMER CREDIT CONTINUES 

The biggest risk in such an environment is not whether the consumer recovers – the consumer needs to deleverage and clean up their balance sheet – but whether the government continues to pummel the currency and rack up massive debts as they try to dig our way out of the debt hole.  These are the same mistakes Japan made in the 90’s.  Let’s hope we wise up and stop the printing presses before they cause an even larger boom/bust cycle….

 


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The Government’s Effort Has Failed

The Government’s Effort Has Failed

Courtesy of Karl Denninger at The Market Ticker


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Zero Hedge

Trump Sues Manhattan D.A. In Response To Subpoenas

Courtesy of ZeroHedge View original post here.

And now a plot twist: with Trump under relentless attack for the past three years to disclose his tax returns, on Thursday morning the president struck back, suing Manhattan District Attorney Cyrus Vance to block an attempt by New York state prosecutors to obtain eight years of the president’s tax returns in a probe of whether the Trump Organization falsified business records.   

...



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Phil's Favorites

At Press Conference, Fed Chair Powell Refuses to Answer Whether Wall Street Banks Are Too Big to Manage

Courtesy of Pam Martens

Fed Chairman Jerome Powell at Press Conference, September 18, 2019

Following a lack of liquidity on Wall Street, which necessitated the Federal Reserve having to provide $53 billion on Tuesday and another $75 billion on Wednesday to normalize overnight lending in the repo market, the Chairman of the Fed, Jerome (Jay) Powell held his press conference at 2:30 p.m. yesterday. The press gathering followed both a one-quarter point cut in the Fed Funds rate by the Fed yesterday as well as the first intervention by the Fed in the overnight lending market since the financi...



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Insider Scoop

How Cheapskates Can Access Mid Caps

Courtesy of Benzinga

For investors that don't like stocks but do enjoy saving money on fund fees, exchange traded funds are highly desirable destinations. And for those looking to dance with mid-cap stocks, a desirable asset class, there are plenty of compelling ETFs for cost-conscious investors to consider.

What Happened

The Schwab U.S. Mid-Cap ETF (NYSE: ...



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The Technical Traders

SAFE ASSETS - A TRADING STRATEGY FOR UTILITIES, GOLD, AND BONDS

Courtesy of Technical Traders

Chris Vermeulen, Founder of The Technical Traders shares his trading strategy for safer assets. While precious metals and bonds had a great run, the charts are showing the utilities could be the place to be in the short term. It’s important to note we are not saying the other safe havens are going to crash but it’s all about the time frame and playing the sector that could pop first.

LISTEN HERE NOW

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Kimble Charting Solutions

Stocks, Oil, and Bond Yields At Critical Bullish Breakout Tests!

Courtesy of Chris Kimble

It’s not often that three asset classes reach similar important trading points all at once.

But that’s exactly what’s happening right now with stocks, crude oil, and treasury bond yields.

And this is occurring on Federal Reserve day no less! Something has got to give.

In the chart above y...



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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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