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Consumer Credit Bleeding Will Not Cease, Down $12 Billion In August, $2 Billion Worse Than Expected
Yet another month where the decline in consumer credit comes in worse than expected: Total Credit decline from $2,475 billion to $2,463, with the bulk of the $12 billion decline consisting of Revolving Credit reduction, or $10 billion, to $900 billion. Total consumer credit is now back to July 2007 levels... and the decline has yet to decelerate. This is the seventh straight month of consumer credit declines.
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that just means more stimulus by the Fed and goverrnment
why is everyone so stressed?
good news = good news
bad news = more stimulus
buy stocks.
More stimulus means a lower dollar and hence flat or deflating wages buying less things with those dollars. Not sure how that works out for an economy that's 70% consumer spending.
Not to mention food and energy price inflation. Remember a few years back when everybody freaked out at $40 plus oil, well now we have a recession, 10% unemployment, 17% underemployment, and oil is at $70!
Sainsbruy in the UK inbdicating that as food inflation ebbs will be difficult to grow the top line - no......
I guess I should of noted my comment was dripping with sarcasm ;)
Simpleton comment there Mark. Some look to the children of future . Are we handing them a basket of sticks and turd blossom for their future? Can you feel good about that as long as you "get yours"?
Atta boy that's how we got to where we are now!
That will work until it doesn't.
AMZN up 3% on Kindle price cut, and this show just how madly bullish the market is. Has anybody considered the reason they are cutting the price is because they can't sell them, plus a lower price almost certainly means lower margins. All bullish though! Just watch out for the share price halving when reality returns.
Yes, it is hard to get better margins from lower prices.
It's not a million miles away from 1999, people are totally ignoring any sort of reality and continue to pump money in at an incredible 60 times earnings. When it pops it will be back at 30 times earnings in flash. In fact I'm not even sure 30 times earnings is jusftified.
"people ... continue to pump money"
Maybe people are feeling that fiat is shaky? They might be wrong but it is not obviously a mistake to diversify out of USD.
Actually, "people" aren't the ones buying. The retail investor is long gone and if he hasn't come back yet, he's not coming back......
besides retail investors do not move markets...
It's not a million miles away from 1999, people are totally ignoring any sort of reality and continue to pump money in at an incredible 60 times earnings. When it pops it will be back at 30 times earnings in flash. In fact I'm not even sure 30 times earnings is jusftified.
this is eerily similar to the dot com bust.
mr. efficient market always returns, less so than in the past, but he does come back.
you are certainly correct about not being a million miles away. P.T. Barnum was certainly correct as well.
Just get you some of that awesome shares insurance.
reminds me more of 2006 when I was out in october and everything was better than expected, these guys arent that smart, they just have lots o free capital like warren (charlie "insurance money" munger), I am done doubting myself, way too hard to time this thing and downside risk is greater than upside losses, st h&s top possible here me thinks
they'll make it up on volume
(editor's note: sarcasm)
I'm not sure that's the right take on the Kindle price cut. I'd guess Amazon is employing a razor/razor blade model on the Kindle where the real long-term profit is on sales of books and other content to read on the Kindle. They want to get as many Kindles in people's hands as possible to drive content sales. As they produce more Kindles (or somebody produces for them), the cost per unit likely goes down and over time they can lower the price, particularly given the stream of future content sales.
I reckon Apple will blow Kindle out the water. Let's be honest who has the history of producing desirable consumer products, and they can tie it all up with iTunes ect. A huge capitive audience.
God, that would be horrible. It would cost three times as much, use worse hardware, require some kind of unique apple file format that would be incompatible with damn near everything, force you to use itunes, and you would probably have to throw it out and buy a new one everytime the battery went bad. All that just so you could sit in Starbucks and look trendy.
I sure hope you're wrong. Kindles are starting to look tempting for the price given the large amount of content avaliable on them, but with content prices hardly below physical book prices I think I'll stick to real books.
Tried it, don't like it. Luddite, I guess, Rather turn the pages, and buying used books for pennies.
lotta content available at the library and borders too, I guess someone has to buy scientific american
there's always that thing Ben Franklin invented, libraries.
I buy all my books, videos, etc. from half.com. It's hard to choke down the fact that half.com is owned by eBay, but the pricing overcomes the first thrust of vomit into the mouth. And, no, I don't own eBay stock -- nor any stock. Assets in precious metals since 2001.
Companies that implement such a model don't do so as a fallback position. That's the model from day 1. Think Lexmark selling printers for less than the cost of toner. No, it's because Amazon can't sell the turd. Who needs another device, especially one that ties you into a vendor and just does one thing?
Yeap the minute Apple produces a device that it does all, phone, internet, music, video and e-books, it's goodnight Kindle. I want an iPhone, do I want a Kindle, nope!
everyone is not a daytrading hipster
AMZN and their Kindle is going to experience the Apple crush in full effect when their Tablet debuts next year... AMZN should have approached AAPL in the beginnning instead of trying to get into the consumer electronics space.
Good observation, re: AMZN. They are in my crosshairs for shorting. Look at long term chart.
This article makes absolute sense. And it means nothing as long as the Fed is injecting liquidity into the system.
It's like those ads on TV talking about your brain on drugs while showing the egg in a frying pan. Makes all the sense in the world but as long as the pusher is giving the addict nearly free samples, the addict has no interest in rehab and there is nothing you can do to change that.
The people in charge of the punch bowl have said they have no intention of removing the punch bowl. No body's going home as far as I can see.
12 billion monthly reduction in actual money available and the dollar is still down due to rumors... Goes to show how irrational this market has become. Fears and emotions keep making people turn a blind eye on actual facts
Listen bub, you need to put down your facts and start buying CIT with both fists!!! Jim Cramer says it is a no brainer!!!!
I'm no longer so sure the market is that irrational... nor that it is due to fears and emotions. I have about decided that the whole damn thing is the result of direct and continuous manipulation by the government, the FED, Central Banks, and SWFs... Our governmental and financial 'systems' are so full of corruption and greed that blatent manipulation is all 'they' can fathom doing...
But everybody is missing the improved revision for July! If you back that out, August would have been better than expected.
-Timmay
"Goes to show how irrational this market has become."
How about MasterCard (MA) up +$10.40 (5+%) today on the wonderful consumer credit news.
It's W-A-A-Y beyond irrational if you ask me.
what's irrational mean?
SBUX at 60 p/e--tasty!
well 12 billion is only on the consumer side of the equation...the govt is doing its darnest to replace the void.
True, but this is only a small portion of the consumer side of the equation that we do get reports on. There's a massive loss on home equity, purchasing power, etc. But then again it is also true that except for the POMO's and few other details, we also don't have anywhere near to a full picture of all that the fed is doing to counter it. So I guess with this complete lack of transparency either way, we really can't be expected to be perfectly rational when it comes to the market...
Complexity and obfuscation is the intention here. The fullest picture you can get for the macro changes in credit is the z1 report:
http://www.federalreserve.gov/releases/z1/Current/z1r-4.pdf
but it comes from the fed so of course it should be taken with a grain of salt. That said it is not nearly transparent enough for my taste, which is why we need to audit their monetary policy asap.
Wall Street and the banksters are on a spending spree buying up all the tangible assets for themselves with our taxpayer money.
Doesn't anybody else see this but me?
Lots of people are beginning to see the picture. Do the Banksters really believe the local National Guard is going to protect their property for them? Or even the 82nd Airborne? Most of the guys with the real guns are relatives of the folks getting screwed.
+1 I see it.
what shows you this, what's the evidence?...not that I am skeptical of your claim, seems like something they would do
So, a list of what they are buying is:
1. Rusted out factories in cities full of unemployed (and unemployable) people.
2. Tons of inventory: crap made in China.
3. Houses thrown together with bailing wire and duct tape.
4. Businesses selling that junk from China, or doing manicures (services poor folks don't need).
5. Office buildings (see construction techniques above) that will never see decent occupancy.
6. Apartment/condo buildings (construction quality as noted) with no buyers since families are moving in together.
Have I left anything out? Let 'em have it.
Read through the release and note that the entire amount of the decrease is ocming from ABS pool runoff. The commerical banks havent really change their stripes all that much. So you either believe they offloaded the bad stuff to the pools (the high quality stuff - althought that is coming back online YE) or the banks have a long way to go. Rincse wash repeat
http://www.federalreserve.gov/releases/g19/current/g19.htm
You are on target:
http://www.precisioncapmgt.com/2009/10/07/consumer-credit-highlights-dysfunction-in-debt-securitization-markets/
GREEEEEEEN SHOOOOOOTS!!!!
This August shitshow was softened by cash for clunkers related money, add in the China pipe tarrif and *presto* RALLY ON!
It's as if I'm stuck in a continual acid binge where the trip has become reality.
The consumerless, jobless recovery brought to you by Ben, Tim and the mighty printing presses. I can sense another editorial coming from Krugman in which he pleads to Washington for a second, larger stimulus.
To be followed by Senators Schumer & Cornyn at a joint news conference saying they have the votes to increase the home buyer tax credit to 15K and make it good for everyone & second homes to boot. Stimulus! More stimulus! Courtesy of the bank and real estate lobby. All at 3% down with an FHA guarantee as well.
we have such short memories....what's "sub prime bubble" again?? what's "100-125% LTV again? what's "no down payment, no skin in the game, it's a rental contract not a mortgage" again?
i can't decide if cash for clunkers or the home buyer's tax credit is the "worser" of 2 evils, lol! they are both terrible.
so, several years from now the books will come out and say "how could we possibly have been so stupid to recreate another debt bubble when the first debt bubble hadn't even subsided..."
Worse, worserer & worserist. haha Of course we'll hear; "But no one could have seen this coming" once more.
worse than expected for this month, but the month prior got revised up by 2.6 billion.
let's not sensationalize the current drop from 2007 levels w/ that 2nd chart Tyler. We are talking about massive numbers here compared to history. Graph total credit outstanding on a log scale and the current drop is not even the biggest in history. Graph consumer/disposable income ratio and the current drop is not even 1/2 of the drop seen in early 80s and 90s. so far.
Bad analysis Tyler.
worse than expected for this month, but the month prior got revised up by 2.6 billion.
let's not sensationalize the current drop from 2007 levels w/ that 2nd chart Tyler. We are talking about massive numbers here compared to history. Graph total credit outstanding on a log scale and the current drop is not even the biggest in history. Graph consumer/disposable income ratio and the current drop is not even 1/2 of the drop seen in early 80s and 90s. so far.
Bad analysis Tyler.
Sorry for the steady decline, but I had to take the cards away from my wife- everything is on sale.
Now that I know who's responsible I feel much better. Time to buy buy buy.
Seems Timmy G was frontrunning this number, with his 'savings' speech.
Agreed... my thoughts exactly...
People paying off Pharaoh. It will be interesting to see
what happens to these numbers for December 09.
I think its good news that more people are breaking
the habit and the trend is nice too.
Radical default anyone?
Cheers.
Soooooo....... Deflation anyone?
http://www.wxii12.com/news/21229424/detail.html
Dearth of demand. Closed, even with 281M in tax breaks.
How do defaults, foreclosures and such impact this number? Does this reflect consumers paying down debt, or defaulting on debt?
Real estate debt is not considered. You could glean this info from banks' loss loan provisions and writedowns.. oh wait..
Unfortunately, while consumers reduced outstanding credit by $12 billion in a month the federal government is expanding its debt, which will be paid by consumers one way or another, at something in the neighborhood of $150 billion a month.
A miss by only 20%. Buy! Buy! Buy!
Puppet Obama and Al Gore
http://www.canadafreepress.com/images/uploads/ball100509.jpg
STARVE THE BEAST!
Can it BE??
Can it be that Americans are finally collectively realizing that they truly ARE in control of the fate of these criminal corporations that are imploding our country from within and extorting us for TRILLIONS at the expense of our children's futures??
I pulled my money out of Bank of America last week, and moved it to an entity that has earned my business through it's CUSTOMER SERVICE and ethical reputation. I simply REFUSE to FEED these theiving bastards any longer!!!
People!! Send a message to Wallstreet! REFUSE to do business with these criminal banksters and CHOOSE to give your money to smaller, solid organizations that have earned it!! REFUSE their offers of credit and if you want something, pay CASH. If you can't pay cash--then YOU CANT AFFORD IT!
Gidde up!!
Agreed, Ghost has a good manifesto on how to fight the corrupt 19. I pulled my money out of Capital One.
Any company that has received bailouts simply avoid.
Cheers,
Pigpen
I'm going long HotPockets (in your grocer's freezer).
Why would it be beneficial to use credit if we are in deflation?
Dell and Caterpillar respectively announced closure and layoffs today in continued signs that a jobless and cash only recovery is clearly in place.
End of the day HAL9000 buy up, on schedule.
all part of the master plan
http://www.thedailybeast.com/blogs-and-stories/2009-10-06/obamas-secret-jobs-plan/full/
because everything is about winning mid-term elections
and you thought you voted for change - suckers
I have the utmost respect for Simon Johnson
+1
I often don't agree with him, but he's one of the good guys.
Thanks Lizzy. After all, without a major change there will never be any change at all.
so shorting natural gas would seem to be a silly idea at this juncture...
TARP: Excess reserves on Bank balance sheets
Stimulus: Extended unemployment benefits
Jobs: Gone
Re-election chances: Gone
Geithner wants us to save more so we can purchase the Fed's soon to be released 'Hope' bonds to help finance the Fed debt.
Duh, hello in there. This rep is at least ONE-HALF the U.S. economy speaking (the fly-over better half THAT MATTERS, goes to work everyday and pays taxes!!!). You can get your panty-waste politicians elected thru fraud and vote buying, and foist your facist pranks and one-world myopia on us in the meantime, BUT YOU CAN'T MAKE US SPEND THE MONEY! Get it? Some might think the real economy is dead but it's not, we're just digging in. We don't like you, WILL NEVER trust you and are coming to get you soon. Everybody I know and care about is wide awake and fighting mad, and ready to take down the fucktard congress in 2010, and again in 2012. Then we go after the criminal mob running the banks. Sabe Si!?
The problem is Congress thinks the 50% is more like 5%. They will be proven wrong.
Speaking of consumer behavior, was anyone else made to feel queasy by the cover of the latest Barron's? As a Boomer myself, I was embarrassed for my generation.
Abelard
I saw it. It made me cringe.
Whoever thought that cover idea was a great idea should be fired immediately or promoted to head of the organization. Ridiculous. Boomers buying ipods will save us. Please. Please.
Barrons has joins the ranks he rank idiots.
I think this is great news. Why the long faces? We have way too much debt.
Better to get to a sane place with debt/savings, even if that slows growth. We'll end up in a healthier place.
I think many here would agree with you. However, the market's continued disregard for significant news of consumer issues and the MSM's blasting of green shoot bull is the real issue.
posted this earlier today - it is an excellent read
The Alignment of Asset Reflation and a Collapsed Economy
http://gregor.us/crisis/the-alignment-of-asset-reflation-and-a-collapsed...
Interesting link. Thanks.
Seems to me that this is indicative of a population that completely, absolutely does not trust its government
About time.
History will read " The decline of the capitalist monetary system was due to the those in charge of the capital (Goldman etc) trying to do the greatest good for the greatest number of people".
The flaw in that paradigm seemed to have been that to them the greatest number was the number one leading to our indentured servants of credit system now in the mid 21st century. Sure you can have a car and house but you cant own money. It all belongs to the banks which own the populations of the world. The capitalist game was won earlier this century and the world was slam dunked into their pockets.
AA beats massively. The Fix is in!
Some historical context is also in order. The last time consumer credit fell at such a rate was WWII. They had a much better excuse back then.
Pretty long term picture here:
http://merrillovermatter.blogspot.com/
AA took out $150M of costs in the quarter sequentially: $0.10 of the variance. Then ther is this..Every key end market except aerospace saw revenue gains, including automotive which increased 21 percent from the second quarter of 2009. Improved shipments and cost reduction efforts more than offset the impacts of product mix and currency effects in Australia. Q of EPS weak...Still a beat
Looks like consumers will be discovering the real meaning of Christmas this season...family & friends vs. spend, spend, spend..
Sounds good to me.
+1
Remember to roll another one, just like the other one...
dont forget the eggnog.
And the Mistletoe.
I look forward to it. I think it will be much more meaningful for many people.
AMEN to THAT!
Safeway gift cards will be as thrilling as anything ever recieved.......
Does anyone know when the fed is paying out its 6 dollar dividend?
I thought that was scheduled for any day the market needs to be propped up. And you have a small typo, it's not "6 dollar", it is 6^n dollar dividend. (remember who the shareholders are)
why work when we can print?
DJ ) 10/07 05:11PM *WSJ: Former Pres Clinton Says Bush Admin Should Have Rescued Lehman
freaking politicians.....
and the former president should have kept his cigar in his mouth.....
absolutely shameless, they are.
especially given that cigars were all the rage back then.
as a girl, never understood the ....appeal.
we are now back to July 2007 credit levels.
Yet several of the big banks hit 52-week highs today. The HFT computers really love those guys.
I wonder when credit will catch up with the market.
which banks are hitting 52-week highs? year-to-date highs, perhaps...
JPM, WFTC, CMA, AMNB, STT, CNBKA, FFBC, BXS, NRIM, GS (ok, silly - but they are still 'a bank'). BNS and several other Candians just off of their recent 52-week highs.
why are apple f_cktards on here getting hard ons for whatever new overrated and derivative iproduct comes out? Microsoft's tablet will blow apple's craplet away anyway
Know what will blow both of them away? Books.
Carl Fox: I came into Egypt a Pharoah who did not know.
Gordon Gekko: I beg your pardon, is that a proverb?
Carl Fox: No, a prophecy. The rich been doing it to the poor since the beginning of time.
but last month was revised to be less negative. and this month was less negative than last!
I dont understand the AMZN vs iPhone argument as you can already use the iPhone as a Kindle...I do anyway, iPhone wins.
Much of the consumer credit plunge is attributed to consumers who don't want to borrow. If banks screw their customers one time too many, the consumer stops borrowing and cuts up the credit cards. Consumer credit is a two way street.
That Barrons cover was beyond excruciating.
The editorial staff member that gave that cover shot the green light should be looking for a job very soon. He/she would be if he/she were a member of my staff.
Besides Alan Abelson's column, and a couple of others, Barrons has become as bad as "Tout TV". I read it, but don't take it too seriously.