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Savings Rate Declines By 10% As Spending Once Again Outstrips Income, Which In Turn Is 70% Transfer Payments

Tyler Durden's picture




 

Even with consumers defaulting "strategically" on their mortgages left and right (with planned defaults accounting for 31% of foreclosures in Q1), and thus not having to incur almost any housing-related expenses (courtesy of the Treserve for making it all too obvious that nobody is expected to pay anything they owe ever again), the savings rate still declined by 10% in March, from over 3% to 2.7% of Disposable Income, as Personal Spending (+0.6%) outstripped Personal  Incomes (+0.3%), and of this 0.3% increase, 70% was made up of a pick up in transfer payments! At this point we are fairly certain that US consumers are finally mimicking the administration and the financial sector in not caring if they ever get to pay another bill. That, and the government is directly funding the broader population's latest Apple product fix. It sure isn't due to increasing wages, for the simple reason that wages have not increased in years. And whereas in other nations the savings rate is materially higher due to the lack of such "we'll save it for you" entities as Social Security and Medicare, we now know that SSN is virtually bankrupt as we speak, with "cash out" now greater than "cash in." Yet instead of saving for their retirement, Americans are buying, buying, buying. One would think that based on this data real unemployment was lower than 16.9%. It isn't. The government's and the financial sector's methadone clinic has now moved to the suburbs. That this is yet another stimulus high that will ultimately fizzle, because that's what all one-time stimulus programs do by definition: they end, is clear. It is also now clear that the government has no idea what to do when the trickle down benefits from the drunken spending orgy do in fact end.

Some observations from Goldman on PE and PI:

1. Consumer spending posted a large increase in March - 0.6% in nominal terms, 0.5% in real terms - as the return of more normal weather patterns and the early timing of Easter both helped. As a result, the level of spending in March was almost ½% above its first-quarter average. However, we expect to see some payback for the weather and Easter effects in the data for April; today's vehicle sales and Thursday's chain store reports will help determine whether that occurred.

2. Income was better than we expected, as setbacks in dividends were smaller and interest income edged up. Compensation figures were also slightly better, and transfer payments remained quite strong, accounting for almost 70% of the net increase in personal income. Despite the gain, the personal saving rate continued to move down in March, to 2.7% of disposable income.

3. The core index of prices for personal consumption expenditure (core PCE index) rose a bit less than we anticipated, confirming the disinflationary trend in these data. Over the past year, this index has risen only 1.3%.

 

 

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Mon, 05/03/2010 - 14:14 | 329365 Racer
Racer's picture

And just look at that Fed survey of senior loan officers report for Q1!!!!

Mon, 05/03/2010 - 14:15 | 329368 Comrade de Chaos
Comrade de Chaos's picture

!8ball Party like it is 99?

O yeah, like it is 2012 !

Mon, 05/03/2010 - 14:20 | 329376 Miramanee
Miramanee's picture

"...That this is yet another stimulus high that will ultimately fizzle..."

No, Tyler, it will not fizzle. The folks at the FED and in the White House and in Congress "understand" that, until the American people come to the belief that they no longer need dollars in order to service their tax obligations, the operational reality (of being able to create as much money as we want, regardless of public debt levels) of adding zeros and ones to every major player's reserve account on Constitution Avenue will persist. Government spending and money creation will continue ad infinitum. The only forces in the universe that will cease such activities are (a) a massive blackout that turns off all of the computers at the FED, or (b) the choice of the American taxpayer to stop believing that he NEEDS dollars to pay his taxes.

Mon, 05/03/2010 - 15:06 | 329472 Double down
Double down's picture

+10

Mon, 05/03/2010 - 14:21 | 329380 IE
IE's picture

Yeah... but that means 30% of the income gain is actually income gain - a green shoot.

And the market is a leading indicator - which means the rising market is predicting (correctly, as always) a nice big economic expansion.  Just like Dow 13,000 predicted Dow 14,000.  Simple.

And who needs to save more when the market is building your nest egg for you?  All you have to do is be fully invested. 

And disinflation plus additional wealth from the rising markets means more & more disposable income to spend, right? 

 

So...

 

... how'd I do, Harry?

Mon, 05/03/2010 - 14:22 | 329383 RobD
RobD's picture

My spending is up. On gold, guns, ammo and beans. New cars, tvs etc., not so much.

Mon, 05/03/2010 - 14:32 | 329401 anony
anony's picture

Er...uh..If you have tight quarters, you might wanna add a few quarts of beano to the stash. Just sayin'.

Mon, 05/03/2010 - 14:34 | 329405 RobD
RobD's picture

Your not kidding there, you don't want to be around me after I've had some beans, and when I add in some pickled eggs, look out. LOL

Mon, 05/03/2010 - 16:34 | 329624 seventree
seventree's picture

Don't waste that methane. With some engine mods it could power a generator.

Mon, 05/03/2010 - 15:08 | 329476 tmosley
tmosley's picture

If you cook a potato with your beans, you won't get nearly as much gas, and no stench.  Potato starch contains an enzyme that aids in the digestion of beans.

IIRC, it's actually the active ingredient in Beano.

Mon, 05/03/2010 - 16:13 | 329582 Auric Goldfinger
Auric Goldfinger's picture

Who says ZH doesn't offer real/useful information? 

Mon, 05/03/2010 - 15:51 | 329543 Problem Is
Problem Is's picture

"My spending is up. On gold, guns, ammo and beans. New cars, tvs etc., not so much."

Don't Forget Lead, Copper Jackets and Brass

There is a sale on black powder and home reload kits at homereliance.com...

For those that like home hobbies...

Mon, 05/03/2010 - 16:07 | 329573 tmosley
tmosley's picture

If you are using black powder for reloading, you are going to be in for a surprise when you fire your first shot.

You'll be wanting smokeless powder.

Mon, 05/03/2010 - 23:04 | 330134 Hephasteus
Hephasteus's picture

You can't use black powder in nitrocellulose based bullet systems. It burns too fast and doesn't produce 1/3rd as much gas. It'll mess up whatever gun you use it in.

Mon, 05/03/2010 - 15:52 | 329545 Problem Is
Problem Is's picture

"My spending is up. On gold, guns, ammo and beans. New cars, tvs etc., not so much."

Don't Forget Lead, Copper Jackets and Brass
There is a sale on black powder and home reload kits at homereliance.com...

For those that like home hobbies...

Mon, 05/03/2010 - 14:27 | 329394 sangell
sangell's picture

Comment found in the Biloxi-Gulfport Sunherald yesterday;

"

peggy58 (05/02/2010 08:48:06 AM):
"There was a crush of people at the Dept. of Marine Resources office on friday applying for commercial fishing licenses. Some applicants became so unruly that security had to remove them. I can only speculate on the motives of these last minute applicants, but I suspect it has a lot to do with "Sue"...
Mon, 05/03/2010 - 14:34 | 329404 anony
anony's picture

Lord Blankfein, Dickie Fuld, John Mack, Ken Lewis, Joe Cassano aren't the only ones who can game a system.

Mon, 05/03/2010 - 14:28 | 329395 whatsinaname
whatsinaname's picture

why save ?

saving yields 0.25% for an extended period.

My Uncle said so.

Mon, 05/03/2010 - 14:35 | 329408 Carl Spackler
Carl Spackler's picture

Right.

But that is what the current, targeted Fed Funds rate is all about.

Induce spending to counteract deflation and the decreased velocity of money with cheap and abundant liquidity.

Americans don't save when there is no reward for doing such.  They go long on the other risk trades...buying a big screen tv, buying a swimming pool, buying a new Porsche, buying a new fishing boat, etc. 

Mon, 05/03/2010 - 16:09 | 329576 lovejoy
lovejoy's picture

Was going to say same thing.

Mon, 05/03/2010 - 17:34 | 329748 Rainman
Rainman's picture

Many individual taxpayers got the $ 400 stim kicker from the Schedule M in the first quarter.

Remember the 09 stim was supposed to kick in immediately via downward adjustments in withholding ?? For many folks, it didn't happen. So when they filed the M with their tax forms, they got a $ 400 credit, $ 800 for married joint.

I do my daughter's taxes. She spent the whole cash motherlode on shoes.

Mon, 05/03/2010 - 14:29 | 329396 Cleanclog
Cleanclog's picture

Since the ECB has stated it will continue to accept Greek debt as collateral, "regardless of credit rating", until otherwise announced . . . will the Fed accept underwater mortgages from individuals so they may borrow at 0% from the Fed to reinvest with junk bonds that in turn can be put up at Fed if they go sour to borrow some more at 0%?

Oh no.  That's just for the banks.  Sigh. 

Mon, 05/03/2010 - 14:32 | 329398 Boston Wealth
Boston Wealth's picture

When will the S&P start to go down?

I even can’t see  any divergence in 5min/1hr.  I would say, we should close the GAP in cash, and sell-off into the 1155 level , my analysis gives me the 14th of May, where we will see the bottom @ target level.

still 2 weeks to go

full article and chart here...

http://www.bostonwealth.net/2010/05/03/when-do-we-go-down-on-the-sp-500/

 

Mon, 05/03/2010 - 14:35 | 329410 HarryWanger
HarryWanger's picture

That's a very bold prediction in the face of today's strength and in the middle of a strong bull market. My technicals tell a different story. Look at what happened around S&P 1100. The same choppiness and volatility is happening here. It'll probably continue for a bit longer and then the uptrend continues with velocity as it did once 1100 became history.

Mon, 05/03/2010 - 14:51 | 329447 mrek
mrek's picture

Here is a bold prediction, NFP either goes very hot or very cold (negative) on Friday and the response is the same. All US markets down sharply.

Mon, 05/03/2010 - 15:06 | 329471 HarryWanger
HarryWanger's picture

The psychology is definitely positive right now. Any strong NFP number will just add to the euphoria. Especially if the actual rate shows a decline. Headlines of falling unemployment rate will be on every news program and newspaper. It would certainly set up for a pretty strong run in equities.

Mon, 05/03/2010 - 15:12 | 329475 Popo
Popo's picture

lol.  You and your granular data.  Hairy, the unemployment rate is approaching 20%. (..even higher by many estimates). 

 

Spin it however makes you happy.

Mon, 05/03/2010 - 19:52 | 329900 Miles Kendig
Miles Kendig's picture

Too bad you can't pump your own gas dude...  Without Wall Street you would be a street or chimney sweeper. I have the perfect suit for you!

Mon, 05/03/2010 - 14:37 | 329415 Sudden Debt
Sudden Debt's picture

We've agreed the S&P may go down 1% in 2016. But first it has to go up another 7354%

 

Mon, 05/03/2010 - 15:39 | 329521 Boston Wealth
Boston Wealth's picture

The top at 1211 should be by tomorrow, if we stay higher than 1195.66 in cash

Mon, 05/03/2010 - 15:43 | 329532 Boston Wealth
Boston Wealth's picture

Even the permaBears are wondering what’s going on. Probably because they’ve lost so much money. It may be a matter of definition as to whether we are in a new Bull or a rally in a Bear. The time-frame is important. We are certainly in an intermediate Bull. If you look at a logarithmic chart of the very long term, this only looks like a correction in a bigger Bull. It doesn’t really matter to me what we call it, because I trade on a much smaller time-frame. I’m a trader and not a Bull or a Bear

Mon, 05/03/2010 - 14:35 | 329411 Tic tock
Tic tock's picture

Perhaps if the Ghosts of Scrooge were to send a message the grand priests of Wall St. might hear- could all this be because the financial system is nothing but a stream of inflation where capitalists go fishing. Exactly how long will it take for the penny to drop? Are the tax systems working, does the middle-class have anymore money to spend? Hav th demographics been demonstrating the decline in carrying capacity? Look at the solution the USGovt. has thought up... lie to the people (1.7% price increases, er..), inflate the stock-market, play the currency markets, insure the core of the problem -so it doesn't go away-, instigate well-meaning forclosure policies on the one hand, have a half-assed policy on mortgage loan accounting on the other... have I missed anything? Two years. No demand confidence. But.. how fucking dare any Govt. throw a number like 1.7% inflation in our faces, when hundreds of millions of humble people are being impoverished, then claim that Consumer spending on the rise is a good thing and then violate, via their own banks, the future earnings described in equities, for a profit.   

Mon, 05/03/2010 - 14:44 | 329434 jkruffin
jkruffin's picture

I swear I sent a message to the Treasury this morning that stated the exact things you just stated almost word/word.  When I saw the hack job they did on the I-bond fixed rate and the manipulated data work they did on the inflation number,  I just had to send them a nasty gram. I guess they don't want people to buy any Treasury products with the rates they want to pay people to use their money to bail out bankers and other nations' bankers.  I smell a massively failed auction coming real soon.

Mon, 05/03/2010 - 15:07 | 329470 B9K9
B9K9's picture

how fucking dare any Govt.

Grasshopper, it takes many years and a lot of accumulated wisdom to understand the answer to your question. Short answer: They do it because they can.

Longer answer: The federal government is empowered by a document agreed upon by a consensus of governed states to levy taxes, defend the union and enforce the "law". Knowing what you know now, do you see how the federal government became target #1 for any group interested in manipulating & controlling it for their own benefit?

The federal government is a criminal organization. It wears the trappings of authority and mimics the legitimacy originally conferred, but it's just a masquerade. It simply & utterly bears no relation to either the original intent and/or design. Thus, we live in a bizarro world where individuals know something has been lost, yet the common culture re-inforces the myth that nothing has changed.

This of course is a common theme of CogDis. I have long passed the point where I even care; my primary interest is mapping & preparing for what happens after the reset.

Mon, 05/03/2010 - 16:47 | 329656 dnarby
dnarby's picture

Read the 10th amendment.

Then ponder why two things are not taught in school:

 

1.  Modern monetary theory

2.  The Constitution.

Mon, 05/03/2010 - 18:49 | 329846 Implicit simplicit
Implicit simplicit's picture

Here, Here! They attempt the costitution , but no kid knows anything about money vs. debt. They simply don't teach it.

Mon, 05/03/2010 - 18:45 | 329839 spekulatn
spekulatn's picture

I have long passed the point where I even care; my primary interest is mapping & preparing for what happens after the reset.

 

Plus $13 trillion n change. I'd convert to euros but what would be the point.

 

"We don't need no education...."

Mon, 05/03/2010 - 14:38 | 329422 pitz
pitz's picture

Is this what the beginnings of hyperinflation looks like?  People spending with completely wreckless abandon, simply to preserve and capture whatever value they can?

Mon, 05/03/2010 - 15:06 | 329473 i.knoknot
i.knoknot's picture

that was my thinking...

problem is... according to market observations, when everyone is doing it, it's probably the wrong thing to do.

i saw 4 flat-screens in the back of trucks this weekend - and no superbowl-like event to watch before returning on 'em on monday...

maybe it *is* all better. maybe i'm rational, but wrong.

i'm still not buying it yet. literally or figuratively.

Mon, 05/03/2010 - 16:47 | 329659 dnarby
dnarby's picture

Sounds like you saw someone "strategically defaulting" on a credit card.

Mon, 05/03/2010 - 20:10 | 329918 reading
reading's picture

Either that or they just lifted them to go sell them someone to get money for groceries for the week...

Mon, 05/03/2010 - 15:17 | 329486 duo
duo's picture

Looking at the quality of Chinese crap decreasing every month, and prices going up, it makes sense to buy stuff now.  I even bought an extra vacuum cleaner when the outdated model went on sale at Target and the new model (which felt and looked like a Mattel toy) came out.

 

Stuff from Europe may get cheap, temporarily.  Think Italian wine vs Australian.

Mon, 05/03/2010 - 18:13 | 329785 optimator
optimator's picture

And it's going to increase as people note the inflation on everyday products.  I bought a 6 year supply of razor blade cartridges two years ago, as one example, and last time I look they were double what I paid for them.  Lots on nice long term 'investments' out there. 

Tue, 05/04/2010 - 00:36 | 330225 silvertrain
silvertrain's picture

 I had to buy those blades last week and holey moley..$10 for a 5 pack, they have exploded along with batteries.Also picked up a can of Pledge $4.98 {and they cut the can by an ounce} and a small bottle of carpet shampoo cleaner ,ugh, bissell I think..Anyway that was $9.97 for like a 8 oz bottle, that was double from the last I bought before xmas..I told my wife she was going to have to cut back on that stuff..

Mon, 05/03/2010 - 14:40 | 329426 jkruffin
jkruffin's picture

I see $5k GOLD and $500 silver coming to a market near you.......hyperinflation to the max is around the bend.

Mon, 05/03/2010 - 14:53 | 329450 Rogerwilco
Rogerwilco's picture

@jkruffin

Then why is loan demand cratering? If people and businesses actually expected an inflationary blowout, they would be maxing out their credit lines and stocking up on all manner of crap. Take a look at M3 -- it's in freefall.

Mon, 05/03/2010 - 15:13 | 329483 tmosley
tmosley's picture

Zimbabwe didn't need loans to go into hyperinflation.  Neither did Weimar Germany.  Nor has any other nation tht has ever experienced hyperinflation.

You need to throw whatever you think you know about hyperinflation out the window.  Hyperinflation isn't just really bad inflation.  It's a loss of confidence in the currency.  Sure, some people might realize they can game the system by taking out loans and spending the money on stuff and pay back debts in worthless dollars, but most people just shun it altogether.  

Mon, 05/03/2010 - 15:36 | 329517 What_Me_Worry
What_Me_Worry's picture

The average person cannot get a loan.  At least not a loan at a price they would see as affordable. 

The key is we (as in we I mean America) are making less and spending more.  All the while adding new liabilities to our books.  We also project that we don't plan on changing our ways until it is too late.  This makes dollars worth less eventually.  It's not as much inflation as it is devaluation.  Both can appear the same to those domestically who aren't looking at the world view.

Greece showed the world what happens after you reach a tipping point with the world investment community once they begin to smell blood.  America still has a while to go before that happens. 

I always thought we would revert back to a 70's/early 80's style fed funds rate at some point.  However, the fact that nearly $700B has to be rolled every few months shows the Treasury doesn't even have that option.  Hopefully they can find a way to get a large chunk of that debt over to at least the 5 year (even if they have to take higher rates to get it).  If we can get rid of our short-term funding problem AND show some austerity here domestically, then we would have the option of slowly raising rates until our economy (and currency) is back to good.

I know it sounds counter-productive to raise rates to save the economy.  However, I think Volcker showed that if done correctly it can make your economy stronger than when you had the low(er) rates.

Since none of that will actually happen, gold and silver will skyrocket way past the moon.

In Bernanke we trust (our failure).

Mon, 05/03/2010 - 15:49 | 329539 IE
IE's picture

People can get loans if they want to buy a new car or a house.

Mon, 05/03/2010 - 16:01 | 329568 What_Me_Worry
What_Me_Worry's picture

True, they can.

Unless you already had owned a house before the fallout and are unwilling to write a check for $50-$100k to get out from under it to be able to buy another.

I have noticed friends are starting to buy new cars again.  Most got their pay-cuts back from 09 and few think it could happen again.

We need one more stimulus plan where the government will kick-in some sort of matching amount to healthy borrowers that want to refinance their homes to lock in a lower rate but must pay down to its current appraised value.  This would be a stimulus program that would benefit the savers who spent within their means but are far underwater on their mortgage.  This would also cut back on strategic defaults.

We all know there will be more stimulus programs.

Mon, 05/03/2010 - 18:44 | 329838 Implicit simplicit
Implicit simplicit's picture

I agree that there will be more stimulus programs , and I also think there will be a lot more strategic defaults and and credit card defaults. I am not underwater, but if I was I would definitely consider defaulting. I think it is more moralistic to stiff the fascists than to continue feeding them.  Of course if  you work for one of the oligarchs, multinationals or the military industrial, you could have a different view. It is all relative.

Mon, 05/03/2010 - 17:29 | 329739 twotraps
twotraps's picture

really good points, had some banks failed, and rates went back up, it might have been a more uncomfortable year, but perhaps that could lead to a more durable recovery.  We'll never know since the govt stopped the problem with cash.  Now what?  People just get lulled to sleep with 'billion' being used so much...what a waste.

Mon, 05/03/2010 - 16:48 | 329663 dnarby
dnarby's picture

More like $5500 gold and $250 silver IMO, but you say potato, I say potahto, etc.

Mon, 05/03/2010 - 14:47 | 329439 Cincitucky
Cincitucky's picture

It was inevitable that those not learning to curb their spending habits would possibly use the strategic default, without consulting legal advice, as a way to blow their wad when they got their next paycheck.

Spending income has become nothing except a person's means of getting high, without the psychedelic part.  Wish I got that same feeling when I spend cash...

 

Mon, 05/03/2010 - 14:53 | 329453 metastar
metastar's picture

Well, you're not expected to pay anything on your mortgage if you're under water. Or rather, you just need to pay enough that the banks are happy to receive something rather than nothing while having the benefit of keeping their losing assets on the cook book at a fantasy value.

If however you are responsible and have some equity, you slaves better keep making your payments to your masters on-time. Otherwise, the banksters will take whatever you have.

The moral here is that you want to be living a life so large that you're too big to fail (without causing the banksters at least a little pain).

Is this moral hazard?

Mon, 05/03/2010 - 18:25 | 329807 Implicit simplicit
Implicit simplicit's picture

Feed the beast quickly, poison it slowly.

Mon, 05/03/2010 - 14:54 | 329456 aint no fortuna...
aint no fortunate son's picture

I think they're buying lots of gas for the cars they don't have to go to the jobs they don't have... or something like that.

Mon, 05/03/2010 - 15:00 | 329465 MoneyMcbags
MoneyMcbags's picture

Money McBags with a rant on consumers spending more than their incomes are rising

 

http://whengeniusprevailed.blogspot.com/2010/05/5310-midafternoon-report...

Mon, 05/03/2010 - 15:08 | 329477 buzzsaw99
buzzsaw99's picture

Why pay on a mortgage when the banks don't even count the losses? They'll just use the money for bonuses and such. Party on.

Mon, 05/03/2010 - 15:16 | 329484 Truth
Truth's picture

I just had to quote Gordon T. Long's article on kitco.com (today):

 

"You want the truth? You can't handle the truth. Son, we live in a country with an investment gap. And that gap needs to be filled by men with money. Who's gonna do it? You? You, Middle Class Consumer? Goldman Sachs has a greater responsibility than you can possibly fathom. You weep for Lehman and you curse derivatives. You have that luxury. You have the luxury of not knowing what we know: that Lehman's death, while tragic, probably saved the financial system. And that Goldman's existence, while grotesque and incomprehensible to you, saves pension funds. You don't want the truth. Because deep down, in places you don't talk about at parties, you want us to fill that investment gap. You need us to fill that gap. "We use words like credit default swaps, collateralized debt obligation, and securitization? We use these words as the backbone of a life spent investing in something. You use 'em as a punchline. We have neither the time nor the inclination to explain ourselves to a commoner who rises and sleeps under the blanket of the very credit we provide, and then questions the manner in which we provide it! We'd rather you just said thank you and paid your taxes on time. Otherwise, we suggest you get an account and start trading. Either way, we don't give a damn what you think you're entitled to!" As Posted on Calculated Risk

(LMFAO!!)

Mon, 05/03/2010 - 16:20 | 329603 WineSorbet
WineSorbet's picture

+1000000

Mon, 05/03/2010 - 17:12 | 329716 aerojet
aerojet's picture

That's a funny parody, but it derives from a film that was totally fucking stupid.

Mon, 05/03/2010 - 17:31 | 329743 twotraps
twotraps's picture

awesome

Mon, 05/03/2010 - 15:22 | 329492 maynard
maynard's picture

Nobody wants to hold savings as we all expect massive inflation - if not hyperinflation. Better to have on hand an asset slowly depreciating rather than hoard worthless paper.

Mon, 05/03/2010 - 15:25 | 329499 Caviar Emptor
Caviar Emptor's picture

Commercial Mortgage Defaults Near Record High

Fitch Ratings expects more than 11 percent of the $536 billion of loans packaged into commercial-mortgage-backed securities to be at least 60 days past due by Dec. 31, The Wall Street Journal reports. 

http://moneynews.com/StreetTalk/Commercial-Mortgage-Defaults-Record/2010...

Mon, 05/03/2010 - 18:33 | 329819 Implicit simplicit
Implicit simplicit's picture

They will extend and pretend until the day of reckoning when the payments start coming due in large waves.

Mon, 05/03/2010 - 15:26 | 329501 swamp
swamp's picture

I suspect the problem gained a foothold when "discretionary" income became "disposable".

Mon, 05/03/2010 - 15:34 | 329513 Gordon_Gekko
Gordon_Gekko's picture

Get your own personal bailout from the banks - STOP paying your credit cards.

Mon, 05/03/2010 - 18:18 | 329793 Implicit simplicit
Implicit simplicit's picture

True that.

Mon, 05/03/2010 - 19:49 | 329896 Miles Kendig
Miles Kendig's picture

Mortgage, personal loans..  all of it.  If they don't pay then why should we?

Mon, 05/03/2010 - 15:35 | 329516 HarryWanger
HarryWanger's picture

Consumer spending set a record high in March. This is the headline everyone is seeing today. Tough to deny when the consumer that makes up about 2/3 of the US economy is at a record that the economy has recovered quite strongly. Imagine once the jobs situation turns for the better.

Mon, 05/03/2010 - 16:10 | 329578 tmosley
tmosley's picture

You're a witch doctor among economists, Harry.

Mon, 05/03/2010 - 17:23 | 329626 DaveyJones
DaveyJones's picture

he's the anesthesiologist

Mon, 05/03/2010 - 16:15 | 329590 lizzy36
lizzy36's picture
Imagine that FY2011 Budget is projected to widen to $1.6 trillion (10.6 percent of GDP) in FY2010.

And imagine if off balance sheet debt of the GSE's debt was brought on balance sheet. 

Finally, US Treasury rolled over $5.568 Trillionof debt in April.  $4.905 Trillion is non-marketable. Greece needed a bailout because it couldn't roll €20 billion.   

One day the ponzi well end and the trend will not only not be your friend, it will give you the worst rim job, one could ever experience. 

Mon, 05/03/2010 - 16:34 | 329628 Jim Cramer
Jim Cramer's picture

How much you willing to bet HARRY that it craters in APRIL>>>>??????  Of course you'll have some statement like earlier about GDP that it was expected, but totally missed the question on which is worse, the fourth quarter GDP or the 1st quarter GDP, it matters not whether expected or unexpected it's DECLINING!!!!  Same with car sales, but you use circular logic so it all makes sense in your circle jerk world where you don't understand that 4th quarter 5.6% GDP is higher than 1st quarter 3.2%, and substantially higher at that.  YOU ARE SUCH A FUCKING DOUCHE!!!!!  I'd be HAPPY TO MEET YOU ANYWHERE TO SOLVE THIS ISSUE>

Mon, 05/03/2010 - 16:51 | 329666 HarryWanger
HarryWanger's picture

This is no indication that it will "crater in April". To the contrary, we are seeing evidence now that April spending was very strong indeed. Redbook and ISCS store sales have been showing a strong trend through April. So yes, I will bet the farm that sales did not "crater".

Also, I get you point on GDP but all cycles are that way. Strength and strong GDP immediately out of the recession always cools to a nice sustainable level. Why do you find this so odd?

Mon, 05/03/2010 - 17:58 | 329770 Implicit simplicit
Implicit simplicit's picture

Just sell and take your profits, then you won't have to
keep worrying about it; because you know deep down that things are not good.

Mon, 05/03/2010 - 16:43 | 329643 reading
reading's picture

A record high of what?  A record since last year?  It's no where near what it was.

Mon, 05/03/2010 - 23:03 | 330131 depression
depression's picture

Please don't confuse the discussion with a rational thought.

Mon, 05/03/2010 - 18:53 | 329851 RockyRacoon
RockyRacoon's picture

Looks like the neighbors are getting tired of you crapping in their flower beds.

Mon, 05/03/2010 - 19:48 | 329895 Miles Kendig
Miles Kendig's picture

Harry, that is all stimulus government money of one kind or another.  Nothing organic about these numbers.  Move along.

Tue, 05/04/2010 - 02:53 | 330324 Temporalist
Temporalist's picture

As a great man once said "Now we know why tigers eat their young."

Rodney Dangerfield

Mon, 05/03/2010 - 15:42 | 329527 viator
viator's picture

The American Oligarchy

"It is notable then, that for all their criticism of George W. Bush’s economic policy, Johnson and Kwak do not hold him responsible for the bankers’ takeover of the levers of power. Nor do they blame Ronald Reagan. Either Republican president would have been sympathetic to a deregulatory agenda, but Reagan confronted a recalcitrant Democratic Congress, and by the time Bush took office, Washington had already been offered up to Wall Street. Johnson and Kwak place the establishment of an American oligarchy squarely in the administration of Bill Clinton. “One of history’s curiosities,” they write, “is that this shift happened within a Democratic administration, headed by a president elected largely because of middle-class economic insecurity.”

 

"We can formulate a guess by looking at the 20 ZIP codes that pour the most money into the political system. (See the chart on page 23.) This list coincides fairly well with any list of the 20 richest neighborhoods in the United States. All but one of those 20 neighborhoods give the majority of their money to Democrats. (The exception is McLean, Virginia, which gives 48 percent to Democrats.) Most of them give the overwhelming majority of their money to Democrats. For example, none of the 7 Manhattan neighborhoods listed—where we can assume Johnson’s oligarchs live—gives less than 71 percent of its money to Democrats. "

http://www.weeklystandard.com/print/articles/american-oligarchy

 

 

 

 

 

Mon, 05/03/2010 - 17:54 | 329764 Implicit simplicit
Implicit simplicit's picture

Interesting article. Lobbyists and derivatives are killing this country.
"The sympathies of Johnson and Kwak are with the left of the Democratic party, specifically with the SAFE Banking Act sponsored by Senators Sherrod Brown of Ohio and Ted Kaufman of Delaware. It would break up the big banks along a sensible formula similar to the one the authors suggest in their book. They have little hope that it will pass, however, even though there are potentially Republican votes for it.'

Mon, 05/03/2010 - 15:42 | 329531 bxmckenna
bxmckenna's picture

I'm as bearish (realistic) on the economy as the rest of you.  The question I am grappling with is what will trigger the next market correction?  When the world discovered that many of the mortgage-backed securities were worthless, everyone panicked.  So what causes people to panic this time?  Is it sovereign default or something else?

Mon, 05/03/2010 - 17:41 | 329750 Implicit simplicit
Implicit simplicit's picture

I think when the US municipalities start defaulting after the european countries (spain, portugal,ireland,italyetc...). This  will accelerate an already started bear market. A quicker drop (black swan) would start if Iran and the US and/or Israel go to war.

Mon, 05/03/2010 - 23:05 | 330136 depression
depression's picture

When ZIRP ends, in other words never

Mon, 05/03/2010 - 15:47 | 329538 Caviar Emptor
Caviar Emptor's picture

Gasoline hits $2.95 in some service stations.

Mon, 05/03/2010 - 16:18 | 329599 WineSorbet
WineSorbet's picture

Where do you live?  Here in NY, it's over $3 for regular!

Mon, 05/03/2010 - 16:36 | 329634 Jim Cramer
Jim Cramer's picture

I guess you guys missed the analyst that was on CNBC a while back saying that if gas was at 3 or 4 or even 5 a gallon that meant that AMERICANS ARE WEALTHY.  So I go to bed everynight and pray for $10 gas so that I to can be wealthy.

:)

Mon, 05/03/2010 - 17:54 | 329766 Hulk
Hulk's picture

$3.20 here in the SF bay area for regular

Mon, 05/03/2010 - 18:49 | 329844 Rainman
Rainman's picture

$ 3.17 in LA area. They're getting an early start on the usual Memorial Day ram job.

Mon, 05/03/2010 - 19:46 | 329892 Miles Kendig
Miles Kendig's picture

275 in tennessee

Mon, 05/03/2010 - 20:51 | 329976 David449420
David449420's picture

3.78 liters = 1Gal.

@.98 / Lit then 1 Gal = $3.71.

Trenton, Ontario Canada.

 

Mon, 05/03/2010 - 15:49 | 329541 niamor
niamor's picture

"And whereas in other nations the savings rate is materially higher due to the lack of such "we'll save it for you" entities as Social Security and Medicare"

Not sure where this one is coming from.  High saving countries often have a strong social security system (France, Germany, Japan,..)

 


Mon, 05/03/2010 - 17:30 | 329741 Implicit simplicit
Implicit simplicit's picture

Good point. I'd like to see some stats using countries, savings rates and social programs in chart form.

Mon, 05/03/2010 - 16:03 | 329569 Cursive
Cursive's picture

When the worm inevitably turns, this will all seem like a fairy tale.  If you enjoy unicorns shitting skittles, then lap it up.  The fairy tale doesn't have a happy ending for the i-pad consumer type.

Mon, 05/03/2010 - 16:05 | 329572 Racer
Racer's picture

In a way I am glad that the general public are also going along spending as if money was made on trees, sorry toilet rolls. After all the banksters got free money for being bad, so why not the general person on the street. Banksters are bailed out if they mess up and their debts forgiven, so what is good enough for them is also good enough for the poor person too.

But this sort of bad behaviour that has been taught and fostered by the governments will not lead to a proper recovery at all. Kicking the can down the road effect is snowballing into a mega monster that will crush everyone

 

Mon, 05/03/2010 - 16:09 | 329575 Caviar Emptor
Caviar Emptor's picture

An alternative explanation is : spending up because prices are up (gasoline set to hit $3.00 nat avg for the summer, food prices jumped Q1, staples and discretionaries up) fueled in part by government transfer bonanza (it ain't money psychology) and destruction of savings just to pay bills and desperaely clinging to last vestiges of "standard of living". 

Incomes stagnant as always, no surprise. 

Hence a double whammy. Thank you sir, may I have another?

Mon, 05/03/2010 - 16:14 | 329587 Leo Kolivakis
Leo Kolivakis's picture

U.S. is just a larger version of Greece and luckily, they can print U.S. dollars at will. When people are barely getting by, how the hell are they suppose to save?!?

Mon, 05/03/2010 - 16:15 | 329591 docj
docj's picture

So an unemployed and already overextended American consumer dipped into their already pitiful savings so they could continue the ponzi parade for another month by buying and more crap they don't need.

Yeah, awesome.  Bullish.  Dow Infinity - bring it!

Mon, 05/03/2010 - 21:04 | 329997 David449420
David449420's picture

An advertisment I heard recently on the radio on my way to work.

(A local furniture company)

"Yes, that's right Folks.  Come on Down!  You can buy now, and NOT PAY ANYTHING, for 18 months."

How much of this kind of insanity is going on in your community?

Consumer spending is up, is it? 

Mon, 05/03/2010 - 23:11 | 330144 depression
depression's picture

Never underestimate the adaptability and resourcefulness of the American consumer.

Mon, 05/03/2010 - 16:16 | 329594 Grand Supercycle
Grand Supercycle's picture

DOW/SP500 intra day chart gives bullish signal.  Interesting ...

MARKET UPDATES:
http://www.zerohedge.com/forum/latest-market-outlook-0

Mon, 05/03/2010 - 16:17 | 329598 Hubbs
Hubbs's picture

Not saving because:

Won't contribute to IRA, 401K, Pension etc because the Govt has dibs on it. Right now looking at Roth conversion..at least get one foot out of the quicksand.

The markets are not casinos (at least when I eneter a casino, I know my odds are stacked at a certain percentage in the house's favor) but rather a well orchestrated sting operation. A lot of preparation and time will go into reeling the sucker investors in.

Although I bailed in October 2007, I completely missed the run up since March 2009. Guess what? I hate to be late to a last call party.

 

 

 

 

 

 

 

 

 

Mon, 05/03/2010 - 16:22 | 329607 Cyan Lite
Cyan Lite's picture

My take on the higher consumer spending numbers:

1.  The numbers are a fraud.  But of course this wouldn't ever happen in a free society.
2.  The numbers are better due to strategic defaults.
3.  The numbers are better due to inflation.
4.  The numbers are better due to people actually paying down debt over the past 2 years and now have discretionary income.  You have to remember that about 80% of Americans still have jobs.

I pick #4. I have several friends who have paid off HELOCs and credit cards, and are using the stacking approach and live with their parents (who live with their grandparents).  With no rent, no debt, no car payment, it's easy to go out and buy that $600 iPad.

Also there's plenty of the folks went all crazy on Dave Ramsey back in 2008-2009.  Now with things paid off, they can continue to spend their entire paychecks.  The consumer spending itself is a reversion back to mean.  Saving and being frugal is a pain in the butt, especially when you can live like the Jones's.  We know how this movie will end.  The consumer will re-leverage and then the cycle repeats itself. 

In the meantime, I'm long SPY calls.

Mon, 05/03/2010 - 17:02 | 329696 reading
reading's picture

So if they have a HELOC but live with their parents did they default on their primary?  Cause I would certainly be spending more if I just walked away from my mortgage but that hardly makes it a financially sound practice for all parties.  And how exactly are they going to re-leverage?  

Mon, 05/03/2010 - 17:10 | 329714 aerojet
aerojet's picture

Strategic defaults as a reason for anything never made any sense to me.  How can stupid people suddenly make a smart decision based on a macroeconomic factor?  Answer:  They did not.  The only reason idiots default is because they lose their jobs because they aren't smart enough even to copycat others on this matter.

 

So I'm with you on #4--the current jobless are the ones that were marginally employable in the first place.  They may or may not have been big consumers.

Mon, 05/03/2010 - 17:22 | 329727 Implicit simplicit
Implicit simplicit's picture

Know some rebels that are underwater, and think nothing of stiffing the oligarchs. They were pretty well off, and now they are spending a lot. More strategic default spende3rs coming probably will help cpi #s.

Mon, 05/03/2010 - 17:10 | 329715 Implicit simplicit
Implicit simplicit's picture

Intersting take. I've taken the other side since early March. All short, but I have a long time frame, like till I die, or things head my way. Not a trader, an investor. 

If the market takes a long time to head down, it will probbably be worse (larger correction) than if it does it in a hurry. Its the time/space relation, like taking a long time frame chart and squueezing it makes it look like drastic changes over the short term. We can make it shorter like folding space and getting from one point quicker than we would normally (worm hole), but than the recovery would be quicker. I'd rather it take a little time and go down more.

  The fed's program of purchasing motgage backed securities from the banks is finished. Thus, the banks will not have the excess liquidity to keep pumping the market up as they have been doing. With the fed buying program over, M2 will start falling hard. It was already falling from the deleveraging of the bottom 80% of earners. The top 20% incomers are the only ones keeping consumer spending going, along with the debt defaulters. Seemingly, only big banks and big internationals and the people that work for them appear to doing ok financially. Regarding the recent good industrial production (IP) numbers, an interesting tidbit from the "Contrarian Investor" talks about the IP numbers’ disconnect with the “verifiable” lack of a rise in the electrical consumption numbers. it doesn't appear that the rise in IP is from goods being made and sold here considering electrical usage is down to flat. Also, there are no hard numbers (verifiable) given for the IP #s, its from quetionaires.

Mon, 05/03/2010 - 16:30 | 329619 exportbank
exportbank's picture

One of the biggest mistakes I made in my life was to major in math - I look at the numbers and nothing makes sense (the charts have no CASH money behind them - just pretend) - I should have studied Psychology to better understand the idiotic forces that drive human nature - but it's been over a week since I took every last chip off the table and I just feel better.

Mon, 05/03/2010 - 16:32 | 329622 exportbank
exportbank's picture

And there is no way in the world the CPI at 2% is even close to correct. Inflation is running at 7-9%

Mon, 05/03/2010 - 16:41 | 329642 Leo Kolivakis
Leo Kolivakis's picture

Inflation is a lagging indicator. So much liquidity out there that I am getting ready to see a major parabolic move up this summer. Things are just heating up.

Mon, 05/03/2010 - 16:53 | 329670 reading
reading's picture

I would agree with that having just stopped at the gas station on the way to grocery store.

Mon, 05/03/2010 - 16:59 | 329686 aerojet
aerojet's picture

Gas prices are up with the nicer weather, but my grocery bills have fallen--the grocery store I frequent has outright lowered their prices on many items and they are hiding the price drops in other items by having a "sale" every other week.  Grocery prices have always been a huge game, anyways, but it seems to me that the concealment of price drops has become extremely threadbare.  I live in the upper midwest, btw, ymmv.

 

 

Mon, 05/03/2010 - 17:07 | 329706 reading
reading's picture

hmmm, not so here.  Sales yes but prices up

Mon, 05/03/2010 - 17:04 | 329703 aerojet
aerojet's picture

Since when?

Mon, 05/03/2010 - 17:09 | 329709 reading
reading's picture

I would say a gradual increase over the last few months again.  Not as quick of an ascent as we had a couple of years ago, but definitely higher.  

 

Mon, 05/03/2010 - 17:01 | 329693 aerojet
aerojet's picture

There is nothing wrong with having studied math, but you do have to understand that humans are not rational, even when faced with mathematical facts, they remain stubbornly irrational.  I have had to stubbornly relent to the post-positivists.

Mon, 05/03/2010 - 17:17 | 329719 virgilcaine
virgilcaine's picture

Keep the bubble going, keep the sheeple  spending.   2008 didn't happen,  click heels.

Mon, 05/03/2010 - 17:43 | 329753 augmister
augmister's picture

Black Swan.... Black oil leeches beyond FL and up the East Coast, screws up the Gulf Stream and we do an Ice Age?  Buehler?  Buehler?

In the meantime, it's post Concert party time!  Party like an animal and destroy all the furniture in the hotel room (USA).   We can just walk away because we are all smashed and are rock stars, right?   

 

NOT.   This will not end well.........

Mon, 05/03/2010 - 19:45 | 329886 Miles Kendig
Miles Kendig's picture

Hell, government & the bankers that own it have been showing us all for decades how not to be responsible for loses.  It is easy to forget that those 70% transfer payments came from Ben's printing press to begin with... as does 100% of the financial resources I subsist off of.

Mon, 05/03/2010 - 22:21 | 330047 virgilcaine
virgilcaine's picture

The Hosing Mkt is in its second leg decline, Prices are declining in many areas and bubbles exist in others. More pain ahead.  A Trillion dollars of Fed money could only keep it up for 6 months in 09, frightening. Its been in decline since Nov 09.

In NY metro area RE is just a sub sector of the stock market..All I see is Junk with a for sale sign. Many Foreclosures coming down the pike.  CRE is just getting warmed up too. 50% of CRE  loans will be underwater this year.

The Fed doesnt have the tools for a Solvency crisis, never has.  Liquidity/FRn's works for a while until the Debt Wave overtakes it.  Banks Failing each week is not a shortage of cash but total insolvency.

 

Now you know why Lloyd is sounding like Elmer Fudd... he sees his future for GS.

 

Anyone  see the  GDP Price Deflator thing?  Its not going up. At 50 year lows.

 

 

Mon, 05/03/2010 - 22:20 | 330104 tip e. canoe
tip e. canoe's picture

ladies and gents, i bring you from the golden year of 1930, 

"Happy Days are Here Again!" by Ben Selvin and the Crooners!

http://www.youtube.com/watch?v=gqsT4xnKZPg

starring the Freemason Trio!

Tue, 05/04/2010 - 00:29 | 330215 HungrySeagull
HungrySeagull's picture

Paying off debt first.

Using left overs to go to shooting range, buy supplies and refine our posture should something bad happen.

If the crops come in as planned this year, we wont need to spend too much for tomatos and such this summer and fall. We are growing our own for the first time this year learning as we go. That way next year will be better and so on.

We only save just enough to pay off the next debt. For example, we built 6000 dollars and made the truck debt go away. Free and clear. Now we can build up savings again to pay off something else.

there is no way we are gonna sit on 6 grand or any kind of money in any kind of bank or credit union that might.... be made to go away one day.

or just spend it refining our situation such as more ammuntion, supplies etc. Any other kind of spending such as walmart or shopping runs are very rare now.

Tue, 05/04/2010 - 00:50 | 330242 silvertrain
silvertrain's picture

 I think that one thing that may be over looked is that people have ruined there credit scores either through Bankruptcy or are doing so now as we speak...Judgements and such stay on those reports for 5 or 6 years I think, I dont know exactly.Thats going to make it very difficult for the bulk of these folks that have defaulted on Credit cards and home/car loans to get approved for new loans, I dont think anyone is going to relax the standards again but who knows. So that means were going to have an extended peroid of mostly cash only for the masses and so long easy credit..Add to that the real inflation and we have prority only buying for those that still have a job.

Tue, 05/04/2010 - 08:59 | 330528 Grand Supercycle
Grand Supercycle's picture

 

Currently, SP500 futures indicate that the March 2009 bear market rally may be ending. We should get confirmation this week.

MARKET UPDATES:
http://www.zerohedge.com/forum/latest-market-outlook-0

Tue, 05/04/2010 - 18:45 | 331680 Buck Johnson
Buck Johnson's picture

They don't know what else to do, they are just trying to buy time for something.  I think it's war they are buying time for in order to make draconian cuts and call it patriotic sacrifice.

Sat, 05/08/2010 - 15:53 | 338255 Empresario
Empresario's picture

If we run into hyper inflation, all these debt laden consumers will end up feeling vindicated and the banksters have gotten away with stealing america, having their debt inflated away too but still holding all the foreclosed houses and hard assets. Unreal.

www.livingondividends.org/articles/how-to-get-rich-101.html

 

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