Consumer Credit

Key Events In The Coming Week

After last week's global data deluge which culminated with the worst US jobs reported in 6 years, looking at this week’s calendar we get the usual post-payrolls data lull, punctuated by Yellen's speech today which will be the last scheduled Fed statement before the June FOMC.

Futures Flat Following Friday's Jobs Fiasco: All Eyes On Yellen Again

Every ugly jobs report has a silver lining, and sure enough following Friday's disastrous jobs report, global mining and energy companies rallied alongside commodities after the jobs data crushed speculation the Fed would raise interest rates this month.  “The disappointing U.S. jobs report on Friday means that a summer Fed rate hike is off the table,” said Jens Pedersen, a commodities analyst at Danske Bank. “That has reversed the upwards trend in the dollar, supporting commodities on a broader basis. The market will look for confirmation in Yellen’s speech later today.”

Myopic Markets & The Looming Mall REITs Massacre

While markets are myopically co-moving to the siren songs of Fed hawks and doves, deteriorating fundamentals are becoming harder to ignore. Like wildfires, it’s hard to predict how quickly and where market panic will spread to next. However, the chain-reaction of peak consumer credit growth, softening retail sales, and tightening credit conditions does not bode well for REITs going forward.

Everything Changed In 1980 - Why The Fed Is Wrong

Unfortunately, for Mr. Rosengren, since the average American was never allowed to actually deleverage following the financial crisis, and still living well beyond their means, economic growth will remain mired at lower levels as savings continue to be diverted from productive investment into debt service.  The issue, of course, is not just a central theme to the U.S. but to the global economy as well.  After seven years of excessive monetary interventions, global debt levels have yet to be resolved. If the Fed does proceed in hiking rates in the current environment, it will likely be a “policy error” which will be regretted in the not too distant future as debt service costs rise thereby further reducing consumers ability to “consume.”

Even Bill Gross Misunderstands "Free-Market Capitalism"

We have deviated so far from free markets at this point that even the top financial minds no longer have any understanding of what is meant by capitalism. It must be true, for anyone who understands capitalism could never have published such a letter. The logic in Mr. Gross’s argument is beyond invalid, in fact, it is so ludicrous it borders on insane. We mean this quite literally...

Peak Economy - The Failure Of Fed Policy Exposed In 5 Painful P&G Charts

What is taking place in the macro economy is a true demand death spiral and this can be seen very clearly by using Proctor & Gamble’s microeconomic context as a representative model. If one steps back and simply looks at the accuracy of the world’s prominent PhD economists and market pros’ predictions over the past 7 years one can’t help but shake one’s head. And we believe investors have become wise to their ignorance.  We’ve seen a record 15 consecutive weeks of net selling of equities despite these expert pundits continuing on in their attempt to deceive investors into believing we are just one or two quarters away from that (now) proverbial recovery.

US Futures, Europe Stocks Jump On Oil, USDJPY Surge; Ignore Poor China Data, Iron Ore Plunge

The overnight session has been one of alternative weakness and strength: it started in China where stocks tumbled 2.8% to a two month low following some unexpected warnings in the official People's Daily newspaper and poor trade data. Concerns about China, however, were promptly forgotten and certainly not enough to keep global assets lower, with European stocks gapping higher at the open and rallying from a one-month low, driven by a "surprising" surge in the USDJPY which has moved nearly 200 pips higher since its post-payrolls low. Another driver is the jump in oil, which rallied just shy of $46 a barrel, buoyed by Canadian wildfires that are curbing production and speculation that the Saudi Arabian oil minister succession will be bullish for oil prices.

Americans Unleash Epic Debt-Fuelled Spending Spree As Credit Card Debt Jumps Most On Record

The March Consumer Credit data showed that not only did total consumer credit soar by $29.7 billion, or almost double the $16 billion expected, and the highest in series history but that this was driven by a record surge in revolving (aka credit card) debt, as it appears in March US consumers unleashed a historic debt-fuelled spending spree, one which as the chart below demonstrates is either a misprint, a huge outlier, or something has dramatically changed in US consumer psychology.

Futures Sink Ahead Of Payrolls, Capping Worst Week For Stocks Since February

Ahead of the most important macro economic event of the week, US nonfarm payrolls (Exp. +200,000, down from 215,000 despite a very poor ADP report two days ago), the markets have that sinking feeling as futures seem unable to shake off what has been a steady grind lower in the past week, while the Nasdaq has been down for nine of the past ten sessions, after yet another session of jawboning by central bankers who this time flipped to the hawkish side, hinting that the market is not prepared for a June rate hike. Additionally, sentiment is showing little sign of improvement due to concerns over global-growth prospects as markets seek to close the worst week since the turmoil at the start of the year.

A Surprise From JPM: "Pundits Are Urging Investors To Chase Performance; We Believe This Would Be A Mistake"

"Equities had a meaningful rebound from the February lows, and we now find many who didn’t want to add at the time, are looking to enter the market at these levels. Indeed, pundits are urging investors to “chase performance”. We believe that this would be a mistake; complacency has crept into the market again, technicals appear overbought and the upturn in activity appears to be stalling."

The Enabler & The Lifeline: Diamond Resorts & Quorum FCU

Diamond has a good thing going with Quorum: they get access to ample credit, especially for those applicants with weaker credit profiles. From a Diamond investor's perspective, it would be a shame if anything changed. The post credit-crisis strategy of focusing on esoteric lending opportunities like VOI (as well as taxi medallions, hearing aids and fertility treatments) to generate revenues and membership has run into both a broader slowdown in the consumer credit cycle as well as more specific problems, like an increasingly worried regulator.

Depression, Debasement, & 100 Years Of Monetary Mismanagement

There must be some dark corner of Hell warming up for modern, mainstream economists. They helped bring on the worst bubble ever... with their theories of efficient markets and modern portfolio management. They failed to see it for what it was. Then, when trouble came, they made it worse. But instead of atoning in a dank cell, these same economists strut onto the stage to congratulate themselves.

"Sleepy" ECB Preview: What Every Bank Thinks Draghi Will Do Tomorrow

Tomorrow's ECB meeting "looks set to be sleepy" according to Saxo Bank's Mads Koefed as Draghi is largely cornered into confirmation he will do "whatever it takes" and some additional details on the corporate bond purchase plan. Most of the sell-side's research suggests the same, as Bloomberg notes, ECB will probably leave the door open for further cuts if needed; but any downside risk for the euro is seen limited, as Draghi stays on hold by reinforcing its dovish stance after the mix of easing measures announced in March with some defense of the efficiency of his policies after recent criticism by Germany.

Barron's Does It Again

Has there ever been a more ill-timed example of the curse of the Barron's cover than this?