Consumer Credit

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?

"Someone Is Going To Be Very Wrong"

What is clear is that the Federal Reserve has gained control of asset markets by gaining control over investor behavior. “Are you afraid of a market crash? Yes. Are you doing anything about it? No.” Again, it’s back to fundamentals versus expectations. Someone is going to be very wrong.

Frontrunning: April 14

  • Global shares reach four-month high, forex hit by Singapore sting (Reuters)
  • Dollar Rally Hits Commodities as Europe Halts Global Stock Gains (BBG)
  • Currencies Across Asia Fall Sharply Against U.S. Dollar (WSJ)
  • IEA expects limited impact from oil output freeze at Doha (Reuters)
  • IEA Sees Oil Oversupply Almost Gone in Second Half on Shale Drop (BBG)
  • BofA Profit Declines 13% on Trading Slump, Energy Reserves (BBG)

Stocks To Reopen In The Green For 2016 After Crude, USDJPY Rebound

In the final day of the week, it has again been a story of currencies and commodities setting stock prices, however instead of yesterday's Yen surge which slammed the USDJPY as low as 107.67 and led to a global tumble in equities, and crude slide, today has been a mirror imoage after a modest FX short squeeze, which sent the Yen pair as high as 109.1, before easing back to the 108.80 range. This, coupled with a 3.5% bounce in WTI, which is back up to $38.54 and up 4.9% on the week as speculation has returned that Russia and OPEC members can reach a production freeze deal on April 17, led to a global stock rebound which will see the S&P open back in the green for 2016.

Consumer Credit Rises $17.2 Billion; Holding Of Federal Debt Hit New All Time High

After a near record drop in non-revolving (student and car) loans in December, many were wondering if this pipeline which has kept the US auto sector afloat would remain shut. We are happy to report that for two consecutive months, this all important funding pathway has now been unclogged and nonrevolving loans are back to their soaring self.

"There Is A Lot Of Fear In The Market" - Stocks, Futures Slide After Yen Soars

Two days after stocks slid in a coordinated risk-off session, and one day after a DOE estimate of US oil inventories sent US stocks surging while the failed Allergan-Pfizer deal unleashed torrential hopes of a biotech M&A spree leading to the single best day for the sector in 5 years, sentiment has again shifted, this time due to a violent surge in the Yen as the market keeps testing the resolve of the Japanese central bank to keep its currency weak, and so far finding it to be nonexistent.

Japan Stocks Plunge; Europe, U.S. Futures, Oil Lower Ahead Of Payrolls

For Japan, the post "Shanghai Summit" world is turning ugly, fast, because as a result of the sliding dollar, a key demand of China which has been delighted by the recent dovish words and actions of Janet Yellen, both Japan's and Europe's stock markets have been sacrificed at the whims of their suddenly soaring currencies. Which is why when Japanese stocks tumbled the most in 7 weeks, sinking 3.5%, to a one month low of 16,164 (after the Yen continued strengthening and the Tankan confidence index plunged to a 3 year low) it was anything but an April fool's joke to both local traders.