Showing posts with label consumer credit. Show all posts
Showing posts with label consumer credit. Show all posts

Tuesday, November 27, 2018

Monday's Big Bounce Sets Up For Extended Short-Term Rally, Continued Volatility

After last week's bloodletting, it was no surprise that bargain hunters emerged to open the week's trading, sending the markets through the roof right at the open and holding gains throughout the session.

With a four percent loss booked for the prior week, Monday's 1.5-2.0% gains amount to little more than a technical snap-back rally off some very fresh and very dangerous new lows. Early indications from brisk Black Friday weekend sales were the most likely catalyst for Cyber Monday buying, a reflection of what may be considered a robust economy backed by consumers with full wallets and plenty of room to spare on credit cards.

While the Fed has been tightening over the past two years, banks, credit card operations, and shadow banking entities have been cranking up the credit spigots, loosening lending standards and making more money available via an array of personal loans, small business offerings, refinancing, consolidations and other assorted credit vehicles. There certainly is no shortage of easy money in the consumer and small business space, nor in the higher levels of corporate finance.

Add to the consumer and business conditions wide-open spending by governments at all levels and the US economy appears robust, dynamic and unflinching. Never mind that the Fed is threatening to take away the punch bowl. There are more than enough willing participants and suppliers of easy money, many of them spring the mix with added enticements.

There are crosswinds in the capital markets which lead to wild swings in every manner of asset. The flavor of the day may change, but the underlying theme of easy money has not yet left the room. America is in a period that rivals the roaring twenties, the nifty sixties and even the greed-is-good nineties.

The party goes on until the elixir of fast, easy money is taken away, and that's not happening any time soon. Expect even more volatility through the holidays and into the new year.

Dow Jones Industrial Average November Scorecard:

Date Close Gain/Loss Cum. G/L
11/1/18 25,380.74 +264.98 +264.98
11/2/18 25,270.83 -109.91 +155.07
11/5/18 25,461.70 +190.87 +345.94
11/6/18 25,635.01 +173.31 +519.25
11/7/18 26,180.30 +545.29 +1064.54
11/8/18 26,191.22 +10.92 +1075.46
11/9/18 25,989.30 -201.92 +873.54
11/12/18 25,387.18 -602.12 +271.42
11/13/18 25,286.49 -100.69 +170.27
11/14/18 25,080.50 -205.99 -35.72
11/15/18 25,289.27 +208.77 +173.05
11/16/18 25,413.22 +123.95 +297.00
11/19/18 25,017.44 -395.78 -98.78
11/20/18 24,465.64 -551.80 -650.58
11/21/18 24,464.69 -0.95 -651.53
11/23/18 24,285.95 -178.74 -830.27
11/26/18 24,640.24 +354.29 -475.98

At the Close, Monday, December 26, 2018:
Dow Jones Industrial Average: 24,640.24, +354.29 (+1.46%)
NASDAQ: 7,081.85, +142.87 (+2.06%)
S&P 500: 2,673.45, +40.89 (+1.55%)
NYSE Composite: 12,181.60, +145.36 (+1.21%)

Tuesday, February 7, 2017

Debt Notes: Inflation Over The Next 18 Months Is Very Doubtful, Unless...

There's been plenty of chit-chat the past few weeks about how President Trump's infrastructure initiative (we haven't had even a sniff of what this might be, besides the Mexican wall) and tax cuts are going to spur inflation, but there hasn't been any solid data upon which to rest the thesis.

Notwithstanding the minor upticks in CPI and PPI, there's little evidence to suggest that any kind of rampant inflation is on the immediate or even the future horizon, and there are plenty of good reasons for that.

Industry and international trade has been slow since the Great Recession of 2008-09 and our bouncy "recovery" hasn't made any real dent in the actual number of hours worked nationally. Sure, the BLS always tells us more and more jobs are being created and the unemployment figure is near historic lows, but they always fail to point out that people who have dropped out of the labor force aren't counted any more, so those figures are worth about what we all pay to read them... essentially, ummmm, nothing.

Now there is going to be inflation in some things, like it or not, and those things today are, in no particular order, health care, housing, autos, and higher education. Food prices in the USA are, and always have been, relatively stable. Notably, beef prices are far lower than they were just a few years ago.

From all indications, retailers closing up shops nationwide seems to be saying there isn't much demand for clothing. Household goods, ditto. So, where's the inflation coming from if demand is waning?

Simple answer. It's not. The Federal Reserve needs to run the narrative that inflation is upon us so they can jack up their abysmally-low federal funds rate. That's because their experiment in quantitative easing (printing money) and ZIRP (Zero Interest Rate Policy) have proven to be dismal failures. Of course, they will never admit to that, or to the fact that roughly $14 trillion has been wasted or funneled directly or indirectly to the top 1% wealthiest people.

Bottom line is that without demand for goods and services, there can be no price inflation, because, using the standard metric of inflation being more money chasing fewer goods, while there's certainly more money out there, there's also no shortage of goods and services. In fact, were the economy not in such a dreadful state, more people would be opening new businesses, simply because there would be money to be made and not much in the way of competition.

As it stands today, most of the needs of the average, below average, and above average US citizen are pretty easily met. Food and clothing are cheap, and that's two of the three essentials for survival. The third, housing, is largely dictated by geography, so, in big cities, it's expensive. Out in the boonies, not so much.

All of this brings us to the real question, where is all the money coming from?

Another simple answer: debt, though it's not exactly as cut-and-dried as many would believe. Outstanding credit card debt continues to rise, but it's just a shade below $1 trillion, and, as for home equity loans, many people, and many bankers, learned a lifetime lesson in the Global Financial Crisis (GFC). Where the real money is coming from is debt related to car loans and higher education, aka, student loans, both of which reached all-time highs in the 4th quarter of last year.

Strange as it may seem, both are at higher nominal levels than credit card debt, at $1.407 trillion for car loans and $1.11 trillion in student loans. It seems odd that there would be more in just these two categories than everything that could be purchased with credit cards, which is, actually, everything. You can even pay taxes or register your car with a credit card, so it's readily apparent that there's an oversized appetite for new cars and degrees from colleges.

It doesn't really make sense. The vehicles on the road today may be the latest with all the greatest gadgets and widgets, but they're not much better than cars made in the past fifteen years, many of which are still reliably on the road. as for a college education, that has to be a societal miscalculation, because a degree in liberal anti-establishment cultural studies or whatever isn't going to pay for itself any time soon. It's a conundrum, a mismatch, a MALINVESTMENT, of which there are many, everywhere.

That's not to mention that the median cost of a new home is at another all-time high, but, as mentioned earlier, that's largely a local issue, but it bears notice that the average monthly payment of principle and interest (PI) for that median home is over $1000 a month.

So, if you find yourself all bollixed up over high credit card balances with high interest rates, don't worry. There are plenty of college graduates living in nice, new homes driving new cars who are in much worse shape than you.

If you're one of those people, we're all sorry, and we're having a drink to your ultimate demise, telling the bartender, "charge it."

"Compounded interest is the 8th wonder of the world. Those who don't understand it, pay it, and those who understand it, earn it."
- Albert Einstein

At The Close, Tuesday, February 7, 2017:
Dow: 20,090.29, +37.87 (0.19%)
NASDAQ: 5,674.22, +10.66 (0.19%)
S&P 500: 2,293.08, +0.52 (0.02%)
NYSE Composite: 11,236.17, -27.94 (-0.25%)

Wednesday, December 30, 2015

Doubtful That Stocks Will Post Gains for 2015

Stocks took a nosedive into the close, with the three major indices closing at the lows of the session.

More than likely, traders are taking whatever they've made and walking away, as there is only one more day left to buy, sell or hold in 2015.

Crude got hit again and should test the December lows once January commences and the realization that global GDP is going to come in at under two percent or thereabouts for the year. As mentioned earlier, US fourth quarter GDP - which will be first estimated nearing the end of January - will have to measure in the range of 2.8%, which will be a real stretch, as holiday sales have not been very robust and housing - as evidenced again by pending home sales in November, came in at -0.9%, well below already tame estimates of a gain of 0.5%.

Crude Oil closed at 36.65, down 3.22%; Gold and silver were ambushed once more by the global cartel and the ten-year note finished just about where it did yesterday,yielding 2.30%, a pretty good jump of 7-8 pips from the close on Monday.

Natural Gas ended at 2.22, off 6.41%, after a big run-up based upon projections of a colder January for the Northeast via a European model. NOAA's three-month forecast for January-March remains unchanged, showing a warmer than normal winter for much of the Northeast and Midwest. So much for the rapid rise off generational lows. Like oil, there's an absolute glut of Nat Gas, a positive boost for consumers. Storage facilities in the Northeast are near record capacities.

If history is any guide, consumers will continue paying down debt if oil, automotive fuel and natural gas continue to trade at lowered levels. Wall Street may like like the idea, but Main Street is relishing the break from a near-decade of high prices.

Outside of the insanity that is the NASDAQ, a loser close on the S&P will send 2015 investors home flat or losers on the annum. The Dow looks to have no chance to finish in the black for the year.

Here are closing prices at the end of 2014:
S&P: 2,058.90
Dow: 17,823.07
NASDAQ: 4,736.05


Wednesday's closing prices:
S&P 500: 2,063.36, -15.00 (0.72%)
Dow, 17,603.87: -117.11 (0.66%)
NASDAQ, 5,065.85: -42.09 (0.82%)


It's not looking very pretty and January appears to be setting up for a dramatic sell-off.

Tomorrow: Money Daily's Forecasts for 2016

Sunday, November 13, 2011

Identity Theft, Employment and the Reporting Agencies

Identity theft is a major life difficulty that can affect your family, credit score or even your job prospects. Many employers are and have been looking into the credit histories of prospective employees as a way to differentiate the deluge of job applications during these difficult times.

Some say that checking credit scores of job applicants is hitting below the belt against individuals who, for better or worse, could not meet their obligations due to job loss, divorce, illness or the sluggish economy. Employers, on the other hand, are already skeptical of the current economy and are doing everything within their power to employ people while keeping their business intact and operating smoothly. They feel that identifying poor credit risk individuals is within their rights to hire the employees the consider the most fit for the job and the culture of the company.

Like it or not, that's why it's important to keep track of one's credit score. There are many sites at which one can access a free credit score to check for discrepancies, mistakes or fraud, the signature of identity theft.

Sites offering FreeScore provideof credit scores, reports and consumer credit information, along with identity theft protection services. An effective deterrent against identity theft and all sorts of other social maladies, getting the information from the three major credit reporting companies - Equifax, TransUnion and Experian.

Discrepancies on any, from those of the other reporting services, or transactions or information of which you are unaware, should alert you to the possibility of foul play.

It is important that as soon as you become aware of mistakes or errors in any of your credit history, that you contact the reporting agency, preferably in writing, for an explanation. Also advisable is contacting the financial institution upon which the error is recorded, be it a credit card company, bank of other financial institution.

Friday, September 10, 2010

Switching Credit Cards May Prove Fruitful

Despite the downturn in the economy, most Americans are still using credit cards due to their versatility, worldwide acceptance, loyalty rewards and overall ease of use.

A handful of issuers have upped the ante on the competition, offering more competitive rates, better points systems or other inducements to get people to apply for a credit card. Balance transfers have also become important in deciding which card is the right choice.

Many people have turned to popular credit card ratings web sites to sort through the various offers, discounts and online availability. Some sites offer very basic advertisements, while others provide deeper detail, including the ability to search by FICO score, check application status and even calculate the amount of savings provided by a balance transfer.

Tools such as these can help consumers save hundreds, if not thousands of dollars over just a few years by finding the right card with the best interest rate to suit their needs.

While it's true that American consumers are paying down debt at a very rapid rate, it hasn't taken the issuers long to adjust to this shift in sentiment and respond with more competitive rates for serious savers. Naturally, one's credit score always plays a crucial role in acceptance, and lowering one's balance owed is now more important than ever. With finances in flux, however, now might be a very good time to consider switching cards or consolidating debt into one card at a lower rate.

The savings could be substantial.

Tuesday, May 4, 2010

Finding the Best Free Credit Report Service

If the 2008 financial crisis didn't already do enough damage to people's frazzled nerves, hidden, sometimes undetectable errors on a person's credit score can wreak havoc on one's personal finances and even jeopardize current or future employment opportunities.

The three major credit reporting agencies - TransUnion, Equifax and Experian - are responsible for keeping accurate records on millions of Americans, so there's potential for errors on credit reports; even finding differences between the three are common.

To help consumers sort through the maze of possibly conflicting reports, there are a number of services which will provide a free credit score, but finding which one of these services is best may also prove to be more a guessing game than making an educated choice.

One of the best among a large field of choices is FreeCreditScore.com. In addition to their 7-day free trial offer, the site also provides a wealth of information on what is important in one's credit history and tips on what separates a strong credit report from a weak one.

Wednesday, April 7, 2010

Savvy Consumers Shun Credit; Markets React Poorly

There truly is a disconnect between Wall Street and Main Street. The pinstriped crowd looks at the world through some-colored glasses, and while we're not sure whether they're rose or some other shade, their view of the world is certainly clouded by dollar signs, at the least. Their vision is that of an amorphous blob, a mass of numbers and data points and signals, charts and vector graphs all pointing in one orderly direction: toward their commission check. It is difficult for the average Wall Streeter to comprehend how people could miss a payment, budget and save, or go without something they desire.

Main Street's view is much more realistic. People are paid - and taxed - according to their worth, for the most part. You produce or you go home. You work or you become part of the underclass. Most Main Street Americans - businesspeople and consumers alike - comparison shop, love a good bargain and are generally (as compared to their Wall Street counterparts) frugal. They try to make ends meet, keep their places of employment and their homes clean and operable and they do most of these manual chores themselves. They understand just how much a dollar can buy and how many dollars they need to get through the week and the month. They have real needs and many of them are just a paycheck or three away from despair, if not already there.

These differences were never more noticeable than this afternoon, when the Federal Reserve announced that consumer credit outstanding declined at an annual rate of 5.6%, seasonally adjusted, down $11.5 billion, to $2.448 trillion in Febraury.

Wall Street's reaction to Main Street's frugality? You guessed it: fear and near-panic. Consumers not spending like drunken sailors is anathema to Wall Street. And not using credit is regarded as almost other-worldly. Wall Street just cannot get it through their heads that the rest of the world doesn't drive a Bentley, wear $2000 suits and fly to Curacao for weekends. Thus, when evidence like today's consumer credit condition - in decline 16 of the past 17 months - the investor class runs scared.

Sooner or later, they're also going to find out that many people can't afford the homes they're living in, and when that reality strikes home, it will make today's little scurry to the downside look like a walk in the park.

To illustrate just how much a drag on the US economy housing really is, this post and these graphs point out how far above historical levels housing prices galloped in the 2000s and just how poor the government's attempts to "stimulate" the market have been.

Since that's a story for another day, suffice it to say that Wall Street took a hit from the old reality pie straight in the kisser this afternoon. Following an exceptionally-well-received 10-year Treasury auction (another condition the "experts" had completely wrong), stocks were basically treading water until just before 3:00 pm, when the consumer credit news hit.

The Dow was off 124 points at the worst level, having earlier recovered lost ground after the $21 billion, 10-year Treasury auction which witnessed a 3.72 bid-to-cover ratio (far above the recent average of 2.87) and a solid 3.90% yield rate, which pushed 10-year yields further down, to 3.86%, by day's end. Yesterday, I wrote about fears of the 10-year heading North of 4% and why it isn't going to happen. Today we saw what was true. Indirect bidders (foreign central banks) accounted for 42% of the total, suggesting that maybe some people like US Treasuries at under 4% more than Greek's at around 7%.

Sure the Greek bonds offer more bang for the buck, but, then again, their economy might just blow up, too. Risk-avoidance is "in" once again.

Dow 10,897.52, -72.47 (0.66%)
NASDAQ 2,431.16, -5.65 (0.23%)
S&P 500 1,182.44, -6.99 (0.59%)
NYSE Composite 7,546.18, -58.26 (0.77%)


For a change, declining issues outpaced gainers, 3928-2577; new highs remained high at 600, compared to just 48 new lows. The most significant numbers were the volume readings, however, which evidenced a noticeable spike in trading activity. From a technical perspective, after days of low volume gains, a high-volume decline is a harbinger of doom and a sign that a corrective phase could soon be upon the markets. Almost everybody knew that stocks were overbought heading into earnings season and these upcoming 2-3 weeks could be damaging to sentiment long term.

NYSE Volume 5,700,141,000
NASDAQ Volume 2,872,620,250


The commodity market seemed uniformly confused by the day's data. Crude oil took a bit of a breather, losing 96 cents, to $85.88, but gold galloped ahead $17.20, to $1,152.30 and silver pushed higher by 27 cents, to $18.18, close to 52-wee highs. The metals moves make no sense at all in what can only be described as a deflationary environment, unless there was a rampant short squeeze, which many suspect this was. The metal may be giving an extended head-fake or be reacting to the credit numbers in a flight to safety.

Either way, the US is far from being clear of the crisis. Wall Street may be just beginning to find out what Main Street already knows.