How many people, sitting in a home where anyday the sheriff is expected to show up with packing orders, are charging up the cards to the max in anticipation of BK or default since, what the hay, the FICO dead, no matter.
I use it for groceries all the time, and every other bill I can (cell, phone, internet, etc). When I achieve enough "points" on the card, I order a Visa Gift Card and use that for Stuff I Need Anyway.
I've paid, maybe, $75 in interest charges on my CCs in my whole life. I know their "double cycle billing" game, so if I do have a late payment, I zero-balance the card immediately.
Some CCs give an extra rebate on supermarket sales as well as gas and drugstores (our hero C is one of them). Don't make too much of it. I use CC at supers just for the 1% rebate if the amount is big enough (beer!).
The Federal Reserve recently increased by US$50 billion (to a total of $150 billion) the amount of money it will auction to banks (commercial and investment) through its Term Auction Facility (TAF).
Additionally, the Fed expanded the list of collateral it will accept for asset-swapping through its Term Securities Lending Facility. The list now includes collateralized car loans, credit card receivables, and student loans.
All of this new credit card debt will make its way into the Federal Reserve (through the Fed window.) The magnitude of this stimulus dwarfs the rebate checks now being sent out. The Fed is monetizing the debt. We should not be surprised that commodity prices are rising as people attempt to hedge against this monetization of debt.
The Fed definitely gets how desperate the situation is becoming for JULS. This explains why the Fed has expanded the TSLF to include credit card backed CLO's. They know that this is the next time bomb that's about to explode. Now that the home ATM has been tapped out JULS is really living on borrowered time. How long can you live off of credit cards to finance your standard of living? I hate to be such a doom and gloomer but this is really bad news for the state of the economy.
The JohnDoe Investment Bank announced last night that credit card writedowns that could could reach upwards of $30k. It is widely speculated that the JDIB has swapped its AAA-rated beanie baby collection for treasuries via the TAF, and has announced the layoff of 2 college-aged children at its headquarters in Cleveland.
Also announced was a capital infusion from a 401k-wealth fund, and the sale of preferred shares of the SUV investment vehicles on Craigslist.
Stocks rallied 2.1% on the news and Sec. Paulson said that the worst of John's credit crisis is behind him.
Thornburg's board of directors is asking its shareholders to approve a plan that would increase the number of shares of stock in the company to 4 billion from 500 million and modify the terms of preferred stock outstanding, according to a filing with the Securities and Exchange Commission. The approval of those two amendments would complete requirements Thornburg needs to complete a financing deal with private equity firm MatlinPatterson.
OT
I use credit cards for nearly everything including food. My card puts 1% of all purchases (and extra for certain ones) in my kids college fund. I try to keep a couple hundred bucks positive balance on the card (so in case I forget about a payment they can't screw me). So far I've saved about $500 and haven't paid fees. It amuses me.
CR said: "Say goodbye to the Home ATM, and hello to credit cards."
However "immoral" this behavior might seem to the bears, this is bad news for them. Whatever the headlines and misery index-type polls are saying, people are clearly not concerned enough about their finances to cut back on their spending.
I'm no different than anybody else. Often, I use my credit card for downpayments on home purchases, tax payments, and party weekends at the Ritz-Carlton. Sometimes, I use it to open locks, get frost off my windows, and for drawing straight lines. I find them very useful and I appreciate them.
Hm. Why make this some sort of a hit against "the bears?" I always thought you were much more of a shill compared to banker, who provided pretty decent analysis. The logical progression here is consumers tapping home equity - consumers tapping their credit cards - consumers tapped out and no way to spend. Yet you manage to make this some sort of a bullish argument. Amazing and dishonest.
"Whatever the headlines and misery index-type polls are saying, people are clearly not concerned enough about their finances to cut back on their spending."
And Reagan proved that deficits don't matter, and that negative savings rates can be sustained forever.
"Whatever the headlines and misery index-type polls are saying, people are clearly not concerned enough about their finances to cut back on their spending."
How can you say this is not bearish? It basically means the much of the improvement in retail sales in the last 3 months is just borrowing against future retail sales.
Just talked to friend with one of biggest credit card issuers. I've certainly noticed a substantial decline in CC offers in my mailbox.But he says their offers and yields on the offers are up substantially.
What gives? I wouldn't expect this. Are the big CC issuers playing funny games with the Fed's new asset swapping facilities, allowing them to write more potentially bad loans going forward? It sounds off to me, since I'm a good customer of this bank an I know they've cut down on current customer offers. So they're going after needy new prospects and we know who they are and where they'll likely end up.
Sounds like potential abuse of the fed's credit swap facilities. A new Moral Hazard.
There is so much humour to be found in the condition of misery talked about here. Credit cards are a great accessory
with a table mirror when bring the friends over to see the snowfall...
Oh yeah, I use my credit cards for all my purchases as well, btw, and have been doing that for sometime. Those rebates are free money. They key here is that the total balance has increased, and there are people out there who weren't doing that previously that are now using their credit cards for their daily purchases. How this can be spun into some sort of "they're still spending!" good news is beyond me.
How can you realistically expect prosperity when real incomes conntinually decline for the majority while debt levels relative to incomes are at record high levels.
There used to be a time when I could count on reasoned analysis and debate in the comments section of CR. Seb used to be somewhere at the fringe of such debates, and sometimes offered decent input. As economic conditions have deteriorated, no longer. He has turned into just another troll. Sad.
Apparently someone surmised that if the last few months of lackluster retail sales have been goosed by even MORE credit card debt, then the party is probably nearing an end.
Oh, that and $124 oil.
What is interesting is that J6P obviously hasn't digested the reality of a long recession, which is going to make it all that much worse.
At bloomberg:
"U.S. stocks declined the most in a month, led by financial shares, after new securities rules spurred speculation investment banks will be forced to reveal additional losses."
So actual losses are irrelevant. Its telling the world about them that might hurt the stock price.
It nicely sums up the insanity of the market.
ille_vir said: "...The logical progression here is consumers tapping home equity - consumers tapping their credit cards - consumers tapped out and no way to spend. Yet you manage to make this some sort of a bullish argument. Amazing and dishonest."
This is precisely what I meant about bears looking at this completely the wrong way.
Consumers have a tendency to spend until they feel uncomfortable spending any more. That discomfort level is beyond what bears consider to be "rational" or "prudent," sometimes well beyond.
The very fact that consumers used their credit cards to buy means they weren't worried enough to forego any of those expenditures.
Even if they were so deperate as to use credit to buy food or pay for the electric bill, net-net they didn't feel uncomfortable enough to scrimp on anything else.
Reasonable or not, "right" or not, people are spending and are clearly not worried about it.
Don't you love those whocoodanode moments? Is there one somewhere off in the horizon that is something like... Even worse than the Great Depression!!!???? Whocoodanode?
From an investor's perspective, you want to know the firm you are invested in has a strong capital standing. Why these firms wouldn't disclose this data is a mystery.
Currently Smoking Cannabis writes:
$3.50 gas at 19.8%
The cost of an ownership society.
Ouch... except gas is creeping up to $4/gal.
tj & the bear writes:
Sounds like J6P's financing options are running out. Pretty soon it'll be down to real income -- horrors!
I actually had two coworkers argue that being forced to live within one's means was wrong! Ok, not the two sharpest tools in the shed... but some people need a major wake up call.
$124/bbl oil is going to rock the economy. e.g., Data centers must be moved to regions with surplus hydro power or other cheap electricity. Its not going to be a minor driver. At $100/bbl... I argued otherwise. $120/bbl was the threshold.
"Reasonable or not, "right" or not, people are spending and are clearly not worried about it." -- Seb.
Of course, this is Seb deifinition of "worried."
wor·ried adjective 1. having or characterized by worry; unconcerned; not anxious: Their worried parents danced and sang.
2. indicating, expressing, or attended by worry: worried looks of joy.
Well, OK let me get into the Sebastian mood here and offer up something. Just because the total dollar balance went up, doesn't mean that people are putting more on cards for every day items. I'd like to see a breakdown of the categories where the spending occurred, and I'd also like to see how much of the new balance was carried month to month.
Also, is there seasonality to spending on credit cards? Is this abnormal from a seasonality series? For example, is it normal at this time of year to book summer vacations, so there is a balance upswing?
A little too little data here to make broad general assumptions from. Although I admit it sounds worrying.
I disagree. It would be one thing if consumers were just piling up CC debt, but they are also dipping into bins like their 401Ks.
I read this as panic on the part of consumers. If you need diapers for the baby or gas for the car, you are going to buy it anyway you can and work out the messy details later.
Excuse me, but what is wrong with using credit card for groceries?
Nothing. Personally I always have about 14 crumpled up dollars in my pocket and everything goes on the card. Ipodius loves points and free airline tickets or gift certificates to places he buys things anyhow!!
That will take up enough of your time that you won't notice what is going on in the financial markets.
Buckle up, the CR counter is on the rise again, and another wave of dislocation is on the way!!!
Like watching a homebuilder short floating over the abyss, you know that gravity will eventually act upon the wayward equity, and you must just sit there and wait for your profits.
Ready for $6 a gallon?
That would really put the US economy in a bind.
Seb, this oil shock is moving through the economy with glacial speed, and you expect all of the icebergs to have been passed with just one calving?
I can hardly wait to see how bad it gets by November.
Reasonable or not, "right" or not, people are spending and are clearly not worried about it.
It's the clearly not worried part that is the interesting bit of spin that you introduce to the argument that I think could be surmised as wishful thinking on your part there Seb. After all, people need to eat and put gas in their vehicles to work. If you have to go into debt to do these things then people will do them until the wheels fall off, but I don't think that it is completely honest to say that they are not worried about it. I am one of them and I am worried about it.
You guys and your cc's point's ever stop to think that maybe, just maybe the things your paying for via cc, may have been marked up a tad?
And that's how MC&vsa can give away stuff?
Actually, it looks to me like the dollar value on cards went down, but seasonal adjustment put it higher. See page 2 of the fed's h.8 report (not seasonally adjusted credit card debt).
Also, recall that March retail sales were stronger than expected, seasonally adjusted. This has me also wondering whether the timing of Easter, weather, or other factors might be at play.
All that said, increasing consumer debt didn't just start happening in March.
Real incomes dropping, per capita GDP negative and huge ramps in consumer credit...hmmmm...
The summer vacation thesis is interesting, however along with the record low consumer sentiment surveys there are reduced numbers planning a vacation this summer.
Hey Retail,
Got a Costco AMex- they give me 5% back on my gas purchases there. Um, that is now 5% of $60 to fill the tank.
They also have the lowest prices around. Now, how do they make it up on my cheap bulk food purchases?
Costco/Amex makes their money off of most of the markups on everybody.
I could use my crappy debit card, but hey- I get more back with the other.
The debit takes the money right out of my account, and the big places don't give cash discounts like Lefty's Used Tire shop or ye old friendly Tre Baller shop.
Big retail has zero cash discounts, in fact they dislike cash, cause employees tend to steal it.
Isn't that what you were saying at DOW 14K. "This is an opportunity to profit....we're heading to 17K. This market is waaay undervalued".
It just got more undervalued than before. I am buying here and think it is good times to invest in the market. However, for you bears, I recommend investing in brain surgery/implantation before trying to figure out the market.
The Pension Benefit Guaranty Corp., the government agency that protects the pensions of 44 million workers in case their employers can't (or won't) pay promised benefits, has announced that to avoid going bust it will double the percentage of its portfolio -- to 45% -- that it puts into stocks. An additional 10% will go into alternative investments, including hedge funds.
Has the Fed purposely given the average American consumer indirect access to the Fed window? Think about this; credit cards issuers will now be more willing to issue credit cards because of the backstop offered by the TSLF. The increased desperation of the American consumer will motivate him to max out any credit that's offered to him. Is the Fed just begging someone to dump toxic personal debt onto a credit card that will then consequently be dumped at the Fed window? Is this the Fed's intended purpose or is this an unforeseen consequence of bad fiscal policy? At least the Fed is now literally giving the average person access to the discount window.
Show us another one of your regressions. How DO you do those?
Gamma | 05.07.08 - 4:46 pm | #
Seb's regressions yield unexpected and fascinating results, because they do not involve Calculus, but rather curling up in the fetal position, soiling himself, and crying for a changing.
Sebastian, boy are you dense.
"The very fact that consumers used their credit cards to buy means they weren't worried enough to forego any of those expenditures"
This spending will go straight into a wall at 150mph, just like subprime loans and altA.
If what you say is correct, what about this from the same news item:
Overdue payments at the six largest U.S. credit-card lenders reached the highest since November 2004, according to data compiled by Bloomberg. An average of 4.11 percent of loans were at least 30 days late in February and March, according to reports filed by American Express Co., Bank of America Corp., Capital One Financial Corp., JPMorgan Chase & Co., Citigroup Inc. and Discover Financial Services.
Doesn't seem to match with a carefree consumer spending spree.
"A classic disconnect that we ought to be taking advantage of to our profit instead of being part of the sheeple.:)"
If more debt is good, and you can make money off of it, will you please loan me a few K? Trust me, I promise I'll pay it back with interest. In fact, I've never felt so confident.
kett82 said: "Doesn't seem to match with a carefree consumer spending spree."
I'm afraid you missed the point, as well.
Everyone knows the phrase "the markets can remain irrational longer than you can remain solvent", but nobody thinks to apply the principle when trying to figure out what consumers are going to do next.
I've been recently getting almost daily offers for signature loans in the mail for some pretty large amounts. I don't know if it's just me or if the lenders are seeking out a new breed of sucker. The offers are for pretty big loans too, $5,000-$10,000. If it isn't just me, I wonder if this will be the next boom in consumer debt.
Retail Pro writes:
You guys and your cc's point's ever stop to think that maybe, just maybe the things your paying for via cc, may have been marked up a tad?
And that's how MC&vsa can give away stuff?
What do you suggest? Pay the same amount in cash and forgo the rebate? Only a very few gas station give cash discounts, from what I've seen.
Who pays the rebate? The poor schmucks carrying a balance at 20%. If you want to make a valid argument here, RP, why don't you try the moral angle instead? CC companies are just chumming the water with rebates, hoping to hook someone. They're wrong about me, but they wouldn't be doing it unless it worked.
The best part is when someone fakes your name and writes something rude and childish.... nobody can tell the difference between the real Seabass and the fake Seabass.
Thanks for your posts. I disagree with you w/r/t consumer health, (and most other things) but you take a lot of crap here from a vocal, rabid, perma-bear crowd. If they were as civil as you are, this forum would be much more enjoyable.
I think what might explain this months jump in credit is that people are anticipating the stimulus check. They are thinking "hey why wait and check my mailbox when i can just put it on the card". If this is a longtem trend we are screwed
The best part is when someone fakes your name and writes something rude and childish.... nobody can tell the difference between the real Seabass and the fake Seabass.
That's not a compliment.
Though I disagree with Seb on almost everything, I could tell right away that post was out of character for him. Sebastian doesn't resort to lowbrow rips to get his (incorrect) point of view across.
Fatty Arbuckle said: "I disagree with you w/r/t consumer health..."
Thanks for the support. Just as a point of clarification, I don't think the consumer is especially healthy, and I'm not blind to the difficulties of the economy and the stock market, either.
I just know that it takes a lot to bring down an economy, a lot more than most people realize.
i think you'll agree that an individual is'nt getting that free trip to hawaii on $2500 a year in gasoline.
Rebates work out to about a penny per dollar,(avg) so to get that you need to spend $75g's on your card.
that's only slightly higher than th median national income.
I tend to agree somewhat with you on your comments here, however I take a slightly different view about how "bullish" or "bearish" the signals are. My experience with those in financial distress and/or near bk is that the rational response to spend/not spend decisions are thrown out the window. This data may be signaling that more people have given up hope and are now maxing out credit as much as possible....
SS writes:
I liked Target's receivables being monetized by JPM.
Based on WSJ, I read it as a complex financial transaction under which Target offloads just under half its CC receivables to JPM in almost like a debt or leaseback deal. But obviously, it's not balance sheet debt.
Target will get immediate cash plus the right to buy back the CC stake out of its own profits. It also sounds like they are offloading some of the CC credit risk.
It's a smart move for Target, because they shouldn't tie a vulnerable retail biz to the anchor of CC bad debt in a deep recession. The anchor could drag them under. You would think JPM would have done due diligence on the receivables quality. But who knows?
RP, I don't disagree with your estimate, but you didn't answer the question. Why should I use cash? There's no benefit to doing so, except avoiding the risk of an identity swipe (I shop at Hannaford sometimes). Or, the risk of a cashflow mishap, like the CC companies are hoping for, and a carried balance. One late payment and interest can take back a lot of rebates. But, since I got my first Visa in November 1979, I've never carried a balance. I like my odds.
I can't express just how filled with joy that I am now that the FRB has become one gigantic Everquest for all the country's banks, non-banks, check cashing joints, bookies, dogs@poker...and the like.
Make me wish I too had suicidal and/or sociopathic financial tendencies. I feel like I have/am missing out.
The worst part about the rebate checks being spent before they arrive: what do you think are the odds that the people who said they were going to put the checks in the bank/pay down the CC won't see something new and shiny, and use that found money?
why use cash? generally you can negotiate better terms with cash(generally). And since you two both seem to be in the big spender camp, the $750 theoretical tkt to HI is a non-issue anyway, and comes with caveats. NO fly on x day, etc..
whatever it is that you happen to spend $65g's a year on, if it's a Nobu or the one and only club, then your still better off negotiating for cash on most purchses. Most don't.
And i'm sure some of you guys pay your irs tab on amex. if you do, anything that the card offers in awards you probably already have and don't need.
I had a robocall at my business last week offering $100K line of credit. I just place the reciever down (not hang up). This is much more satisfying with an actual yammerer on the line.
"I just know that it takes a lot to bring down an economy, a lot more than most people realize."
Sebastian | 05.07.08 - 5:15 pm
Seb, I'm looking out the window of my office of the week at one of the fanciest malls in the US. The parking lot is half full on a Wednesday. I marvel at the ability of Americans to consume food and disposable items and borrow.
Too many new money people can't afford for our market to crash. We've got countries all over the world new to our love of spending and they want the show to go on.
Actually, on an NSA basis revolving credit declined a bit. The same pattern happened last year.
Consumers usually pay down their CC balances after the holidays. Last year, at least, they managed pretty well, but it took them longer than normal.
So consumers are not running up debt - more than likely they are just having trouble paying it down what with higher fuel costs. Last year consumers caught up when the winter bills slowed down, and I bet they do this year as well.
Consider that S******** is paid to be here, at the behest of the NAR or the Republican Party, nudging the comment consensus away from bearishness. Consider that he may be getting paid $10. or so for every comment response that he draws from us.
Considering that likelihood, do you really want to respond to him any more? Please, ignore him.
So, I get paid by CR to be here. I'm kind of like one of those hired dancers at a fancy restaurant who gets everyone else in the mood to dance. What is wrong with that?
And how long can credit cards go on as sources of spending? Do the credit card companies worry about getting their money back? Or have they off loaded this debt again to suckers somewhere in the world?
I'm not a financial pro, and I admit that many of the arguments on this blog go over my head. But here's something that bugs me. People are always talking about "taking cash out of their homes" or using their homes as "ATMs." But dammit, when I use an ATM, the money comes out of my bank account, and I'm under no obligation to put it back. What people are doing with their houses is BORROWING with their houses as collateral. They are taking on debt, not taking out cash. I think we should get away from that ATM analogy. It's the kind of faulty thinking that made it so easy to get into this mess.
why use cash? generally you can negotiate better terms with cash(generally). And since you two both seem to be in the big spender camp,
He might be, but I'm definitely not; $300/mo average I'm guessing, half of it in gas. So I'm really talking chump change in my case. I'm not sure I buy the cash leverage argument when standing in Best Buy. Oh yeah, antique stores around here do give cash discounts.
i agree completely. i'm not going to attack on the moral front, or defend. I think you already know how that debate would end.
I was not being facetious there, it is the strongest argument you could make. How can I justify, in effect, taking my rebate money from credit junkies, or people who just experienced an economic trauma, large or small? I think about it myself sometimes. But this goes to a much larger discussion, I think. And that one definitely never ends.
kw,
You don't have to put the money back in your home ATM, either. It magically reappears when you sell it for a huge profit. No need to worry. Move along. Nothing see here.
Yes, you have identified the problem with that line of thought correctly, and you can bet if you could actually hear the commenters' voices here, you'd hear them sneer whenever they said it.
What's a troll? I want one. Can I put it on a credit card? I'll keep its cage clean, feed it table scraps, take it for wart treatments, and nickname it "SEB". -$200
"matty writes:
I had a robocall at my business last week offering $100K line of credit. I just place the reciever down (not hang up). This is much more satisfying with an actual yammerer on the line."
It works better still if you tell them you are deeply interested in their product/service, but could they just hold on one moment while you get the baby to stop crying/take water off boil/etc. If you keep yelling out "I'm on the way back, don't hang up" intermittently some of them will hang on ten minutes or more.
"kw writes:
I'm not a financial pro, and I admit that many of the arguments on this blog go over my head. But here's something that bugs me. People are always talking about "taking cash out of their homes" or using their homes as "ATMs." But dammit, when I use an ATM, the money comes out of my bank account, and I'm under no obligation to put it back. What people are doing with their houses is BORROWING with their houses as collateral. They are taking on debt, not taking out cash. I think we should get away from that ATM analogy. It's the kind of faulty thinking that made it so easy to get into this mess."
If you take money out on a HELOC, yeah, you're just borrowing.
But much of the opriginal commentary about the "Home ATM" idea came from was from the refinance waves, and it was actually a reasonably benign effect, and it was (in a sense) free money for the homeowner.
If you were in a fixed mortgage and rates fell, you could take out a new mortgage with exactly the same payment, but a larger loan balance. [Since house prices went up, there was equity room on the house to increase the loan balance. If house prices had not risen, you would limited room to expand your mortgage size.] That means you get to extract money out "for free" (yeah, there will be closing costs embedded in there).
Alternatively, you could have kept the balance the same and lowered the payment. But since you could afford the original payment (presumably), and your wages may have risen in the meantime, why not extract the cash now?
You would just be cashing in the embedded option in the mortgage that some MBS investor sold you; if you didn't refinance you would essentially be giving a cash gift to the MBS investor. And the MBS investor wouldn't even send you a thank you note.
Actually, I probably contributed to the debt issue. You see Capital One offered me 0% for 18 months so I rearranged some lines of credit to quickly pay off the existing balance at 0%. Once the check clears, the new debt will be paid off. So, I guess you can say that I added to the credit card debt for a bit.
But if you are going to give me 0% for 18 months with a max $199 transaction fee, I definately will use it to pay off the rest of my debt. I don't know how Capital One is making money but they are sure helping me pay off my debt faster. And yes, I never miss a payment as I send electronically and snail mail.
Cheers
That's exactly right. You are not taking cash out of your home--you are using ther home as collateral. If you do not pay your loanshark, he breaks your leg. You never say, "I'm taking cash out of my leg."
"Ready for $6 a gallon?
That would really put the US economy in a bind.
"
It most certainly would but its not going to happen. The world is currently flooded with crude oil and this spec bubble is going to break very hard and probably very soon. My guess (hope) is that it will fuel a last huge wave up in the equity markets in all things non commodity/energy.
Today was actually an interesting day in the term structure of crude contracts. The markets are getting closer to contango which would be a death knell. Nobody seems to be noticing but gasoline demand is collapsing at these prices. Gold also seems to 'know' what is going on.
I had a robocall at my business last week offering $100K line of credit. I just place the reciever down (not hang up). This is much more satisfying with an actual yammerer on the line."
You could tell them "GREAT! Because after my last bankruptcy, I could sure use the cash."
DavidInCt, I have remembered your theory that oil would go down, and I've been waiting for it. I think it's taking a little longer than you thought. Ipodius also believes it will happen, when rates stay stable (I think that's what he thinks).
So I'm not filling my oil tank until I have to. And I have to remember to sell my gold. And when oil drops, I will say a big thank you to you.
outsider,
the hardest thing in markets is to catch real turns. the fundamentals of crude are hugely bearish at this time regardless of the mindless chatter about geopolitical risk and mythical rising demand. demand is falling hard at these prices which is why refinery runs are way way down. there is an extraordinary amount of late money in this trade from pure spec funds to idiots like calpers.
when this market turns for real the first move down should be pretty spectacular and the top it leaves behind will be there for a very very long time. At $100 dollar crude, nevermind 123 just about any energy scheme you can think of is wildly profitable. as has been said of the commodity markets the cure for high prices is high prices.
i am still long lots of airlines and fully expect to get paid, but i am always an optimist.
good luck
d
Franz, I've been doing that for years, but recently the credit card issuers, across the board, have been demanding a 3% fee for that 0% with no upward limit like the recent $50.00 or $75.00 maximum (it often used to be no fee).
My guess is that they will capitalize your your $199.00 as "profit" immediately to offset write-offs. As an example, Citibank is paying 8.75% on some notes, but offering me tens of thousands of 0% balance transfers for a 3% up-front fee.
The only way these banks could justify these offers in any way while they themselves are taking on debt at higher effective interest rates is a.) by capitalizing the fee up-front as profit and/or b.) throwing my unblemished credit record into a pool to help bring up the pool numbers for packaging loans.
"However "immoral" this behavior might seem to the bears, this is bad news for them. Whatever the headlines and misery index-type polls are saying, people are clearly not concerned enough about their finances to cut back on their spending." - Sebastian
You dont get it at all. It will be the creditors that cut back credit availability. They are already starting to get scared. Notices will go out capping credit card balances at whatever the debtors current balance is.
Joe sixpack with $8K on two cards and a $15K limit on each will suddenly find out he can not charge anymore. His limit will suddenly be capped at $8k. Uh Oh.
I didn't know that Bears are liberals, as was implied; based on Sebastian being a "paid troll of the RNC". Jeez, wouldn't the RNC get more amusement by annoying "those liberals" over at MonthJones?
However, IF all Bears are mostly liberal THAT would surely be an interesting psychological attribute. Liberals are pessimist. So, Libertarians being the right wing versions of liberals are also pessimists. And both distrust authority. So, to be a Bear youve got to distrust some authority. That would make the Socialists (aka progressives, the Democrats) optimists and their counter-part brethren, the Fascists (aka conservatives, the Republicans) equally optimistic about their political fantasies. And Socialists and Fascists both worship authority. So, to be a Bull youve got to worship some authority. It all kinda makes some sense, to be an optimist you gotta BELIEVE in the bullpoop. But, still, be careful investing on this ideology stuff, which might be what a mean Libertarian like Sebastian is trying to point out.
However, regardless of Sebastian's politics (and who's paying him) there IS an obvious disconnect between what is my reality (a typical mean Libertarian) and the generic J6P peasants, but also between my reality AND the "financial trading" peasantry. Both appear to be driven by pure optimism, which makes most peasants Socialist or Fascists which, of course, is the two choices youall be gettin in November. Good luck with THAT, btw.
How many people, sitting in a home where anyday the sheriff is expected to show up with packing orders, are charging up the cards to the max in anticipation of BK or default since, what the hay, the FICO dead, no matter.
first?
ouch
last month they broke out the auto lending component. would you know what that is?
The credit card is our discount window.
$3.50 gas at 19.8%
The cost of an ownership society.
I have a Batman Credit Card issued in 1966 but never used. It is now a collectible.
One day all our credit cards will be in a museum for our ancestors to gawk at and wonder.
Can't we just write it down as a loss?
this whole thing is going to end with a big explosion.
Can I swap my credit card debt for US securities?
"Say goodbye to the Home ATM, and hello to credit cards."
And hello to prostitution, drug dealing, and armed robbery.
$15.3 billion is over 10 percent increase in total debt at a yearly rate. Anyone want to bet how much of the $2.56 trillion will finally be paid off?
Subprime, Alt-A stated income, all over again.
Anyone else out there using credit cards for groceries? I have been for months.
"Anyone else out there using credit cards for groceries? I have been for months."
Not me, but I see it from time to time in line at the super. Not a bank card, but an actual credit card.
I use it for groceries all the time, and every other bill I can (cell, phone, internet, etc). When I achieve enough "points" on the card, I order a Visa Gift Card and use that for Stuff I Need Anyway.
I've paid, maybe, $75 in interest charges on my CCs in my whole life. I know their "double cycle billing" game, so if I do have a late payment, I zero-balance the card immediately.
They make the rules, I play the game.
Some CCs give an extra rebate on supermarket sales as well as gas and drugstores (our hero C is one of them). Don't make too much of it. I use CC at supers just for the 1% rebate if the amount is big enough (beer!).
The Federal Reserve recently increased by US$50 billion (to a total of $150 billion) the amount of money it will auction to banks (commercial and investment) through its Term Auction Facility (TAF).
Additionally, the Fed expanded the list of collateral it will accept for asset-swapping through its Term Securities Lending Facility. The list now includes collateralized car loans, credit card receivables, and student loans.
All of this new credit card debt will make its way into the Federal Reserve (through the Fed window.) The magnitude of this stimulus dwarfs the rebate checks now being sent out. The Fed is monetizing the debt. We should not be surprised that commodity prices are rising as people attempt to hedge against this monetization of debt.
Sounds like J6P's financing options are running out. Pretty soon it'll be down to real income -- horrors!
Who said the credit markets were frozen? How much of that increase is due to non-core goods like gas and food?
fear not TJ, the unemployment rate went down last month. Everyone who has a job wants one. Plenty of income to go 'round.
The Fed definitely gets how desperate the situation is becoming for JULS. This explains why the Fed has expanded the TSLF to include credit card backed CLO's. They know that this is the next time bomb that's about to explode. Now that the home ATM has been tapped out JULS is really living on borrowered time. How long can you live off of credit cards to finance your standard of living? I hate to be such a doom and gloomer but this is really bad news for the state of the economy.
The JohnDoe Investment Bank announced last night that credit card writedowns that could could reach upwards of $30k. It is widely speculated that the JDIB has swapped its AAA-rated beanie baby collection for treasuries via the TAF, and has announced the layoff of 2 college-aged children at its headquarters in Cleveland.
Also announced was a capital infusion from a 401k-wealth fund, and the sale of preferred shares of the SUV investment vehicles on Craigslist.
Stocks rallied 2.1% on the news and Sec. Paulson said that the worst of John's credit crisis is behind him.
I hate to be such a doom and gloomer but this is really bad news for the state of the economy.
Sometimes reality is doom & gloom.
Thornburg's board of directors is asking its shareholders to approve a plan that would increase the number of shares of stock in the company to 4 billion from 500 million and modify the terms of preferred stock outstanding, according to a filing with the Securities and Exchange Commission. The approval of those two amendments would complete requirements Thornburg needs to complete a financing deal with private equity firm MatlinPatterson.
Same thing sort of.
OT
I use credit cards for nearly everything including food. My card puts 1% of all purchases (and extra for certain ones) in my kids college fund. I try to keep a couple hundred bucks positive balance on the card (so in case I forget about a payment they can't screw me). So far I've saved about $500 and haven't paid fees. It amuses me.
"credit card writedowns that could could reach upwards of $30k"
per capita?
I'm with lumpen, we use a Delta AmEx for everything possible and pay it every month.
Lots of "free" plane tickets ($65/year or something like that) but I've flown to Greece, Belize, CA, etc.
For us it's a great deal.
CR said: "Say goodbye to the Home ATM, and hello to credit cards."
However "immoral" this behavior might seem to the bears, this is bad news for them. Whatever the headlines and misery index-type polls are saying, people are clearly not concerned enough about their finances to cut back on their spending.
Sebastian
Matt writes:
The credit card is our discount window.
YES!!! Bottom time
Honestly, that is the most bearish news I've seen in a few weeks, and there has been no shortage of it lately.
The new Chase jingle:
I want it now! I want it now! I want it now, and I'm not going to pay you back!
I'm no different than anybody else. Often, I use my credit card for downpayments on home purchases, tax payments, and party weekends at the Ritz-Carlton. Sometimes, I use it to open locks, get frost off my windows, and for drawing straight lines. I find them very useful and I appreciate them.
Hm. Why make this some sort of a hit against "the bears?" I always thought you were much more of a shill compared to banker, who provided pretty decent analysis. The logical progression here is consumers tapping home equity - consumers tapping their credit cards - consumers tapped out and no way to spend. Yet you manage to make this some sort of a bullish argument. Amazing and dishonest.
"Whatever the headlines and misery index-type polls are saying, people are clearly not concerned enough about their finances to cut back on their spending."
And Reagan proved that deficits don't matter, and that negative savings rates can be sustained forever.
Or maybe not...
"Whatever the headlines and misery index-type polls are saying, people are clearly not concerned enough about their finances to cut back on their spending."
Or they need to eat.
Goodbye credit cards, hello 401k. Goodbye 401k, hello payday loan. Goodbye payday loan, hello welfare. Goodbye welfare, hello life of crime.
Am I right if I assume 2.56 trillion divided by about 110 million households equals $23,272 in car+credit card debt for each household on average?
@ Sebastian:
How can you say this is not bearish? It basically means the much of the improvement in retail sales in the last 3 months is just borrowing against future retail sales.
U.S. Economy? Yours.
Just talked to friend with one of biggest credit card issuers. I've certainly noticed a substantial decline in CC offers in my mailbox.But he says their offers and yields on the offers are up substantially.
What gives? I wouldn't expect this. Are the big CC issuers playing funny games with the Fed's new asset swapping facilities, allowing them to write more potentially bad loans going forward? It sounds off to me, since I'm a good customer of this bank an I know they've cut down on current customer offers. So they're going after needy new prospects and we know who they are and where they'll likely end up.
Sounds like potential abuse of the fed's credit swap facilities. A new Moral Hazard.
There is so much humour to be found in the condition of misery talked about here. Credit cards are a great accessory
with a table mirror when bring the friends over to see the snowfall...
Oh yeah, I use my credit cards for all my purchases as well, btw, and have been doing that for sometime. Those rebates are free money. They key here is that the total balance has increased, and there are people out there who weren't doing that previously that are now using their credit cards for their daily purchases. How this can be spun into some sort of "they're still spending!" good news is beyond me.
Sebatian is a troll... don't feed the troll.
Party for Armegeddon !
people are clearly not concerned enough about their finances to cut back on their spending.
C'mon Seb, that's not even a good try. You can do better than that.
alo,
You skipped pawnshops. Mish had a great post on those they other day. People pawning stuff for $20 to buy gas, etc.
I see the bad news, but I still don't understand how we hit a wall in the market's ability to absord that news and rally for no apparent reason.
I guess the $124 oil means nothing as well.
Sebastion,
Put the stock market aside for a moment.
How can you realistically expect prosperity when real incomes conntinually decline for the majority while debt levels relative to incomes are at record high levels.
"You skipped pawnshops. Mish had a great post on those they other day. People pawning stuff for $20 to buy gas, etc."
tj & the bear
Soon it will be pawning themselves, aka prostitution.
I liked Target's receivables being monetized by JPM.
Do you ever get the feeling that due to the size of the problem there is no out and the government is just buying time before it all blows?
There used to be a time when I could count on reasoned analysis and debate in the comments section of CR. Seb used to be somewhere at the fringe of such debates, and sometimes offered decent input. As economic conditions have deteriorated, no longer. He has turned into just another troll. Sad.
SS says: "Do you ever get the feeling that due to the size of the problem there is no out and the government is just buying time before it all blows?"
Bingo!
This was the one that screwed the pooch today:
U.S. Stocks Decline on Concern SEC Plan Will Hurt Broker Profit - Bloomberg.com
"...I still don't understand how we hit a wall in the market's ability to absord that news and rally for no apparent reason."
Trade by the oscillators, would be my recommendation. When you reach a certain level of oversold, the market puts its bull goggles on.
When we're overbought, the opposite occurs.
Just last week, high oil prices would've been viewed as a healthy sign of demand from emerging markets.
Now they're viewed as a potential drag on the consumer.
Coming into today, we were pretty well overbought.
Apparently someone surmised that if the last few months of lackluster retail sales have been goosed by even MORE credit card debt, then the party is probably nearing an end.
Oh, that and $124 oil.
What is interesting is that J6P obviously hasn't digested the reality of a long recession, which is going to make it all that much worse.
ss, this is a family site,no room for beastiality(sp?)
At bloomberg:
"U.S. stocks declined the most in a month, led by financial shares, after new securities rules spurred speculation investment banks will be forced to reveal additional losses."
So actual losses are irrelevant. Its telling the world about them that might hurt the stock price.
It nicely sums up the insanity of the market.
Bigtime recognition today that the banks are going to have to do round after round of recapitalization.
Why do IBs need traditional liquidity when they have the Fed? That rule shouldn't bother the market. They have all the liquidity they could ever want.
ille_vir said: "...The logical progression here is consumers tapping home equity - consumers tapping their credit cards - consumers tapped out and no way to spend. Yet you manage to make this some sort of a bullish argument. Amazing and dishonest."
This is precisely what I meant about bears looking at this completely the wrong way.
Consumers have a tendency to spend until they feel uncomfortable spending any more. That discomfort level is beyond what bears consider to be "rational" or "prudent," sometimes well beyond.
The very fact that consumers used their credit cards to buy means they weren't worried enough to forego any of those expenditures.
Even if they were so deperate as to use credit to buy food or pay for the electric bill, net-net they didn't feel uncomfortable enough to scrimp on anything else.
Reasonable or not, "right" or not, people are spending and are clearly not worried about it.
Sebastia
Don't you love those whocoodanode moments? Is there one somewhere off in the horizon that is something like... Even worse than the Great Depression!!!???? Whocoodanode?
"ss, this is a family site,no room for beastiality(sp?)"
That would be "interspecies erotica," thanks.
Once a long time ago, I was into sadism, bestiality and necrophilia, but let's not beat a dead horse.
The good news is that the advent and widespread use of new productivity-enhancing applications such as this might allow us to avoid a recession.
AFP: 'Grand Theft Auto IV' races into videogame record books
Gotta love this quote from Bloomberg:
From an investor's perspective, you want to know the firm you are invested in has a strong capital standing. Why these firms wouldn't disclose this data is a mystery.
Oh yeah. That's a real puzzler.
What's in a capital one credit card. about 50 billion dollars of debt that is going to be unpaid.
Currently Smoking Cannabis writes:
$3.50 gas at 19.8%
The cost of an ownership society.
Ouch... except gas is creeping up to $4/gal.
tj & the bear writes:
Sounds like J6P's financing options are running out. Pretty soon it'll be down to real income -- horrors!
I actually had two coworkers argue that being forced to live within one's means was wrong! Ok, not the two sharpest tools in the shed... but some people need a major wake up call.
$124/bbl oil is going to rock the economy. e.g., Data centers must be moved to regions with surplus hydro power or other cheap electricity. Its not going to be a minor driver. At $100/bbl... I argued otherwise. $120/bbl was the threshold.
Got Popcorn?
Neil
Excuse me, but what is wrong with using credit card for groceries?
Sebastion,
Not worried? Take a look at consumer sentiment surveys. Historic negative levels.
"Reasonable or not, "right" or not, people are spending and are clearly not worried about it." -- Seb.
Of course, this is Seb deifinition of "worried."
wor·ried adjective 1. having or characterized by worry; unconcerned; not anxious: Their worried parents danced and sang.
2. indicating, expressing, or attended by worry: worried looks of joy.
Well, OK let me get into the Sebastian mood here and offer up something. Just because the total dollar balance went up, doesn't mean that people are putting more on cards for every day items. I'd like to see a breakdown of the categories where the spending occurred, and I'd also like to see how much of the new balance was carried month to month.
Also, is there seasonality to spending on credit cards? Is this abnormal from a seasonality series? For example, is it normal at this time of year to book summer vacations, so there is a balance upswing?
A little too little data here to make broad general assumptions from. Although I admit it sounds worrying.
Sebastian,
I disagree. It would be one thing if consumers were just piling up CC debt, but they are also dipping into bins like their 401Ks.
I read this as panic on the part of consumers. If you need diapers for the baby or gas for the car, you are going to buy it anyway you can and work out the messy details later.
o , really....
Excuse me, but what is wrong with using credit card for groceries?
Nothing. Personally I always have about 14 crumpled up dollars in my pocket and everything goes on the card. Ipodius loves points and free airline tickets or gift certificates to places he buys things anyhow!!
That being said, people did spend $500M on a videogame, so perhaps people aren't in dire straits.
"Also, is there seasonality to spending on credit cards?"
Yes, during the poor season you use them more.
Seb, buy a rental property.
That will take up enough of your time that you won't notice what is going on in the financial markets.
Buckle up, the CR counter is on the rise again, and another wave of dislocation is on the way!!!
Like watching a homebuilder short floating over the abyss, you know that gravity will eventually act upon the wayward equity, and you must just sit there and wait for your profits.
Ready for $6 a gallon?
That would really put the US economy in a bind.
Seb, this oil shock is moving through the economy with glacial speed, and you expect all of the icebergs to have been passed with just one calving?
I can hardly wait to see how bad it gets by November.
Someday this war's gonna end...
"and are clearly not worried about it."
That is the part I call bullfeces on.
And I truly enjoy the wit of Elvis' posts.
Speaking of wit, where did bacon dreamz go? Did bacon and Tanta elope?
Reasonable or not, "right" or not, people are spending and are clearly not worried about it.
It's the clearly not worried part that is the interesting bit of spin that you introduce to the argument that I think could be surmised as wishful thinking on your part there Seb. After all, people need to eat and put gas in their vehicles to work. If you have to go into debt to do these things then people will do them until the wheels fall off, but I don't think that it is completely honest to say that they are not worried about it. I am one of them and I am worried about it.
Angry Saver said: "Not worried? Take a look at consumer sentiment surveys. Historic negative levels."
That's what they say, but what did they do?
A classic disconnect that we ought to be taking advantage of to our profit instead of being part of the sheeple.
S.
You guys and your cc's point's ever stop to think that maybe, just maybe the things your paying for via cc, may have been marked up a tad?
And that's how MC&vsa can give away stuff?
That being said, people did spend $500M on a videogame, so perhaps people aren't in dire straits.
$59.95 in this market is like spending a $1...
Ipodius,
Actually, it looks to me like the dollar value on cards went down, but seasonal adjustment put it higher. See page 2 of the fed's h.8 report (not seasonally adjusted credit card debt).
Also, recall that March retail sales were stronger than expected, seasonally adjusted. This has me also wondering whether the timing of Easter, weather, or other factors might be at play.
All that said, increasing consumer debt didn't just start happening in March.
Sebastian -
Isn't that what you were saying at DOW 14K. "This is an opportunity to profit....we're heading to 17K. This market is waaay undervalued".
Show us another one of your regressions. How DO you do those?
Real incomes dropping, per capita GDP negative and huge ramps in consumer credit...hmmmm...
The summer vacation thesis is interesting, however along with the record low consumer sentiment surveys there are reduced numbers planning a vacation this summer.
Hey Retail,
Got a Costco AMex- they give me 5% back on my gas purchases there. Um, that is now 5% of $60 to fill the tank.
They also have the lowest prices around. Now, how do they make it up on my cheap bulk food purchases?
Costco/Amex makes their money off of most of the markups on everybody.
I could use my crappy debit card, but hey- I get more back with the other.
The debit takes the money right out of my account, and the big places don't give cash discounts like Lefty's Used Tire shop or ye old friendly Tre Baller shop.
Big retail has zero cash discounts, in fact they dislike cash, cause employees tend to steal it.
Someday this war's gonna end...
Sebastian -
Isn't that what you were saying at DOW 14K. "This is an opportunity to profit....we're heading to 17K. This market is waaay undervalued".
It just got more undervalued than before. I am buying here and think it is good times to invest in the market. However, for you bears, I recommend investing in brain surgery/implantation before trying to figure out the market.
S.
Can we have a new thread and leave the special needs kid rocking in the corner?
(with apologies to the real special needs kids!)
The Pension Benefit Guaranty Corp., the government agency that protects the pensions of 44 million workers in case their employers can't (or won't) pay promised benefits, has announced that to avoid going bust it will double the percentage of its portfolio -- to 45% -- that it puts into stocks. An additional 10% will go into alternative investments, including hedge funds.
those poor wage slaves will never win.
Looking for a retort to Elvis, I found this article: Donating Blood Plasma...It's Not Just for Bums Anymore. Kind of old, but it has some timeless points.
My favorite line: "Unfortunately, there is not much of a market for prostitution in Ames. Too many people are providing this service for free."
CR- can you produce a chart showing litres of plasma donated by month? That would make a pretty good bear-market bellwether, IMO.
Has the Fed purposely given the average American consumer indirect access to the Fed window? Think about this; credit cards issuers will now be more willing to issue credit cards because of the backstop offered by the TSLF. The increased desperation of the American consumer will motivate him to max out any credit that's offered to him. Is the Fed just begging someone to dump toxic personal debt onto a credit card that will then consequently be dumped at the Fed window? Is this the Fed's intended purpose or is this an unforeseen consequence of bad fiscal policy? At least the Fed is now literally giving the average person access to the discount window.
"Anyone else out there using credit cards for groceries? I have been for months."
That's all I use - period. I get the airlines points and pay off ea. month. Can't beat the itemized statements.
Show us another one of your regressions. How DO you do those?
Gamma | 05.07.08 - 4:46 pm | #
Seb's regressions yield unexpected and fascinating results, because they do not involve Calculus, but rather curling up in the fetal position, soiling himself, and crying for a changing.
Wow. I haven't seen 300 visitors on the counter in at least a month or two.
Sebastian, boy are you dense.
"The very fact that consumers used their credit cards to buy means they weren't worried enough to forego any of those expenditures"
This spending will go straight into a wall at 150mph, just like subprime loans and altA.
Funny thing is, you'll be surprised.
ipodius,
Seasonality-wise, don't people run up their cards during the holidays and pay them off with their tax refunds?
Regardless, the only bright spots in retail sales these days have been in essentials, i.e., gas & food.
"However, for you bears, I recommend investing in brain surgery/implantation before trying to figure out the market."
yup Seb, just keep on whacking at that hornet's nest.
The fake "Sebastian" is back again, the post from 05.07.08 - 4:49 pm is not mine.
Just a word to the wise, but that's a good way to get your posts removed and your future contributions rejected.
Sebastia
Dear Seb...
If what you say is correct, what about this from the same news item:
Overdue payments at the six largest U.S. credit-card lenders reached the highest since November 2004, according to data compiled by Bloomberg. An average of 4.11 percent of loans were at least 30 days late in February and March, according to reports filed by American Express Co., Bank of America Corp., Capital One Financial Corp., JPMorgan Chase & Co., Citigroup Inc. and Discover Financial Services.
Doesn't seem to match with a carefree consumer spending spree.
Best regards,
However, for you bears, I recommend investing in brain surgery/implantation before trying to figure out the market.
Well, your lobotomy was obviously a success.
Dr. N said: "yup Seb, just keep on whacking at that hornet's nest."
Dumb and/or witless insults aren't my tool of choice for that. I'm contrary, but always civil.
Sebastia
"A classic disconnect that we ought to be taking advantage of to our profit instead of being part of the sheeple.:)"
If more debt is good, and you can make money off of it, will you please loan me a few K? Trust me, I promise I'll pay it back with interest. In fact, I've never felt so confident.
if i here one more rant about the fed printing or dialog betweeen posters and sebastian , i'm going to blow my lid.
It's about me..
me me me
kett82 said: "Doesn't seem to match with a carefree consumer spending spree."
I'm afraid you missed the point, as well.
Everyone knows the phrase "the markets can remain irrational longer than you can remain solvent", but nobody thinks to apply the principle when trying to figure out what consumers are going to do next.
Sebastia
Dear S,
Didn't realize I was talking to the "fake" Seb.
Any way, your thoughts on this...?
Regards,
I've been recently getting almost daily offers for signature loans in the mail for some pretty large amounts. I don't know if it's just me or if the lenders are seeking out a new breed of sucker. The offers are for pretty big loans too, $5,000-$10,000. If it isn't just me, I wonder if this will be the next boom in consumer debt.
Retail Pro writes:
You guys and your cc's point's ever stop to think that maybe, just maybe the things your paying for via cc, may have been marked up a tad?
And that's how MC&vsa can give away stuff?
What do you suggest? Pay the same amount in cash and forgo the rebate? Only a very few gas station give cash discounts, from what I've seen.
Who pays the rebate? The poor schmucks carrying a balance at 20%. If you want to make a valid argument here, RP, why don't you try the moral angle instead? CC companies are just chumming the water with rebates, hoping to hook someone. They're wrong about me, but they wouldn't be doing it unless it worked.
Sebastian is the most well-fed troll in history. Putting his high-school debating team background to use for his own amusement.
Sebastian-
The best part is when someone fakes your name and writes something rude and childish.... nobody can tell the difference between the real Seabass and the fake Seabass.
That's not a compliment.
The fake Sebastian is smarter than the moron Sebastian.
Go fake Sebastian!
Sebastian,
Thanks for your posts. I disagree with you w/r/t consumer health, (and most other things) but you take a lot of crap here from a vocal, rabid, perma-bear crowd. If they were as civil as you are, this forum would be much more enjoyable.
I think what might explain this months jump in credit is that people are anticipating the stimulus check. They are thinking "hey why wait and check my mailbox when i can just put it on the card". If this is a longtem trend we are screwed
Could Consumers have already spent their rebate cheques ? The consumer credit card balances increasing in expectation of the extra $600 ?
The consumer isn't worried because he expects to be able to pay this extra balance off with Uncle Sam's largesse.
Gamma writes:
Sebastian-
The best part is when someone fakes your name and writes something rude and childish.... nobody can tell the difference between the real Seabass and the fake Seabass.
That's not a compliment.
Though I disagree with Seb on almost everything, I could tell right away that post was out of character for him. Sebastian doesn't resort to lowbrow rips to get his (incorrect) point of view across.
The offers are for pretty big loans too, $5,000-$10,000
I'm typically seeing offers for signature loans up to $50K. This is from B of A. I've seen a handfull from other banks in the $15K-35K range.
Fatty Arbuckle said: "I disagree with you w/r/t consumer health..."
Thanks for the support.
Just as a point of clarification, I don't think the consumer is especially healthy, and I'm not blind to the difficulties of the economy and the stock market, either.
I just know that it takes a lot to bring down an economy, a lot more than most people realize.
Sebastia
econoclast,
i think you'll agree that an individual is'nt getting that free trip to hawaii on $2500 a year in gasoline.
Rebates work out to about a penny per dollar,(avg) so to get that you need to spend $75g's on your card.
that's only slightly higher than th median national income.
Sebastian -
I tend to agree somewhat with you on your comments here, however I take a slightly different view about how "bullish" or "bearish" the signals are. My experience with those in financial distress and/or near bk is that the rational response to spend/not spend decisions are thrown out the window. This data may be signaling that more people have given up hope and are now maxing out credit as much as possible....
abal,
I think that is a frightenly astute hypothesis on your part...
Correction: I think that is a frighteningly astute hypothesis on your part...
Based on WSJ, I read it as a complex financial transaction under which Target offloads just under half its CC receivables to JPM in almost like a debt or leaseback deal. But obviously, it's not balance sheet debt.
Target will get immediate cash plus the right to buy back the CC stake out of its own profits. It also sounds like they are offloading some of the CC credit risk.
It's a smart move for Target, because they shouldn't tie a vulnerable retail biz to the anchor of CC bad debt in a deep recession. The anchor could drag them under. You would think JPM would have done due diligence on the receivables quality. But who knows?
RP, I don't disagree with your estimate, but you didn't answer the question. Why should I use cash? There's no benefit to doing so, except avoiding the risk of an identity swipe (I shop at Hannaford sometimes). Or, the risk of a cashflow mishap, like the CC companies are hoping for, and a carried balance. One late payment and interest can take back a lot of rebates. But, since I got my first Visa in November 1979, I've never carried a balance. I like my odds.
I use my credit card all the time. I get 1-5% back. I spend more than 60k a year... My net is always positive. I'm not a fool.
me me me
ipodiius
Oh wow look! Someone has enough free time to spoof me. I'm so flattered! perhaps they should spend the time actually learning something.
perhaps they should spend the time actually learning something.
ipodius
Karate will come in handy during these upcoming crime ridden days. Learn that or the art of debauchery.
"Oh wow look! Someone has enough free time to spoof me. I'm so flattered! perhaps they should spend the time actually learning something."
Gosh, you're tiresome. Shows you don't have to be a troll to take the level of debate down a couple of notches on an otherwise civilized board.
I also think tax rebates were spent before they arrived. Now today, Paulson rejected for now the notion of a second stimulus bill. Markets drop.......
More butter please..........
I can't express just how filled with joy that I am now that the FRB has become one gigantic Everquest for all the country's banks, non-banks, check cashing joints, bookies, dogs@poker...and the like.
Make me wish I too had suicidal and/or sociopathic financial tendencies. I feel like I have/am missing out.
March's rise beat out the Christmas shopping season(November)....wow.
The worst part about the rebate checks being spent before they arrive: what do you think are the odds that the people who said they were going to put the checks in the bank/pay down the CC won't see something new and shiny, and use that found money?
econoclast and bts,
why use cash? generally you can negotiate better terms with cash(generally). And since you two both seem to be in the big spender camp, the $750 theoretical tkt to HI is a non-issue anyway, and comes with caveats. NO fly on x day, etc..
whatever it is that you happen to spend $65g's a year on, if it's a Nobu or the one and only club, then your still better off negotiating for cash on most purchses. Most don't.
And i'm sure some of you guys pay your irs tab on amex. if you do, anything that the card offers in awards you probably already have and don't need.
I had a robocall at my business last week offering $100K line of credit. I just place the reciever down (not hang up). This is much more satisfying with an actual yammerer on the line.
CC companies are just chumming the water with rebates, hoping to hook someone. They're wrong about me, but they wouldn't be doing it unless it worked.
i agree completely. i'm not going to attack on the moral front, or defend. I think you already know how that debate would end.
"I just know that it takes a lot to bring down an economy, a lot more than most people realize."
Sebastian | 05.07.08 - 5:15 pm
Seb, I'm looking out the window of my office of the week at one of the fanciest malls in the US. The parking lot is half full on a Wednesday. I marvel at the ability of Americans to consume food and disposable items and borrow.
Too many new money people can't afford for our market to crash. We've got countries all over the world new to our love of spending and they want the show to go on.
Actually, on an NSA basis revolving credit declined a bit. The same pattern happened last year.
Consumers usually pay down their CC balances after the holidays. Last year, at least, they managed pretty well, but it took them longer than normal.
So consumers are not running up debt - more than likely they are just having trouble paying it down what with higher fuel costs. Last year consumers caught up when the winter bills slowed down, and I bet they do this year as well.
To all:
Consider that S******** is paid to be here, at the behest of the NAR or the Republican Party, nudging the comment consensus away from bearishness. Consider that he may be getting paid $10. or so for every comment response that he draws from us.
Considering that likelihood, do you really want to respond to him any more? Please, ignore him.
So, I get paid by CR to be here. I'm kind of like one of those hired dancers at a fancy restaurant who gets everyone else in the mood to dance. What is wrong with that?
And how long can credit cards go on as sources of spending? Do the credit card companies worry about getting their money back? Or have they off loaded this debt again to suckers somewhere in the world?
people are clearly not concerned enough about their finances to cut back on their spending, says Sebastian
Do you think Sebastian they would become concerned if their credit got cut off? Or would this not stop their spending? LOL
Consider that I'm very well compensated for my intermittent silences here.
Yet, as you see, I burst into prose regardless.
I'm not a financial pro, and I admit that many of the arguments on this blog go over my head. But here's something that bugs me. People are always talking about "taking cash out of their homes" or using their homes as "ATMs." But dammit, when I use an ATM, the money comes out of my bank account, and I'm under no obligation to put it back. What people are doing with their houses is BORROWING with their houses as collateral. They are taking on debt, not taking out cash. I think we should get away from that ATM analogy. It's the kind of faulty thinking that made it so easy to get into this mess.
Does this rant make any sense?
why use cash? generally you can negotiate better terms with cash(generally). And since you two both seem to be in the big spender camp,
He might be, but I'm definitely not; $300/mo average I'm guessing, half of it in gas. So I'm really talking chump change in my case. I'm not sure I buy the cash leverage argument when standing in Best Buy. Oh yeah, antique stores around here do give cash discounts.
i agree completely. i'm not going to attack on the moral front, or defend. I think you already know how that debate would end.
I was not being facetious there, it is the strongest argument you could make. How can I justify, in effect, taking my rebate money from credit junkies, or people who just experienced an economic trauma, large or small? I think about it myself sometimes. But this goes to a much larger discussion, I think. And that one definitely never ends.
kw,
You don't have to put the money back in your home ATM, either. It magically reappears when you sell it for a huge profit. No need to worry. Move along. Nothing see here.
Does this rant make any sense?
Yes, you have identified the problem with that line of thought correctly, and you can bet if you could actually hear the commenters' voices here, you'd hear them sneer whenever they said it.
What's a troll? I want one. Can I put it on a credit card? I'll keep its cage clean, feed it table scraps, take it for wart treatments, and nickname it "SEB". -$200
Being a smart nannygoat -- priceless.
"matty writes:
I had a robocall at my business last week offering $100K line of credit. I just place the reciever down (not hang up). This is much more satisfying with an actual yammerer on the line."
It works better still if you tell them you are deeply interested in their product/service, but could they just hold on one moment while you get the baby to stop crying/take water off boil/etc. If you keep yelling out "I'm on the way back, don't hang up" intermittently some of them will hang on ten minutes or more.
"kw writes:
I'm not a financial pro, and I admit that many of the arguments on this blog go over my head. But here's something that bugs me. People are always talking about "taking cash out of their homes" or using their homes as "ATMs." But dammit, when I use an ATM, the money comes out of my bank account, and I'm under no obligation to put it back. What people are doing with their houses is BORROWING with their houses as collateral. They are taking on debt, not taking out cash. I think we should get away from that ATM analogy. It's the kind of faulty thinking that made it so easy to get into this mess."
If you take money out on a HELOC, yeah, you're just borrowing.
But much of the opriginal commentary about the "Home ATM" idea came from was from the refinance waves, and it was actually a reasonably benign effect, and it was (in a sense) free money for the homeowner.
If you were in a fixed mortgage and rates fell, you could take out a new mortgage with exactly the same payment, but a larger loan balance. [Since house prices went up, there was equity room on the house to increase the loan balance. If house prices had not risen, you would limited room to expand your mortgage size.] That means you get to extract money out "for free" (yeah, there will be closing costs embedded in there).
Alternatively, you could have kept the balance the same and lowered the payment. But since you could afford the original payment (presumably), and your wages may have risen in the meantime, why not extract the cash now?
You would just be cashing in the embedded option in the mortgage that some MBS investor sold you; if you didn't refinance you would essentially be giving a cash gift to the MBS investor. And the MBS investor wouldn't even send you a thank you note.
Actually, I probably contributed to the debt issue. You see Capital One offered me 0% for 18 months so I rearranged some lines of credit to quickly pay off the existing balance at 0%. Once the check clears, the new debt will be paid off. So, I guess you can say that I added to the credit card debt for a bit.
But if you are going to give me 0% for 18 months with a max $199 transaction fee, I definately will use it to pay off the rest of my debt. I don't know how Capital One is making money but they are sure helping me pay off my debt faster. And yes, I never miss a payment as I send electronically and snail mail.
Cheers
That's exactly right. You are not taking cash out of your home--you are using ther home as collateral. If you do not pay your loanshark, he breaks your leg. You never say, "I'm taking cash out of my leg."
"Ready for $6 a gallon?
That would really put the US economy in a bind.
"
It most certainly would but its not going to happen. The world is currently flooded with crude oil and this spec bubble is going to break very hard and probably very soon. My guess (hope) is that it will fuel a last huge wave up in the equity markets in all things non commodity/energy.
Today was actually an interesting day in the term structure of crude contracts. The markets are getting closer to contango which would be a death knell. Nobody seems to be noticing but gasoline demand is collapsing at these prices. Gold also seems to 'know' what is going on.
I had a robocall at my business last week offering $100K line of credit. I just place the reciever down (not hang up). This is much more satisfying with an actual yammerer on the line."
You could tell them "GREAT! Because after my last bankruptcy, I could sure use the cash."
DavidInCt, I have remembered your theory that oil would go down, and I've been waiting for it. I think it's taking a little longer than you thought. Ipodius also believes it will happen, when rates stay stable (I think that's what he thinks).
So I'm not filling my oil tank until I have to. And I have to remember to sell my gold. And when oil drops, I will say a big thank you to you.
Last.
I've been noticing as of late, my daily 40 mile commute towards LA has been getting easier and easier.
outsider,
the hardest thing in markets is to catch real turns. the fundamentals of crude are hugely bearish at this time regardless of the mindless chatter about geopolitical risk and mythical rising demand. demand is falling hard at these prices which is why refinery runs are way way down. there is an extraordinary amount of late money in this trade from pure spec funds to idiots like calpers.
when this market turns for real the first move down should be pretty spectacular and the top it leaves behind will be there for a very very long time. At $100 dollar crude, nevermind 123 just about any energy scheme you can think of is wildly profitable. as has been said of the commodity markets the cure for high prices is high prices.
i am still long lots of airlines and fully expect to get paid, but i am always an optimist.
good luck
d
Franz, I've been doing that for years, but recently the credit card issuers, across the board, have been demanding a 3% fee for that 0% with no upward limit like the recent $50.00 or $75.00 maximum (it often used to be no fee).
My guess is that they will capitalize your your $199.00 as "profit" immediately to offset write-offs. As an example, Citibank is paying 8.75% on some notes, but offering me tens of thousands of 0% balance transfers for a 3% up-front fee.
The only way these banks could justify these offers in any way while they themselves are taking on debt at higher effective interest rates is a.) by capitalizing the fee up-front as profit and/or b.) throwing my unblemished credit record into a pool to help bring up the pool numbers for packaging loans.
"However "immoral" this behavior might seem to the bears, this is bad news for them. Whatever the headlines and misery index-type polls are saying, people are clearly not concerned enough about their finances to cut back on their spending." - Sebastian
You dont get it at all. It will be the creditors that cut back credit availability. They are already starting to get scared. Notices will go out capping credit card balances at whatever the debtors current balance is.
Joe sixpack with $8K on two cards and a $15K limit on each will suddenly find out he can not charge anymore. His limit will suddenly be capped at $8k. Uh Oh.
Re: Sebastian and the Bears.
I didn't know that Bears are liberals, as was implied; based on Sebastian being a "paid troll of the RNC". Jeez, wouldn't the RNC get more amusement by annoying "those liberals" over at MonthJones?
However, IF all Bears are mostly liberal THAT would surely be an interesting psychological attribute. Liberals are pessimist. So, Libertarians being the right wing versions of liberals are also pessimists. And both distrust authority. So, to be a Bear youve got to distrust some authority. That would make the Socialists (aka progressives, the Democrats) optimists and their counter-part brethren, the Fascists (aka conservatives, the Republicans) equally optimistic about their political fantasies. And Socialists and Fascists both worship authority. So, to be a Bull youve got to worship some authority. It all kinda makes some sense, to be an optimist you gotta BELIEVE in the bullpoop. But, still, be careful investing on this ideology stuff, which might be what a mean Libertarian like Sebastian is trying to point out.
However, regardless of Sebastian's politics (and who's paying him) there IS an obvious disconnect between what is my reality (a typical mean Libertarian) and the generic J6P peasants, but also between my reality AND the "financial trading" peasantry. Both appear to be driven by pure optimism, which makes most peasants Socialist or Fascists which, of course, is the two choices youall be gettin in November. Good luck with THAT, btw.
What would life be without Pollyannas optimism?
Last.
Hey!
Over here!
Anyone want to pay me to be a troll?
No reasonable offer refused.
(Sorry, Elvis, try again)
Last and go to sleep.
What's the big deal with being last?
How's the credit card debt homedebtors?
signed
Bitter renter
LOL!
Keep tryin', Elvis.
You ain't nuttin' but a hound dawg.