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alstry (35.69)

Consumer...Prepare to DIE!!!!!

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December 02, 2008 – Comments (12)

(Reuters) - The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

"In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent."

No more Home Equity Loans.....and now credit card availability will be cut in almost half?

Money is evaporating at a rate we have never seen before.....unless of course you are a bank.  I am not sure where you Fools think this is going...but if you need money to live, or buy things, or stay in business.....it is going to get a lot harder to obtain if we continue down this path.

The solution:  Prepare and Party.  You can change the order if you wish.  I will be brewing my own beer tomorrow......let's hope it tastes good after it ferments in a few weeks.

12 Comments – Post Your Own

#1) On December 02, 2008 at 7:09 AM, saunafool (98.67) wrote:

In the end, the consumer pullback is a good thing. When I see home prices falling 25% per year, construction falling off a cliff, and auto sales falling by 40%, it gives me hope.

Why? Because there is no way the economy can recover until asset prices are back in line with incomes, until all the bad debt is paid off (or more likely written off), and the consumer has real cash to spend and invest.

That cash will have to be the real thing: cash they have worked for, scrimped, and saved. The savings rate is increasing for the first time in a long while. It's still only 2.4%, and I'll expect it will get over 10% before we're done.

Making beer at home seems like the best advice I've heard so far. We'll have to kick it old school--scrimping and saving, making do with less, homemade apple pie, driving the speed limit, taking the bus, who knows what else...

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#2) On December 02, 2008 at 8:22 AM, alstry (35.69) wrote:

Actually, I am making beer at a beer making place.  It is likely going to cost an arm and a leg but I am going to be putting my own lables on them and giving them as gifts......only after I sample enough and make sure the taste is suitable.

As far as your following quote:

Because there is no way the economy can recover until asset prices are back in line with incomes

I pretty much agree with your premise....but what if few have incomes???????

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#3) On December 02, 2008 at 8:36 AM, johnw106 (60.90) wrote:

You need to amend the title to credit consumer prepare to pay through the nose.

There are many of us out here who have cash in pocket and a fat savings account and no debt. I for one have not and will not be changing my spending habits. And I will continue to use my debit card and toss the credit applications in the trash, just as I have been doing for years.

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#4) On December 02, 2008 at 11:02 AM, jegr5347 (< 20) wrote:

I have a GE Capital zero interest promo credit card account I owe about $3k on. It is offering me $100 to pay it off.

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#5) On December 02, 2008 at 12:20 PM, zygnoda (26.68) wrote:

It's going to get really ugly for a lot of people.

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#6) On December 02, 2008 at 1:36 PM, hansthered0 (< 20) wrote:

I have been preparing by buying actual gold and silver, learning to pan for gold and buying a shotgun. It could get real ugly out there.

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#7) On December 02, 2008 at 3:21 PM, Gingerbreadman55 (33.00) wrote:

By panning for gold you mean farming, right?

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#8) On December 02, 2008 at 4:34 PM, hansthered0 (< 20) wrote:

LOL - I would farm but i cant stand the smell of acres and acres of animal feces. But believe me I have thought about it.

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#9) On December 02, 2008 at 5:28 PM, guiron (21.45) wrote:

I only use my credit cards for cash back and never carry a balance. I don't care much about how much credit I have, because it's not about getting a loan for me. Let V/MC keep the transaction fees and send me the difference.

But I'd gladly take jegr5347's circumstances and get paid to pay off a 0% interest balance. 

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#10) On December 02, 2008 at 10:50 PM, dexion10 (28.29) wrote:

Meridith Whitney's assertion was dependendent on the government sticking to it's guns and a new regulation takes effect in 2009 that doesn't allow banks to reset credit card rates so aggressively.  Resetting rates is one way the banks mitigate their risk - so

Whitney was saying that if that regulation goes into effect banks will pull credit lines.  I'd bet the regulation doesn't go into effect.

A bigger / surer problem for consumers is going to be unemployment. More defaults for banks means less credit for everyone. 

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#11) On December 12, 2008 at 9:29 PM, tonylogan1 (28.65) wrote:

Alstry -

Good to see it looks like you have entered the "Acceptance" phase. I actually starting using CAPS becuase I followed you and FB's arguments on Yahoo while I was shorting homebuilders last year.

It took losing money on some of those homebuilders when I "knew" they should be bankrupt to realize how the system works.

I suggest the deflation we are currently experiencing is going to very short lived (6 to 9 months maximum).

Infrastructure and other spending will put newly printed dollars into the hands of US residents (money velocity), we will re-inflate the "value" of houses, etc, to the point that they will be closer to in line with incomes.

We may even get to the point we (the government) thinks it is "better to pay people to work than pay unemployment", so we'll even print money to "stimulate" work programs where people do menial jobs to "earn" their "stimulus" checks.

Too early to over-allocate to gold and silver (no more than 5-10% of net worth), I'd suggest a healthy mix of food, guns and ammunition first, along with purchasing anything that you think you need that will last for 20+ years. Then you can start buying commodity stocks, inverse ETFs, or anything else that will do well in this short run of deflation before inflation comes.

 

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#12) On December 31, 2008 at 12:09 AM, jeffduby (21.25) wrote:

please look to this link and see the depth of the problem out west. My personal experience in this matter has been shocking. I'm glad I'm out of credit card debt!

 

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