Swish, Swish, Swish, Swish...What's that sound?
May 08, 2008
– Comments (14) |
RELATED TICKERS: COF
, TM
, ENERQ
Swish, Swish, Swish, Swish...What's that sound?
No it's not the sound of the rotors on Ben Bernanke's magical money-dropping helicopter. It's not the sound of Hillary's chance of becoming the next President of the United States being flushed down the toilet either. That's the sound of millions of Americans using their credit cards to help them pay for increasingly expensive things like food and gas now that they can no longer use their homes as ATMs.
According to a report issued by the Federal Reserve late yesterday, total seasonally adjusted consumer debt rose by $15.2 billion to $2.56 trillion in March, a 7.2% annual rate (see article: U.S. March consumer credit up $15.2 bln, or at 7.2% rate). This is the fastest rate that consumer credit has risen by since November. Specifically, consumer credit-card debt increased by $6.3 billion to $957.2 billion in March, up 7.9%. These numbers raised the total increase in consumer credit during the first quarter to $34 billion, which is the highest level for any quarter since Q1 2001...which not coincidentally is the last time that the U.S. economy was officially in a recession.
Consumer spending has held up slightly better than I had expected over the past several months, though not as well as the government would like us to think it has. Perhaps this is because consumers are racking up all sorts of credit card debt. If so, something is going to eventually have to give. Consumers are going to either slow their spending as their credit card debt becomes too scary or they max out their cards or they are going to begin to default on their credit card debt.
Many people have been anticipating that credit cards will be the next domino to fall in the credit crisis. According to a study compiled by Bloomberg (see article: U.S. Consumer Debt Rises More than Forecase in March) overdue credit card payments at the six largest U.S. lenders have reached their highest since November 2004. For those of you who are interested, these companies are American Express (AXP), Bank of America (BAC), Capital One Financial (COF), JPMorgan Chase (JPM), Citigroup (C), and Discover Financial Services (DFS). Some of those might make a nice CAPS short, with COF and DFS probably being the best (or worst in this case). I may have to see if I can end a couple of my two hundred live picks and give them the old thumbs down.
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I hate to say I told you so...well no I don't. I told you so. I have been writing for a while now that Toyota (TM) is probably headed for problems. Its stock is down over 4% so far today after reporting a sharp drop in its fourth quarter profit and its first yearly decline in earnings in eight years (see article: Toyota forecasts go into reverse). Of course, I never shorted TM in CAPS or in real life so this prediction and $20 will get me a cup of Starbucks coffee (I did end a TM long position at some point last year).
5/1/08: A tale of two automakers, one mighty, one weak...both headed in the same direction
4/3/2008: Auto Industry Analyst: "The current market for light vehicles in the U.S. is about as bad as I have seen it in the past decade."
4/4/2008: Hello, Hello, Hello...Echo, Echo, Echo...
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At the end of a blog post that I made a couple of days ago I mentioned that I was looking for an alternative energy company to add to my real world portfolio. One of the potential candidates that I talked about (there was four or five of them) was Energy Conversion Devices (ENER). At the time it was probably my leading candidate. I added it to my CAPS portfolio, but never in real life. DOH! It announced earnings today and it's up 40% @#$%&*(@#$%^&&*!!!!!!!! Oh well.
Deej
No position in any company mentioned
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