Karen Consumer

Anticipating the Next Boom Without Going Bust

The banks have cheap money. The consumers do not. Car totaled 2/25/09, had to buy used car, paying 17% interest (and damn happy to have been approved for the loan). Credit cards bumped from 19% to 29%. Can't refinance house, no one will touch me. But I'm one of the few with job security (at least until the city's budget year ends Sept 30).

Two kinds of young people entering market today, people who graduate college with loans and credit card debt and no job to pay for it, or people graduating high school having to pay cash for college because loans prohibitively unattainable. What are they going to learn from this? Don't get credit, don't even try, stay at home with parents and hoard cash until you can pay complete purchase price in cash with no financing. Don't put money in stocks, they treat your money like their personal gambling fund, only they never lose (love them fees and retainment bonuses). Your better off going straight to Vegas (or Atlantic City, Bosier City, any Indian casino in America).

How do I know that? I'm raising that kid. And so are my friends.

Oh, and I loved the part about the government instructing banks not to broadcast how they faired in the stress tests (after of course guaranteeing that no bank would fail in the first place). Oh yes, that's the way to build confidence.

The Shadow Inventory of Foreclosed Homes

Charles, I disagree with you on your supply/demand stance. A family foreclosed on is not necessarily the family who had the loan. There have been (and continue to be) renters who are put out on the street because they were already renting from a landlord who stopped making payments. Since banks are not in the business of renting, only in selling, the foreclosure closes the rental property. Once a hard working family has been burned by one rental house, they are normally reluctant (and almost always financially strained out of the ability) to immediately rent a house again, preferring instead an apartment. And depending on the size of the household, you might have 1, 2, or even 3 generations of a family chosing to live in one home temporarily (say 1-3 years) until their financial crises pass. I personally know people who lived in MIchigan up until Fall 2008 and then just left the state (and their upside down homes) for job friendlier pastures.

The shadow inventory won't be able to stay out of the light forever.

Data Not Supportive of Higher Stock Prices

When Walmart sees smaller than expected same store sales, you know money is tight. Even I (a regular Walmart shopper) was surprised at that, as I see more people than ever shopping there, and Walmart is known to haggle down suppliers to the bone.

People without jobs are borrowing or living with family and friends who do have jobs. At work there's an entire (almost cult like following) group of dedicated couponers.

How the stock market makes money when no one is buying has always been a mystery to me. I always understood business saved money when they layed off people, but when you couple layoffs with no sales, I would think what's left is just covering the lights and the taxes, and how long can you stay in business like that?

Wells Fargo's Record Profit: Beginning of a Trend?

This is banks cooking the books in the truest sense. We have record unemployment and underemployment (and don't give me that 'size of the workforce' nonsense). People who don't have jobs and get 1/2 to 2/3's of their former salary in unemployment insurance are having to pick and choose between floating the house note, car note, or credit card bills every month they remain un- or under- employed. But the banks aren't going to be writing off any more credit losses like they were BEFORE the layoffs started September/October?

If you buy bank stocks now, you must have money to burn, and congratulations to you.

If you sell bank stocks now, you're the only smart guy in the room.

And it's funny (I mean with irony) that the president is almost begging people to re-finance their homes. Evidently someone is pointing out to him that its not happening. The only people who seem to be aware why are the people who have been trying but can't make it through the hoops that the government set up to make the whole process easier.

There is no way we are going to run out of houses before 2009. We are going to run out of money and patience first.

How Derivatives Got Cities and Counties in Hot Water

Can you repossess a city or a state?

I ask that question facetiously, but I don't understand the muni bond derivatives. Would someone please put it in laymans terms?

The Slippery Slope of Declining Petrochemical Demand

Unemployed people use less gas because they aren't able to go to work each day and the number of companies calling them in for interviews is small. Empty (foreclosed) houses in winter aren't heated by oil or natural gas. People who do have jobs just do necessary travel and wear more indoors or use their wood burning fireplaces. That's market economics.

And you can only have plug in hybrids if you can generate electricity. We still have a long way to go before more power plants are built (remember, Obama said 'you can try to build a coal power plant, but we're going to make it so expensive...'), and in the mean time there is still no nuclear plant that the environmentalists will tolerate, and now that the environmentalits have shown their hand with objecting to wind turbines in the deserts of California, and the recent declaration of the [endangered] status of the Sacramento and San Joaquin rivers in CA, where is this power going to come from?

As long as governments insist that market economics must be green and clean as well as "fair", we're screwed.

Stock Market, Housing Does Not Equal the Overall Economy

The average people that I know (we're just the engine of the economy, not the brains that got us in this mess) know that the economy isn't getting better. No less than 2 miles from me is a housing development that just finished its last house, and after 18 months on the market, they have 3 foreclosures and about a dozens houses that remain unsold. In the north part of the city are two subdivisions that are finishing up and remain 1/2 sold (we're talking 150 houses built, 75 remaining vacant), we've got another two subdivisions in the heart of our city that are being built, and yet no one is buying. I guess they had to use up the financing they had, but now we have houses empty and no one wanting to buy. This is even after we've torn down some 750 apartment units and 100 or so substandard houses, and the new houses are raining from 110k to 180k (not totally unreasonable prices for Texas).

People without jobs cannot buy houses. People having to take part time jobs cannot buy houses. People who have been told that their companies have to tighten their belts are not going to buy houses. You could offer 1% interest on mortgages, but I don't want to take any chances on messing with my delicately balanced household budget, ok?

The media and government can talk up the economy all they want, until everyone that I know (at least the 3 closest to me) have full time jobs again, we are hunkering down for the long haul.

One in Ten Americans Receives Food Stamps?

My friends and family want to work. Friend 1 worked at Microsoft until they let her go in Sept 2008. Friend 2 has been underemployed since being let go from Microsoft in 2006. Son 1 can't even get a call back from grocery stores since being let go from a web hosting company. That's just the beginning and this is all in Texas. These are all highly educated people who have continued their education even after job loss.

Just what are they supposed to eat when no one is hiring?

FASB's New Mark-to-Market Standards: April Fools' Came a Day Late This Year

Please help me figure this out. Banks made loans (all types). Banks packaged up the loans into notes and sold them. The market bought them, and sold them, until they couldn't sell anymore. During this selling period, people stopped paying their loans (all types). The packages stopped recieving income (interest & principal payments), making them unprofitable, uncollectable, and unsellable. Now the FASB says you don't have to say what these packages are really worth IF you tried to sell them now, just what you think they would be worth if someone were to buy them. So the banks and others still aren't collecting principal or interest on these packages, they just don't have to tell anyone how much they aren't collecting (or have just lost outright).

And this is going to make the stock market money? Are my family members 401k's going to spring back up in value? Are they're houses going to stop lowering in value? I'm not an economist, but I don't think this is going to do anything but delay bank losses for 2 to 3 quarters at most, then somebody smart with money is going to figure out that uncollectable in Q4 2008 is still uncollectable Q4 2009.

What am I missing?

Six Reasons Why it May Be a Jolly Christmas

"My opinion regarding retail orders is based upon portfolio data from the companies that First Capital finances. First Capital lends money to literally hundreds of companies producing consumer goods that are sold in the retail distribution chain. And, First Capital’s credit department researches and talks to management of all of the major retailers and most of the smaller regional and specialty retailers. First Capital’s view of retail sales does not include consumer durables, toys or food products."

So do you own them or work for them (First Capital)?

Seriously, unless First Capital is the only company that loans to producers, I don't see how you can predict Christmas sales based on this.

Is there a Parallel Between Carbon Trading and Subprime Lending?

Carbon trading/Cap-n-trade is goign to end up like the Subprime derivitive fiasco, with speculators buying up every credit in site and flipping them to the shmuck d'jour. Eventually the shmucks will run out of money and the environmentalists will have some new target that must be dealt with, and "poof" worthless credits like worthless mortgage securities.

Real Disposable Personal Income Grows by 2.2% in February

I've been working for the past 10 years at the same place, and I can tell you that I had more money to spend in 2005 than I do this year. My personal income is stagnate, but my costs have risen since 2005. Hopefully my costs will level off this year, then maybe I can stay at the break even (enough to pay bills and buy groceries, but nothing else). My costs started to rise in fall 2007 (just before the crisis) and soared in 2008. That lead to me canceling my Satelite TV, paying my electric bill a week late every month, and ceasing to eat out. Now they "seem" to have peaked for me, and I'm not having to juggle in which order to pay bills or buy groceries, but that's it.

I really wish some of the authors here would stop relying on the government's data and do some independent research.

And yes, I really do look at this stuff.

Real DPI and real PCE

Real DPI -- DPI adjusted to remove price changes -- decreased 0.4 percent in February, in contrast to an increase of 1.3 percent in January.

Real PCE -- PCE adjusted to remove price changes -- decreased 0.2 percent in February, in contrast to an increase of 0.7 percent in January. Purchases of durable goods decreased 1.5 percent,
in contrast to an increase of 3.2 percent. Purchases of motor vehicle and parts accounted for most of the decrease in durable goods in February and about one-half the increase in January. Purchases of nondurable goods decreased less than 0.1 percent in February, in contrast to an increase of 1.2 percent in January. Purchases of services decreased less than 0.1 percent, in contrast to an increase of 0.1 percent.

PCE prices -- The price index for PCE increased 0.3 percent in February, the same increase as in January. Prices, excluding food and energy, increased 0.2 percent, the same increase as in
January.

Credit Card Crunch: Creating a New Generation of Subprime

I agree with Mizzoufan. After the recession and the 2010 credit card "help" from congress, banks and credit card companies will need all new algorithms in order not just to provide credit but to stay viable.

A person who walks away from their house but pays their credit is different from a person who keeps their house and lets everything else go (ability/willingness wise). A person who pays off all their cards on time and gets higher interest rates and lower credit availability or complete loss of credit availability isn't going to run back to the same organization in two years to reapply for that line of credit. A person who stops paying on their credit cards to pay for food can still get household necessities on lay-a-way, a payday loan, or go to a pawn shop for emergency cash.

What we're seeing (IMO) is additional irrationality on the part of banks and credit issuers. Not happy with shooting themselves in the foot with derivatives from bad home loans, they are now determined to shoot themselves in the kneecaps with credit cards. You can treat the consumer like dirt for a while, but they won't tolerate it forever.

Geithner Trying to Get Bankers to Take on Risk

Please help me understand the bad bank idea I keep hearing about. Private companies won't buy bad securities because they don't want to lose any more money. The government's solution: ask private companies to buy bad securities using taxpayer money as insurance? Or is it: ask private companies to loan the government money so the g'mt can buy bad securites with mostly taxpayer money but not all (my taxes pay 90% of purchase price, private companies pay the other 10%)?

I know I'm just a high school grad, but it seems to me that if these "toxic" assets were worth hanging on to or having, they wouldn't be toxic and they wouldn't need my money to buy them. Did I miss the last round of kool-aid?

A Look at a World with 90% Tax Rates

I believe the 90% tax rate was on $125,000 single people and $250,000 married couple. But I think that's too narrow minded for them to set a limit. Better for anyone of any income that gets a bonus to pay 90%, why punish only Wall Street types when you can crush creativity and hard work across the board?

I vaguely remember learning in high school history class (and this was a public school mind you) that communists paid workers exactly the same regardless their work product. It worked so well for them, evidently the administration thought it would work well for us as well.