Consumer confidence soars!

but ericho doesn't care...he's got his charts and graphs and damnit things are better or at least not as bad as they were....

well we have 101bln in issuance this week alone, and tons more for remainder of year. perception of China slowing purchases or stalling purchases, after they already dumped a ton of agency debt forcing the fed to commit to over a trillion of purchases there. The fed is on line to be the buyer of last resort for treasuries, and that is pure money printing as the fed moves from buying massive agency debt to buying massive amounts of treasuries. the inflation we will see will not be the good kind to start!

your saying the bond market is signaling a recovering market, an economy that will get hot enough to spark the fire of inflation (wage inflation and asset inflation); and I disagree. I think other forces are at work in the treasury market because of where we came from and where we are right now, part of endgame.

The inflation we will see at first will be the bad kind, in food, energy, metals, health care, etc..not in wages or home prices. Then we will have to combat this ugly inflation, and that will subdue growth. Thats what I think. But you can get excited about you think the treasury market is signaling.

I mean, did you see what treasuries did late last week when the 4-7YR auction couldnt cover bids submitted? It sold off big time. You took that is a sign of future recovery?

Inflation/hyperinflation is not the direct cause of 'wage' increase. It never was and will never be.
It's simply the velocity of money creation gone haywire.

http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html

Was there an out of control wage increase which caused the Wiemar republic hyperinflation? Hardly...

aboutready... I got 6 salad shooters.. .each one for a different type of green... takes me 2 hours to make a salad.

Okay eunich75 pls do not post again unless your SAT score is above 1300, you are in a position where I am duly impressed (not just a janitor in GS), unless you sold in 2007 in manhattan and are sitting on $2MM cash, and did not buy in LIC (n you think you did a great trade).

On another thread you tell your friend to wait and lowball at your bldg in LIC... could that be deflationary? And what is your skin in the game besides this overpriced studio in LIC that you bought in 2008?

having lived through our last bout with inflation, i still maintain that we are not in the kind of pyschological environment where price increases can can through. too much idle capacity everywhere. lets see what happens as gasoline rises again. i think that demand will fall off the side of a cliff.

Revenue numbers for Walmart.
It is contradicting what you are 'seeing'.

http://finance.yahoo.com/q/is?s=WMT

Record revenues for the first quarter of 2009.

ericho75 - i address a statement and you bring up velocity? Look at velocity now. Do you think that will go haywire? Businesses are getting squeezed by a frugal consumer, high debts, rising interest rates, tightness in credit markets, severe recession. Wait until commodity inflation really hits and if rates rise what these two will do to profit margins. Not the best environment for wage inflation.

do you see velocity spiking up? Perhaps it will a bit after the plunge, but will that cause wage inflation? Fed is paying interest on reserves to sterilize their stimulus a bit, causing banks to hoard in excess reserves. They dont want all that money flooding the system and the banks need cushions to absorb spreading losses.

I am simply saying your statement that the latest treasury move is signaling a recovery is flawed.

w67thstreet,
Do us a favor and don't make any post unless you have 'real' data or something of substance. You're got nothing but hot air. I've read about 10-20 of your threads and it's a utter waste of my time. At least some of the bears here are making valid points with good information.
You and your need to speak with someone with a SAT score of 1,300 makes you look like a complete idiot.

those numbers are through January, ericho. why is it that people think that others can't pull up a link and read it? In January those aisles were full, and so were the parking lots. and alot more people had available credit. if wal-mart improves going forward, it will only be due to the demise of competition. at least in the near term.

ericho, that is fiscal quarter...ending 1/31
I didn't realize we were in February...it's almost June buddy.
You quote this without thinking it through...the point is the tide is turning (although so long as w67th continues buying salad shooters by the dozens, we should be ok.)

people cut back, so where they once went to Target, they instead go to Wal-Mart (we are in agreement Target has been hurting, correct?) now people are going to start saving even more.
More and more jobs lost...but hey, who cares, right? They'll just max the credit cards...oh wait, those are maxed
now what?
i liked your stabbing analogy better.

hold on there partner...enrico...you can insult everyone and anyone but never w67th st. i urge you not to screw around with him.

urbandigs,
How can you say it's flawed? Market is up 40% off the lows. Isn't the stock market a good indicator of the current health of the economy?

now....you're kidding right?

Walmart already mentioned that revenue will be 5% less than last quarter. The avg estimate is 103.9 billion. On a quarterly basis, that's still more than any quarters in 2008.

HOLY MOLY NO! this is getting silly now

was it a good indicator in OCT 2007 at S&P 1565 when all credit markets plunged after secondary markets started to freeze up and toxic holdings came out as truly destructive?

was it a good indicator in MAY 2008 at S&P 1425, after the fed rescued Bear and we rallied 30% or so as everyone claimed 'systemic risk is removed, the fed has succeeded'?

the stock market was very very wrong twice in the past 18 months. Done.

tell us more about how the stock market is an indicator of the health of the economy. you weren't kidding?

w67th, you need to upgrade. six food processors would do you right. wal-mart might only be able to provide a couple, though. you might have to hit macy's or even that dying store Williams-Sonoma, but you'd be doing your civic duty so go buy now.

that last comment (that I saw at least, about the 40% upswing representing the current health of the economy) just deflated me something fierce. oh ericho, invest away big boy. have fun. buy some copper. better yet, invest in shipping lines and freight haulers.

"MMAfia,
When consumer confidence numbers are way down you spin it like it's one of the 'magic' indicators. Now, the numbers are now falling and 'starting' to trend up you 'ignore it'. What's the difference between you and a delusional bubble feasting real estate lemming investor? Nothing..."

Please show me exactly where I have used "consumer confidence" data to form any of my analysis. Shame on me if I ever used it to form an analysis.

Link please?

Where? Where have I ever used that metric?

Show me.

please, please tell me that this guy doesn't work in the financial business. please.

Stock market is a good indicator of the economy? Based on what?
BAC was at 15 a couple weeks ago, but now at 11...sound like they are weak!
oh wait, or maybe 15 was inflated, or perhaps 11 is deflated...or perhaps the stock market isn't a true indicator.
I worked on the floor of the NYSE for several years, and saw specialists hungover or doing favors for friends of many years, at the detriment of other brokers, or the stock in general. So I am very wary of those who say the stock market is god.

No one indicator can be a measurement of where we are at. I've combined the latest data with the current state of the stock market to indicate things are NOT as BAD as some are saying. There were folks calling it a great depression II. A complete utter BS.
This rally is very different from the last 2. Bond yields are up over 1.25 basis point!!! The last 2 recovery had a .50 basis point move.

ericho75... my bad.. let's be friend... my all time fav band is U2, love the little umbrellas on Mai Tais in the 4seasons Maui, love 911s (especially turbo and turbo s), I think a 944 Turbo S is one of the most underrated cars of all time, like the look of the Beneteau 281s... feels like a 32 footer, love love John Stewart and South Park.....hey by the way... what'd you get on your SAT score? Please let me know what you do for a living? No seriously... you analysis is spot on.... those 4 or 5 inflationary indicators are all you need... double down on gold... I see it hitting $1,500 Tuesday June 9th, 2009 at 10:15 a.m. That's cause North Korea will send a nuclear tipped Dong Mong I Hate American ICBM at 10:10 a.m into the Pacific as their "show and tell" item.... See if you can tell the future like I can then it's absolutely critical that you listen to me...

w67thstreet,
Again another worthless post. Why does it not surprise me?

If the measure of "wrong" is that you look back with 20-20 hindsight and the market is at a very different level than it used to be, then the market was actually very very wrong three times in 18 months. The most recent was at 667 on the S&P in mid-March. That was 36% appreciation ago.

Or maybe the rule is that when the market goes down that is always a rational reflection of everything that is wrong with the world, but when it goes up it's always irrational exhuberance (sp?). Yes, that must be it. Now I understand.

Because you have a useless indicator that points out worthless posts?
I mean, you have an indicator you call on for everything else...I figure why not this too.

I hear stock for Extendze is through the roof!

And what do you guys use as indicators to see signs of a bottom?
Praying for a sucker to sell you a unit 20-30% below what you are bidding for? How's that going?

You guys/gals got nothing beside 'shadow' inventories, high 'inventories' and an unemployment rate that have stalled.
Let's face it, you guys got nothing.

must've crossed paths... I just read "ericho75 - How can you say it's flawed? Market is up 40% off the lows. Isn't the stock market a good indicator of the current health of the economy?"

Forget it... I want my friendship back... we can't be friends.... the same reason my wife hates idiot colleagues that can't spot a heart attack from gas.... it's a f'n waste of time and resources... you are banished my friend... that has got to be the most telling statement of your intelligence or lack thereof ... and I don't need to go back 1000 comments by you.

From that stmt alone I'd say 800 SAT tops! urbandigs.... look 1 + 1 = 2..right? urbandigs... how come no-one invites me to drinks after work? Urbandigs.... why won't she sleep w/ me? urbandigs... where did my puppy go? Urbandigs... what happens when my fish dies? Urbandigs.... i bought LIC at $1000psf... I'm okay right? ? ? right? someone look at these charts... pls explain pls explain.....

w67thstreet,

Again another worthless post.
Why don't you give you bears something to gloat about?

"This rally is very different from the last 2"

YES - The stock market is the current vehicle being used to recapitalize our banking system!

"Bond yields are up over 1.25 basis point!!!"

YES - Some of us had been discussing the treasury rollover in depth as part of endgame to this crisis and the policies taken to stem the severity of it. Now its happening, and you are interpreting as a sign of recovery? Some see this force as the dominant reason why we will have a double dip recession or muddled L for a while, as unintended consequences are revealed

upperwestrenter... yep EXTENDZE! Nice nice...

aboutready... pls tell this stuttering fool (eunich75) that the "mkt" stmt makes him a FOOL. You can be my go between... i will not "thread" w/ him anymore until he retracts that stmt.

Dude eunich75... even SteveF and Alpine292 are whistling and pretending to not be reading this thread... that should say something to you...

Are you folks telling me that things are WORST today than winter of 2008????
Now, i know you folks are truly delusional.

ericho, your stats are bullshit...you're the guy who 4 months ago said things won't drop 20%.
Have they?
I would venture that for some new construction, they fell closer to 30 or even 40% off their top price.
But hey, show me some stats off the web that prove me wrong chief

are you nuts? yes, things are far WORST today than winter 2008 and continuing to get WORST.

w67street,
Again, your post are a complete waste of my time. Another useless post...
Until i see something...a link, or some 'hard' data with 'substance' to argue your arguements, then maybe i'll address some of your questions.

"You guys/gals got nothing beside 'shadow' inventories, high 'inventories' and an unemployment rate that have stalled.
Let's face it, you guys got nothing."

'shadow' inventories, high 'inventories' = supply
an unemployment rate that have stalled [at a high level] = demand

Sounds like more than nothing to me, unless everything ever taught in microeconomics is flat wrong

ericho75... it's not that the "the Catcher in the Rye" sucks... it's your reading comprehension... that's why I keep asking for the SCORE.... and no i don't believe 1 score is the be all and end all, but compile that with your "mkt is up 40%" and there is very little hope for your financial future...

upperwestrenter,
Nope, i never made that statement. I actually did say prices in my neighbor will drop 20-30% from their peak.

why not pick one day in the winter?
or better yet, a specific time?

have you ever heard of the calm before the storm? You're the guy who rolls his boat into the eye of the storm and looks up says, WOW, things are looking UP for me!

do us a favor and take some of that money and go buy some shit then, cause it can only help, right? Buy buy buy! Turn those machines back on Mortimer!

ericho, all you care about is the effin' market. yes, for huge numbers of people today is worse than winter 2008. financial collapse, not for now, but they are doing their best to create economic malaise the likes of which will even depress you. and this is no stalled unemployment rate. i'm tempted to call you names, but i'm the model of restraint here.

the consumer IS this economy, not the market. what do we manufacture, and who is buying it? we manufacture financial products, and forgive the world if they're not buying right now. oh, and turbines and airplanes, and the world isn't buying those either.

keep buying, ericho, you're america's only hope. i'm frightened.

columbiacounty,

Man, most of you have no idea. It's like trying to speak with a cashier working in my friendly neighborhood bodagas. Have a look at the TED spread.

http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP%3AIND

Credit spreads are already back to normal.

Check out the 5 year charts and look at when the crisis started and the rise in the spread.
Look at the spread today.

Jezzz....

From the AP:
The Standard & Poor's/Case-Shiller National Home Price index reported home prices tumbled by 19.1 percent in the first quarter, the most in its 21-year history. Home prices have fallen 32.2 percent since peaking in the second quarter of 2006.
We have already discussed this, but you say it's garbage I guess? Or screw them?
Or, the market is up, so it's great!

what about those 5 million and counting people who have lost their jobs in the last 6 months. can they use the ted spread on their bread?

"the consumer IS this economy, not the market....."

Gotcha! Check out the title of this thread. Consumer confidence went up. Did it not? Even though it wasn't much, it did GO UP!

rates are not all they're cracked up to be:

http://www.nakedcapitalism.com/2009/05/fall-in-libor-may-overstate-improvement.html

i'll let someone else explain to genius here why the rates are where they are and what that means.

the consumer thinks things will improve in six months. how do you think the consumer will feel when a loved one loses a job between now and then?

Let's use Ericho's analogy of the market for Apple:
from Fortune:
Eight months ago, Morgan Stanley and RBC Capital both downgraded Apple (AAPL), triggering the company’s worst selloff in eight years, a 23-point drop that lopped nearly $18 billion off its market cap.

RBC’s Mike Abramsky reversed his position last month, raising his price target for Apple from $95 to $165.

On Tuesday Morgan Stanley’s Kathryn Huberty followed suit, raising her target from $105 to $180 and sparking a rally that by mid-afternoon had lifted Apple’s stock price 6.6%, to more than $130 a share.

Apple must have released a new product, right? New iPhone? Maybe it spits out bullshit trends, that our friend chorizo could use? No...so maybe this guy needed to substantiate hisjobs and change his rating, and others followed suit. Or perhaps he just took a guess.
The point being, how does it relate to the health of Apple?

How does the market relate to the health of the economy?

ericho75... it's a f'n pile on!!! Love it when this happens! NICE NICE....

Did you just say you get your mkt data from the Bodega guy?

There was an interesting article in Bloomberg about how looking at the inflation rate and Credit spreads is like looking at the middle spot of a tug of war between two monstrous teams.... $ trillions of paper being printed... $trillions of wealth/consumption decreasing... net net (getting back to upperwestener eye of storm analogy) ericho75 is pointing to the fact neither of those items are moving to call an all clear..... in due time... one of these forces will outweigh the other and just like a tug of war... one team is gonna be eating grass... I for one think it'll be deflation..... then a swing right into inflation .... get that in your little LIC head eunich75.....

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aeVUkAzAEWmc

This thread is moving too quickly for me to keep up - but LIBOR hides "exceptional" bank lending spreads per Bloomberg.

Must go be productive so as not to lose job.

Can someone explain to me how the heck did GS, JPM, BAC, etc. are able to raise all that money to paid off the TARF?
They all tap the equity market...Private and public investors fellas......

can you say market manipulation? raise her up so you can issue some stock. it's not TARF, but it should be BARF.

Okay, that does it for today fellas.
Have to head out to my closest bodegas and pay a visit to W67thStreet. Maybe i'll tip the guy...

i'm stealing this from chunderboy, but he won't mind. Economic Policy Institute, 5/21. Perhaps it's best that ericho has left. He wouldn't want to have to think about the poor.

"The expected growth in unemployment will generate much misery and an urgent need for policy action

In this new slide presentation, EPI’s president Lawrence Mishel examines the deterioration of the economy and the outlook ahead, showing the substantial rise in labor market distress and poverty overall, but especially for minorities.

This presentation examines the labor market characteristics of the current recession and the expected landscape for 2010. Unfortunately, the economy has deteriorated so much since October/November 2008 that our fears last November—that unemployment would exceed 10% in mid-2010 if there were no stimulus—will likely be realized even with the substantial, smart stimulus package in place. Consequently, there will be unacceptably high unemployment and associated income losses and poverty rates next year and beyond. For instance, some one-third of the workforce will be unemployed or underemployed at some point in 2010. Higher unemployment will drive child poverty to 27%—up from 18% in 2007—and black child poverty will exceed 50%. The analysis has led him to predict, for example, that black unemployment will reach 27.8% in Michigan and over 22% in California and Mississippi.

New York Times columnist Bob Herbert called Mishel’s analysis one that shows “the human toll caused by job losses on this vast scale.” (Read Herbert op-ed.) Mishel says “we must reexamine our policies and enact further public investments as stimulus, provide relief to the many families that are and will be struggling, and use government to directly generate jobs in areas where private sector activity is especially weak.”

ar - i:m sorry, but I think you have problems distinguishing between the forest and the trees. Examples: (1) Walmart is killin' it. Sorry to break it to you, but they just are. In this kind of economy, they win. But you'd rather discount the actual, reported financial performance of this huge company (forest) and substitute your experience at one store during two brief visits over a single weekend (trees). (2) consumer confidence - the indicator is up. It's a fact. Up to a level so low that it's sort of comical that it would be used to start off a thread with a bullish premise (i.e., this one), but still up. It's up in the face of rising unemployment, including lots of people's 'loved ones,' and the pace of those job losses is now starting to decline so why shouldn't is be up more with less of a headwind. It's a big economy and the macro indicator (forest) is a lot more persuasive than tugging on heart strings about this or that person's loved one losing a job (trees).

if you mean, are there more unemployed, then the answer is yes! But the pace of the axe has slowed and now we are so healthy that we are only losing 400,000 jobs a month, not 600,000..YAY!

In the end, we are in worse shape, but markets look ahead and the slowing pace of decline is giving markets reason to believe. now that MUST materialize or stocks that are now much less cheap on a p/e basis, will get hit again and re-adjust

no, sidelinesitter, for current conditions consumer confidence was virtually steady, it's up for future expectations. and people reported that they may buy, in the future. and even jericho admitted that wal-mart expected a 5% decline which is fairly remarkable given the fact that they are diverting purchases from everyone else.

and the forest, well that's the purpose of my last post.

Again, no substance....everything is personal attacks because you can't bring the goods.

also, sidelinesitter, i think people don't like to think about the trees. it makes everything personal, and uncomfortable. the forest is the statistics, and i think i have a pretty good handle on those. the people are the trees, and i'm sorry if you feel my maudlin introduction of them diminishes my argument, i'm feeling that they are getting rather the short end here and elsewhere in discussions on the state of our economy.

i'm not going all 60 Minutes here, but the trees deserve some notice. observations are sometimes at odds with statistics, and sometimes more correct, which is why those shoppers who said that the weekly retail numbers must be wrong actually turned out to be right.

ar - Mishel is selling a political perspective and using carefully selected economic data (actually forecasts (apparently his own), not data) to do so. Everyone does this to sell their political wares, but don't mistake that for level headed economic analysis.

On consumer confidence, thank you for demonstrating my case. Even with current conditions almost as bad today as they have been in recent months, people (in aggregate and even in the face of all those unemployed loved ones) see the future as less bad.

my bad eunich75...
1) I thought you said you were leaving... that comment was for everyone's enjoyment, except yours;
2) I thought the lack of sack wouldn't allow you to finish the deed...
3) your reading comprehension IS really bad... that is called a preposition modifying "NYSE."

This is not for your enjoyment:

"EXTENDZE" now comes in a stronger formulation.... just for you! Available at all LIC bodegas!

sidelinesitter, do you see this stock market rally as a bull or a bear market rally? if your answer differs from mine that may be the reason we view the consumer confidence numbers differently.

do you see large bank losses continuing? do you see unemployment rising (and i'm happy to provide any number of studies for you saying they will)? do you see foreclosures continuing?

we shall see. i think the consumer is getting sold a pile of manure, and being told it's a shiny gold coin. right now they are tempted to believe it. in the future, we shall see.

lets remember where we started:

some add'l detail from the release:

"Consumers' overall assessment of current-day conditions improved again. Those claiming business conditions are "good" increased to 8.7 percent from 7.9 percent. However, those claiming conditions are "bad" increased to 45.3 percent from 44.9 percent. Consumers' appraisal of the job market was also more favorable. Those claiming jobs are "hard to get" decreased to 44.7 percent from 46.6 percent in April. Those saying jobs are "plentiful" edged up to 5.7 percent from 4.9 percent."

the "bad" rating is continuing upward as well.

all of this because of a poll of 5000 people. the reuters/UMich consumer confidence poll includes only 500. wonder what Nate Silver would say about the numbers.

ar - bear market rally. I look at all there +150 and +200 point Dow days and wonder what people are smoking. That said, I don't see testing new lows because I don't see the sense, vintage March, that the world really could end coming back. I think the market got oversold based on negative sentiment and that it has come back beyond near term fundamentals but I see the answer as a reversal, not a meltdown

I see large bank write-offs continuing; large bank losses, not so much. The ability of banks to chew their way through bad assets when short term funding costs approximately zero is an amazing thing to behold. Witness the credit cycle of the late '80s - early '90s when the banks absorbed the LatAm debt crisis, the bursting of the first LBO credit bubble and a major real estate correction. The write-offs were huge (by the standards of the day) but the Feb stepped on the gas, funding costs went to nothing and the banks blew right through the bad assets. There were signs of this in Q1 2009 bank profitability as well. Messy and not the stuff of high PE multiples, but they are shoveling away at the dung pile.

Unemployment rising. Yes, and probably to levels that cause a real problem to consumption/growth/corporate profits. Hence the view that the stock market is ahead of itself.

Foreclosures continuing. Yes, but not sure how much that matters. With respect to bank impacts, see previous comments on chewing through bad assets. On the homeowner/consumer side, the equity is already gone and by the time people are missing payments and facing foreclosure they know it. The actual foreclosure turns people who de facto are renting from the bank into people who are renting from a landlord. I see foreclosures as a process that has to work its way through the system, but there isn't a lot of new news there.

i can buy that, even though i can see other possibilities and nuances as well. the only areas i might have meaningful disagreement is whether banks can pull it together enough to continue to cover ongoing losses. free money certainly helps, but except for some targeted areas i don't see much business opportunity for them in the near to medium term. i think Q1 had some one-offs that can't be repeated, but they certainly helped (not to mention the change in accounting year). i also think that the foreclosure issue may or may not be resolved with a whole world of hurt.

i guess what i should have said from the beginning is that i don't think this indicator is a meaningful one. it's not one that i quote when it's down, generally, and it's not one that i look to as an indicator of improvement. it's extremely volatile, and not especially correlative to PCE. there has been a spate of using statistics and sources in, shall we say, a selective manner around here recently. that reference to the Richmond Fed's manufacturing survey, and a certain cavalier attitude toward anything other than the health of the market, set me off, i'm afraid.

so we converge to near agreement. as an aside, when i referred to about banks i meant bank banks, not investment banks newly converted to the gospel of fed supervision and discount window access. the change in accounting year thing was really gs and ms. for the bank banks, i don't think they really need new business (i.e., loan growth) to earn a lot bigger interest margin. zero cost deposits and even nearly zero cost interbank money (LIBOR) does wonders. most of them don't have the capital to support a growing balance sheet anyway; they just need to hunker down, cut some costs, keep sticking it to their depositors and take a chunk out of the bad loan pile every quarter.

on statistics, sources and selective usage, i think, to be fair, that syndrome exists on both sides of the bull/bear debate. i don't see the usual suspect bears posting positive or less negative statistics any more than I see stevef or ericho75 posting doom and gloom stuff.

sidelinesitter, i don't mind someone posting info that supports one's position. i do mind someone cutting out half a paragraph and neglecting to include the second half which greatly weakens the position. things like that.

my only comment about the bank banks is that they now contain a lot of i-bank.

my concern remains the fundamental economy. as an example, where will annual auto sales stabilize? i don't buy all the hot air about replacement cycles...many, many people were buying/leasing every three years---these cars are good for at least 7-10 yrs---what happens if people keep them that long? apply that to any consumer durable and i think you get my point.

how much money (bad credit reserves aside) do the banks make annually in aggregate on credit cards? what happens when annual usage of these cards goes and stays down (never mind the financing charge part--i'm talking about the vig on each transaction) 20% or more?

what happens when people decide that they can live with a cable bill at $60 per month instead of $100?

and on and on.

cc -

autos - it's nowhere near as dramatic as you imply. Initial lease terms have nothing to do with useful life of the cars (i.e., how long they will remain in the fleet), which I actually think is more like 10yrs+ than 7-10 years. Cars have become very reliable machines. If the initial user (owner or lessee) uses cars 7-10 years then there will be fewer used cars on the market and prices will rise. On the margin, some people will then buy or lease a new car because the cost advantage of buying used is smaller. Of course some will not buy that used car at all (demand will fall) because of higher prices, but it's a second order effect. The first order effect is a fleet of 150mm units or whatever it is that don't last forever. Do we get back to annual sales of 17mm? Maybe not. Do sales stabilize way above the current level? Yes. Other consumer durables may actually be better examples. For example, my impression is that white goods basically last forever (decades, anyway), especially of you throw a few bucks at maintenance. If you decide to put off remodeling the kitchen, those applicances that you don't junk can hang around for a long time.

Not quite sure the underlying premise on the credit card point, but I suspect that I disagree. If the idea is that credit card spending is a proxy for consumer spending, then down 20% just ain't happening. Consumer spending is 70% of GDP and taking 20% or more out of that is a 14%+ GDP decline even if nothing else (investment, etc) changes. The last two quarters (Q408 and Q209), personal consumption expenditures were down 4.3% and up 2.2%, respectively. Down 20% is not on.

There is clearly a cautious/downside case to be made about economic fundamentals, but it isn't made by hyperbole.

It is inevitable that car sales fall. There are currently more cars in the U.S. than licensed drivers. Plus once the baby boomers starting getting older, masny of them will have to give up driving and their cars. So there goes an entire pool of buyers.

anyone know where i posted that awesomely frightening chart that showed if you backed out HELOC spending GDP would have been mostly negative from 2004-08? sidelinesitter, that's just HELOC withdrawals, not other forms of credit.

i honestly believe that the contraction in personal credit, both from a psychological fear standpoint and a more practical access to cash aspect, is one of is one of, if not the greatest threats to our economic health. i can't quantify it, but i don't think it's hyperbole (and we'd just started getting along again).

let me try again.

if 30% of the people who bought cars every three years, decide to keep them (release) for another 4 years---you don't think this will lower new car sales-- at least for four years? what am i missing here?

as to credit cards---not sure of your age and don't want to be presumptuous in any way but...

assuming you had kid(s) 18 or older, what would your advice be re: credit cards? mine is burn them. i believe that using credit cards rather than cash creates the unfortunate illusion of not really spending money. if you disagree, lets let it be. if you agree, then follow my logic than credit card usage will drop far more than overall consumer spending.

Fall from where they were? 16 or 17mm annually for several running. Sure, and probably not coming back.

Fall from where they are today? 9-10mm SAAR. No. Not only not inevitable; not happening.

"It is inevitable that car sales fall. There are currently more cars in the U.S. than licensed drivers. Plus once the baby boomers starting getting older, many of them will have to give up driving and their cars. So there goes an entire pool of buyers."

That must be the most idiotic comment of the day.
Have you heard of Car rental companies? Do you have any idea of what the car rental business represent for the auto industry? How about government owned vehicles? Commercial vehicules?

cc - on cars, yes, some transition period of lower new car sales (arguably we're at least a year in already) although the assumption that the initial hold goes overnight from 3 yrs to 7-10 across the board is a stretch.

my kids are younger than that, not that that's the point. I agree with your macro concern about credit cards as a medium of payment. Actually, I only carry one myself (technically zero since Amex is a charge card). It's not that I don't trust myself with more; I just don't need more since I'm not into spending. Never caught the consuming bug. I think that at the margin you're right about the credit card usage dropping more than consumer spending, but I do think the impact is marginal. I am not attacking your logic, but rather taking a different view on the likelihood, culturally speaking, of the American consumer changing his/her habits in a dramatic way.

ok---so auto sales stabilize at 12 million? that's down 25% from peak which means 25% less employment around the world involved in making cars for us consumption. do you think it stops at cars?

you don't believe in credit cards for yourself or your family, right? but, you think its good for everyone else? come on, give others some credit (just a little levity). how can credit card usage not go down --- the limits are being cut across the board.

tell me the parts of the economy that are immune from this. sometimes, i feel like i finally turned into my father---i'm even turning off lights around the house!

what does it look like if overall consumption goes down? ugly.

sidelinesitter, the credit card companies are cutting credit lines at a ferocious pace. and they are largely doing so for customers who might need the access to credit. if customers become maxed out on their credit cards due to formerly available credit disappearing, that would imply that they have been using the credit previously. and it would imply that their FICO scores will take a sudden dive and they won't be able to obtain any other credit. and perhaps most importantly, it will make them save as they have no "emergency" source of funds. this may be good for consumers as financial planners, but it will be deadly for PCE.

http://www.forbes.com/2009/05/13/meredith-whitney-consumer-markets-economy-credit.html?feed=rss_markets

"urbandigs,
How can you say it's flawed? Market is up 40% off the lows. Isn't the stock market a good indicator of the current health of the economy?"

A little historical perspective: in 1987, the Dow crashed from a high of around 2400 down to around 1700, losing about 1/3 of it's value. By 1992, it was at about 3300, about DOUBLE (not just 40% up) from the crash point. What happened to RE prices in Manhattan between 1987 and 1992, while the DOW was doubling?

what didn't happen between 1987 and 1992? a credit bubble.

ar - the concept makes sense, and I have thought the same myself at times over the last year (even without the benefit of any awesomely frightening charts). However I also find it hard to imagine a period when access to consumer credit is worse than it has been the last nine months, yet consumer spending is only down low single digits, even in a period when aggregate household debt is finally falling and savings rates are climbing (two sides of the same coin, I guess). While these are the worst consumer spending numbers since at least the early '80s, they don't reflect the kind of epic retrenchment that the doomsday scenarios posit. I freely admit that I don't have all the answers, or even an internally consistent theory for that matter, but the empirical observation that the world has not ended stands.

CC I hate credit cards... wasn't the metro card supposed to be a gov't run payment system? If the fed gov't could just create a debit /credit card that could be linked to our social security benefits... well this recession would be over now :)....

I'm w. aboutready on the structural changes that are coming to America. The last 10 yrs w/o HELOCS and RE wealth effect would have cut 2 to 3% of GNP (i'm old schoolz like that.... GNP vs. GDP) per annum... that would have meant ALOT of the income gain would've went POOF!

We have to see where income/savings rate for America stabilizes after all the foreclosures stop....

Some more historical perspective: NY Mag article from 1980 on red-herring anxiety: http://www.google.com/books?uid=12846639365641343003. The ads are fun, too.

cc - i don't think it's good for everyone else. I think it's bad. I also think that my moralizing is irrelevant. My position is practical: forget baseball or football, consumption is America's national sport. It's as if the Declaration of Independence included an inalienable right to consume alongside life, liberty and the pursuit of happiness.

"what didn't happen between 1987 and 1992? a credit bubble."

Actually, in term of Coop loans, there was a credit bubble: MANY Coops couldn't get end loans for purchases. The banks enacted all sorts of arcane rules: many would lend on studio at all, other wouldn't lend on studios less than 500 Sf. Percentage of Sponsor ownership restrictions. And really odd rules like "pro rata share of underlying mortgage vs purchase price", etc. The cash tap was turned off in a very substantial way in terms of Coop loans, and that was a very significant factor in the price declines.

to sidelinesitter: with all due respect, no frigging way. "It's as if the Declaration of Independence included an inalienable right to consume alongside life, liberty and the pursuit of happiness."

this is a generational thing. my parents (one of whom is still stumbling around) part of the greatest generation (i think that's what tom brokaw called them) did not believe in spending. its us, my generation that started this nonsense.

Point taken. Too bad, because I thought the inalienable right to consume line wasn't bad, if historically inaccurate. However, me being put in my place about American history is one thing. The spending habits of the vast majority of American consumers who come from the baby boom and later generations are another. I think there are some pretty widespread and ingrained habits.

congrats! sidelinesitter... you now know why I believe this RE Bubble was such a destructive "head" fake for our economy.... you consume b/c you produce.... the last time I chked.... house sitting / swapping was and IS NOT a productive occupation.....

Now the inventor of the ExtendZE... and Michael Buble..... :)

agreed...my thought (perhaps my fantasy) is that our childhood memories will resurface and we'll stop. what will happen then is anyone's guess....

i have an aunt who is 98...she can't hear, she can barely see and she's not a lot of fun.

she called me last year when bear went under screaming about bank closings and I told you so, etc, etc. did everything i could to get her off the phone nicely...now i wonder. she was 18 in 1929 and it will always be real to her. not a story, not an article, but her life.

Let's try this again ericho75:

"MMAfia,
When consumer confidence numbers are way down you spin it like it's one of the 'magic' indicators. Now, the numbers are now falling and 'starting' to trend up you 'ignore it'. What's the difference between you and a delusional bubble feasting real estate lemming investor? Nothing..."

Now, stop changing the subject and squiggling around- show me where I "spin" consumer confidence data.

Show me where.

Link please.

Otherwise, stop going around posting lies about how I said this and that.

she sounds like fun, can we hang out?

I'm getting my rocking chair and shotgun ready for the end...I'm running upstate and finding a nice piece of land to defend.
I'll marry a doctor and she can tend to my wounds that I receive in battle against bears and shit.

If any of you need a place to stay when Armageddon hits, you know who to call (except youcannot and ericho glacias...not you two)

upperwestrenter, ikea is having a sale on rocking chairs. and don't forget to hit up wal-mart for the spam and other tinned goods.

if you bring the gun, i'll supply the chair.

but who will put the chair from IKEA together then!
Wal-Mart has salad shooters I hear as well...not that us manly mens will need 'em

putting the chair together could be a bonding experience. make sure to get provisions for the little ladies. all they do is farm, garden, tend animals, create household products such as candles and soap, make yarn, weave and sew, raise children and fight off intruders while the men are out getting the meat.

that's why ladies rule. meat is bad for you.

Look, at business school we had a pretty simple rule when looking over all of the case studies that our professors would throw at us. This rule honestly saved me from jumping off a bridge during exam time: if it is too complicated, then you're over-analyzing it. Likewise, people are reading far too much into consumer confidence without reading any other features of the economy. Unemployment is rising and continuously so, the market conditions resemble the pause in the slide seen in 1930, international markets continue to slide, the EU report that the "recession is over" has been universally panned and already proven wrong, inflation continues to rise, and so on and so forth. The present market economy isn't going to go away overnight and the market certainly isn't on the rebound at a faster rate than 1987. In the early 1980s, the unemployment rate for college undergrads was approximately 35% while today it's around 19$. Things aren't looking up guys, and the faster that we suck it up the better off we'll be.

well put, youngbuck. but i happen to agree with you. i think this addresses Falco's comment on another thread, why are people so antsy. I for one think that this endless kicking the can down the road can only lead to greater pain. total economic collapse was not and is not an option. but the current course of action seems determined to do us in over the long run, taking much longer to do so. it's like knowing that the train is going to wreck, but being forced to stay on it travelling sometimes at 8 miles an hour and sometimes at 180 miles an hour for months and months until it does so.

when fdr said the only thing we have to fear...., he wasn't kidding. it was real then. and its real now. personally, professionally, globally, nothing is worse than that which you are not willing to face. until we are willing to look this shit in the eye and deal with it, its gonna be the slow death of a thousand cuts.

hey folks...we're gonna have to do without as much as we used to have. you know what? its not that bad. frankly, i firmly believe once we get it, it won't be bad at all. but as long as we cling to the nonsense of the last 20-30 years, the have it all bullshit, we're screwed.

of course, and that is exactly why I get so pissed reading posts from enchiro spirez and youcannot...clinging to the old nonsense...because change is scary...