[dradernh]

Originally Posted by Luxury

Does anyone here use irony as a component in the development of their investment thesis?

I sense more anxiety than irony being present here. However, that could just be me.

[tgrundke]

Originally Posted by Chick Webb

The Fed will be forced to pivot at some point, but by then it'll be too late. With credit for small and medium businesses essentially frozen I believe we will see a rapid deterioration of the economy, with job losses accelerating into the summer. By labor day it's going to be ugly. Demand will likely drop far enough that inflation will be zero by the end of the year. At least that problem will have been solved.

Time to extend duration. TLT looks like a good buy.

I'm not so sure they're going to be able to pivot in the short run - especially after yesterday's labor numbers and the fact that services inflation remains stubbornly high. We're still very short labor, compared to 2019, and while the increase in wages has slowed, it's still running at 5% overall, on top of all the other services inflation.

The consumer is holding up incredibly well, but as you say, it's the banking sector (and commercial real estate) that are going to dictate where things go from here. We've got some $5tn in CRE that will adjust in the next 18 mos., this could put a lot of banks in really big trouble.

[Chick Webb]

Originally Posted by tgrundke

The consumer is holding up incredibly well, but as you say, it's the bankng sector (and commercial real estate) that are going to dictate where things go from here. We've got some $5tn in CRE that will adjust in the next 18 mos., this could put a lot of banks in really big trouble.

I'm sure that Powell & Co will hang on for as long as they can; their reputations and the credibility of the institution are at stake, after all. But at this point things are breaking and the market will out, I think. The banking crisis is far from over. Who knows where that's going to go next? And, as you observe, CRE is a ticking time bomb and it's going to start going off in a big way soon. Has already started, in fact. Story last week about an office building in SF (350 California St) that was worth $300 million several years back and is expected to sell for around $60 million. We'll be hearing a lot more of that, and regional banks are where most of those loans are sitting.

Honestly, though, I'm getting sick and tired of this "the consumer is holding up OK" BS. The consumer has been crushed by inflation first, and the rapid increase in interest rates, second. Credit card debt is at record highs (just hit $930 BILLION), auto loan delinquencies are at 15 year highs (also a record, since they only started keeping those stats 15 years ago), and the major credit card issuers have recently written off $3.4 billion in consumer loans. Granted, that's a small amount, but none of this bodes well. That the media continues to ignore this speaks to their desire to make, rather than report, the facts, but I digress.

The ONLY thing that's saving the consumer economy right now is the fact that unemployment remains low. Because, and I hate to sound like a broken record, people who have jobs continue to spend money, even if they don't have it. The unemployment picture will change pretty quickly now that credit, especially for small and medium businesses, has essentially evaporated. It'll change immediately if there's a default on the debt, but that's for another thread. When it does, the consumer economy, which is 70% of the overall economy, will collapse so fast even the MSM won't be able to ignore it.

[Chick Webb]

Originally Posted by ASAP

You do realize you just named capitalism in your entire post...

Of course I do. And there's zero irony here. Capitalism is the greatest organizing force the world has ever seen, and it's responsible for a degree of shared prosperity that has never been experienced. Is it perfect? No. Does it cause disruption to individual lives? Yes. Does it require some regulation? Of course. But the ability to own the fruits of your labor has and will continue to make far more people far better off than any other system we know.

I am a capitalist. And proud of it.

[Tyga11]

Originally Posted by Chick Webb

Of course I do. And there's zero irony here. Capitalism is the greatest organizing force the world has ever seen, and it's responsible for a degree of shared prosperity that has never been experienced. Is it perfect? No. Does it cause disruption to individual lives? Yes. Does it require some regulation? Of course. But the ability to own the fruits of your labor has and will continue to make far more people far better off than any other system we know.

I am a capitalist. And proud of it.

Well said

[chassis]

Originally Posted by Chick Webb

Credit card debt is at record highs (just hit $930 BILLION), auto loan delinquencies are at 15 year highs (also a record, since they only started keeping those stats 15 years ago), and the major credit card issuers have recently written off $3.4 billion in consumer loans.

Population always grows. Economic activity always grows. Inflation means the nominal value of real activity always grows. Combined, these factors means that everything grows. Absolute values do not matter. Ratios do.

What is your assessment based on ratio analysis, of the absolute values you laid out? Without this, it might appear you are simply cutting and pasting, in other words regurgitating without adding value, to what you read in the MSM.

Originally Posted by Chick Webb

The consumer has been crushed by inflation first, and the rapid increase in interest rates, second.

The ONLY thing that's saving the consumer economy right now is the fact that unemployment remains low. Because, and I hate to sound like a broken record, people who have jobs continue to spend money, even if they don't have it. The unemployment picture will change pretty quickly now that credit, especially for small and medium businesses, has essentially evaporated. It'll change immediately if there's a default on the debt, but that's for another thread. When it does, the consumer economy, which is 70% of the overall economy, will collapse so fast even the MSM won't be able to ignore it.

I see these two statements as in conflict with one another. Is the consumer saved, or crushed?

[ASAP]

Originally Posted by Chick Webb

Of course I do. And there's zero irony here. Capitalism is the greatest organizing force the world has ever seen, and it's responsible for a degree of shared prosperity that has never been experienced. Is it perfect? No. Does it cause disruption to individual lives? Yes. Does it require some regulation? Of course. But the ability to own the fruits of your labor has and will continue to make far more people far better off than any other system we know.

I am a capitalist. And proud of it.

none of this explains the irony in your original quote of people's self serving attidudes being best while returning people to the office lmao...
i legit have no idea why u made that first example of that book because it has 0 relevance to your other comments lol

[tgrundke]

Originally Posted by Chick Webb

Honestly, though, I'm getting sick and tired of this "the consumer is holding up OK" BS. The consumer has been crushed by inflation first, and the rapid increase in interest rates, second.

Allow me to rephrase: consumer spending has been holding up OK.

[ASAP]

Originally Posted by tgrundke

Allow me to rephrase: consumer spending has been holding up OK.

Allow me to re rephrase - The US consumer's willingness to get into debt knows no bounds

[chassis]

Folks what data (links) is informing the preceding statements on debt? Non-media sources please. Thanks!

[ASAP]

Originally Posted by chassis

Folks what data (links) is informing the preceding statements on debt? Non-media sources please. Thanks!

yes sir - absolutely

https://www.newyorkfed.org/microeconomics/hhdc

[chassis]

Originally Posted by ASAP

yes sir - absolutely

https://www.newyorkfed.org/microeconomics/hhdc

Thanks, good source. I usually use FRED (St. Louis Fed) but the other Reserve Banks have good data products also.

As stated earlier, all aspects of economic activity, including debt, increase without ceasing. Therefore increasing debt, and "all-time high" debt are not bad things. Population today is at an "all-time high". It naturally follows that many products and services are being consumed at all-time high levels. Life (diapers and baby food) and death (caskets and funeral services) are growth industries, after all.

What makes you believe, if you do believe, that today's level of debt is good, bad, or neither?

[ASAP]

Originally Posted by chassis

Thanks, good source. I usually use FRED (St. Louis Fed) but the other Reserve Banks have good data products also.

As stated earlier, all aspects of economic activity, including debt, increase without ceasing. Therefore increasing debt, and "all-time high" debt are not bad things. Population today is at an "all-time high". It naturally follows that many products and services are being consumed at all-time high levels. Life (diapers and baby food) and death (caskets and funeral services) are growth industries, after all.

What makes you believe, if you do believe, that today's level of debt is good, bad, or neither?

wage growth particularly by the chief consumer aka the middle class consumer which has been about stagnant over 10 years...

[Chick Webb]

Originally Posted by ASAP

yes sir - absolutely

Thanks for that data from the end of 2022. Looks like delinquencies were already trending up for everything but student loans, which isn't surprising b/c nobody has to pay those, yet. The slopes of some of those curves are pretty scary and reminiscent of 2006-7.

Next NY Fed report, for Q1 2023, comes out next Thursday (5/18). Anybody willing to bet that things have gotten better since December?

[XutvJet]

Originally Posted by ASAP

Allow me to re rephrase - The US consumer's willingness to get into debt knows no bounds

Debt is what makes the economy work and thrive. I don't take part in having debt myself though I like owning my stuff outright including my home.

[Chick Webb]

Fed dropped the April Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) report after the market close today.

Regarding loans to businesses, survey respondents reported, on balance, tighter standards and weaker demand for commercial and industrial (C&I) loans to large and middle-market firms as well as small firms over the first quarter. Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.

For loans to households, banks reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government-sponsored enterprise (GSE)-eligible and government residential mortgages, which remained basically unchanged. Meanwhile, demand weakened for all RRE loan categories. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Standards tightened for all consumer loan categories; demand weakened for auto and other consumer loans, while it remained basically unchanged for credit cards.

Tighter standards were expected, of course, but the weakening of demand, particularly in C&I, is a strong signal of a slowdown.

[Chick Webb]

Originally Posted by XutvJet

Debt is what makes the economy work and thrive.

Debt, used responsibly, is a valuable tool. But, dude, people are buying groceries with their BNPL accounts. That's not responsible, or sustainable.

[ASAP]

Originally Posted by XutvJet

Debt is what makes the economy work and thrive. I don't take part in having debt myself though I like owning my stuff outright including my home.

Do you think near 0 fed fund rates are acceptable for 10 years? Do you think inflation is massively caused by people taking on assloads of debt?

[2008M36MT]

Originally Posted by XutvJet

Debt is what makes the economy work and thrive. I don't take part in having debt myself though I like owning my stuff outright including my home.

100% this. Fuck the Joneses.

[ASAP]

Originally Posted by XutvJet

Debt is what makes the economy work and thrive. I don't take part in having debt myself though I like owning my stuff outright including my home.

Originally Posted by 2008M36MT

100% this. Fuck the Joneses.

i had that mentality until I realized this country rewards those with most underwater with the most debt.... otherwise you get eaten alive by inflation and government spending... i have minimal debt... instead I wish I had millions at 2%... sad times we live in

[tgrundke]

Just wait until the student loan repayments start back up in September. The government started issuing guidance, fully expecting that the courts will not allow any further extension in loan deferments.

IIRC, the average student loan repayment is around $450/mo. That's a lot of cash for a lot of people.

[Chick Webb]

Saw a clip of Stanley Druckenmiller this morning on CNBC. Here's part of what he said:

When you have free money people do stupid things. When you have free money for 11 years people do really stupid things.

We will be paying for that for a while, I'll bet. A lot of assets have to reprice and that's not going to happen overnight. Patience and discernment will be rewarded.

CPI report is out tomorrow and concensus is 5.5%, with wages up 4.4% y/y. Doesn't look like the Fed will be in the mood to stop raising/cutting rates due to inflation any time soon. If they do stop/cut, it'll be to stave off/crush a crisis. Which may be coming.