Bank Lending Continues to Slip
click for larger graphic:
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Via Zero Hedge and naked capitalism, we see that bank lending is still heading in the wrong direction: Downwards. Its hard to see how a credit dependent economy can grow as credit contracts.
It was just yesterday that Tim Geithner was lying that banks are constantly increasing lending to consumers. Well, yet another lie refuted. Banks, and not just any banks, but those receiving government bail outs and subsidies, continued constricting lending in July, with total average loan balance outstanding declining by $54 billion from $4,295 billion to $4,241 billion, a 1.3% decline, following a 1.1% decline in June.
As for the reason why loan originations in July declined a whopping 10% after posting a 12.7% increase in June, the government simply noted that this was due to “decreased demand from borrowers.”
September 16th, 2009 at 11:38 am
Agreed. Of all the arguments about “flation”, the credit argument seems to be the most important. Anyone watching inflation should keep their eye on one thing: the price of crude,as it feeds PPI and then CPI.
Maybe TIPS and gold are peaking here, looking at oil it has already formed a rounded top. We could have another spike, but it seems unlikely, so as crude is the prime determinant of inflation, this may be as “hot” as inflation gets. For the time being…. looking at wages and hours it is just difficult to see where inflation can gather steam. What we are looking at in the US is merely engineered inflation created by printing resulting in the DGDF trade.
September 16th, 2009 at 11:45 am
Barry R-
can y ou comment on the market going up like dynamite? Can you come on this thread and say something about it? Look at the bleepin Nasdaq- would like your insight
September 16th, 2009 at 11:48 am
Oh would you STOP with the negativity!!!! You’re obviously just having a crisis of confidence. Take these damn made up numbers away, Ben said it’s “most likely over” with already. “Obviously” businesses are getting their finances from somewhere else, because they are rebounding so heavily. Good times ahead for all…
September 16th, 2009 at 11:50 am
not that it’d matter much, but does TTT ( Tim Geithner ) ever testify ‘under oath’?
lb,
these ‘mmods are ‘en fuego’, if they ‘turnaround’, I’ll be surprised..
we should remember that not all “Inflation” is of the “Demand-Pull”-estilio..
like: “What we are looking at in the US is merely engineered inflation created by printing resulting in the DGDF trade.”
though, pray tell, what is DGDF?
September 16th, 2009 at 11:50 am
CTX: Barry laid it out nicely yesterday with the “6th inning analogy”. Go back and read that. It’s the same thing I’ve been saying as well. The market is going up on technicals AND fundamentals. No denying that.
As far as the Nasdaq, it has a long, long way to run. There’s a lot of excitement in tech land right now with innovation that will spark this higher and higher.
September 16th, 2009 at 11:54 am
Regarding loans, obviously there is a ton of private investment into business right now. It’s not going into equities but it’s being put to use. This would understandably lower the lending rates for these banks. We’re seeing a boom beginning to develop like we haven’t seen in a decade. Positions yourselves accordingly. I hate to sound like a broken record but we have a nice run ahead – especially on the Nasdaq.
September 16th, 2009 at 11:54 am
The banks have a much better racket going. They get money from the Fed at less than 1% and buy preasuries yielding 2-4%. It’s a sure way to make a profit without taking a risk. As long as they can suck money out of the taxpayers that way, why would they do anything that would help the economy.
September 16th, 2009 at 11:58 am
“The market is going up on technicals AND fundamentals. No denying that”
That is actually bollocks, Harry. The market is going up because people are buying stocks. Good luck to you making money, mate and I don’t necessarily disagree with you about the NAZ. But be aware this is a huge leveraged carry trade and once it reverses many people’s balls will be cut off. If we were “booming”, the 10-yr would be at 5%.
DGDF = dollar going down forever:
http://macro-man.blogspot.com/2009/09/dgdf.html
September 16th, 2009 at 11:58 am
Now I KNOW Wanger is BR…
U see TBPers its like this… Nobody actually believes there’s any TRUTH in what Geithner, or Bernanke says anymore…
So now they’ve taken to create the “Ritholtz Put”, (with the 6th inning comments)… I mean, everyone believes BR right?, so if HE says its so, that ought to get us another 150 S&P points…
“Wanger” (How’d ya come up with that one BR)? You’re a funny man… I’m going to tune in more often!
September 16th, 2009 at 11:59 am
Kudos to Barry for being right yet again. That’s all I have to say!
September 16th, 2009 at 12:03 pm
No, Harry is not BR. Just because two people can sit back, analyze technicals, recognize growth in the data and come to the same conclusion that the market is going higher and economic growth is getting stronger, doesn’t mean they’re the same person. Otherwise, on the opposite side of that, just about all the negative doomers could be assumed to be the same person. And there are a lot more posting here than what BR and I are saying.
Look, sit back and look at what’s unfolded. We’re moving into another technology boom phase that will propel this market to new highs by the end of 2010.
September 16th, 2009 at 12:07 pm
“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” -Ludwig Von Mises
~~
“…ZeroHedge.com has a pretty good answer for why it’s happening as discussed in Correlation Of S&P 500 Performance With Fed Monetization Activities Since Start Of QE..”
“…My Comments: The Fed, and more recently the Treasury, have recently announced that they will end QE and stimulus programs in October now that we are out of recession and in recovery. Perhaps the stock markets will hold up for a while (though we are kind of due for a correction), since we should continue to see improved GDP numbers for the 3rd quarter of this year, but the 4th quarter numbers may not be so pretty. It’s likely the Q4 retail numbers and consumer spending numbers will be abysmal. We don’t expect the stock markets to hold up past Jan/Feb of 2010, at the very latest. After the next crisis/crash/correction in equities markets we’re willing to bet that the American taxpayer will be strapped with billions trillions more in stimulus, bailouts and Quantitative Easing.”
http://www.shtfplan.com/headline-news/why-has-the-stock-market-rallied-so-strongly-heres-an-answer_09112009
~~
lb,
re: DGDF, Gracias!~, macro-man does have more than one good take, for sure..
September 16th, 2009 at 12:08 pm
“The market is going up on technicals AND fundamentals.”
Going up on fundamentals like contracting lending by banks, contracting borrowing by consumers and investors, rising credit card defaults, rising residential mortgage defaults, commercial real estate collapsing …
“Regarding loans, obviously there is a ton of private investment into business right now. ”
Currently, there is mainly deficit spending by the government that supports economic growth, while private debt contraction is probably accelerating.
rc
September 16th, 2009 at 12:10 pm
@Harry Wanger
OK my friend… I guess I don’t have to say anything about how the last “technology boom” ended and how from a real technical perspective, we’re still picking up the pieces from that (first the 2001 recession, then the “jobless recovery”, and now the “recoveryless recovery”)…
But I’ll let you have your fun…
@LB & Andy
This being opex week and all, and looking at the charts, we seem to getting perilously close in the seance to call up a Louise Yamada sighting…
September 16th, 2009 at 12:11 pm
“The market is going up because people are buying stocks.”
this should be enshrined somewhere. so simple and yet so true. well done, lefty, well done.
September 16th, 2009 at 12:13 pm
rootless: you’ve raised 5 economic points that either minimally impact the economy or I can outright refute. Commercial real estate is not collapsing. This will turn out to be another of the great “myths” of this “crisis”.
What you fail to mention is all of the overwhelmingly positive news we’ve seen in the past two days. That’s what’s really happening. The economy got the appropriate stimulus needed and, as we are starting to see, will kick off the next boom phase for the economic growth of this country.
September 16th, 2009 at 12:14 pm
HW:
BS.
We’re not in the sixth inning of gains, we’re in the top of the third (if not still in the bottom of the second) for losses. Your irrational exuberance is entertaining and pitiful, all at once (kind of like the proverbial monkey with his hand stuck in a jar).
Show me where the market is moving up on fundamentals. Show me tech innovation (especially in US tech firms — and I’m not talking about Apple’s latest consumer-dependent gizmo).
From unemployment, to trade deficits, to RRE and CRE loan defaults (and their cancerous derivatives), to systemic hidden and/or deferred losses, to ghost fleets of ships, to declining asset prices, to a withering dollar, to the incestuous bond/dollar (Fed/Treasury) circle jerk, to government support of entire industries, to insider selling, to lopsided P/E ratios, to municipal defaults, to failed banks, to sanctioned dishonesty in accounting principles — I see no improvement in fundamentals whatsoever.
September 16th, 2009 at 12:16 pm
To Harry W-
thanks for the reply
i was looking at 950-1100— is that your tech range too?
September 16th, 2009 at 12:18 pm
cvienne: Louise Yamada? The one who said in March/Feb that the Dow would continue to fall to 4000? Any credibility she had on the way down has been obliterated on the way up. She missed that by a mile. Glad to see she’s disappeared. Now if we can make the rest of the doomer squad, Schiff, Roubini, et.al. go away as well, the world would be a much better place.
September 16th, 2009 at 12:21 pm
Thanks bubba, no need to over-complicate things, eh?
Wanger, if you think CRE is not collapsing you need to spend some time talking to Chris Whalen. Also you know that BR does NOT think we are in a boom. This is all trading off QE and DGDF, and as Ramsey King points out this morning in his elegant post, when QE ends this party is over and Harry and all the little Wangers will be eating Humble Pie and those C, BAC, AIG and LEHMQ calls will not look so clever.
If the Fed continue QE here, we will see the MOTHER of all bond market breaks and then we are all DOOMED.
Right CV?
September 16th, 2009 at 12:23 pm
Wanger, read this, or watch the Roubini interview. The Bear is out of the woods but has run off the cliff edge.
http://www.ritholtz.com/blog/2009/09/the-king-report-a-tale-of-two-cities-wall-street-vs-main-street-the-stock-market-vs-the-real-economy/
September 16th, 2009 at 12:23 pm
Andy T (or ben)
Care to step in and shoulder some of the load cvienne is carrying right now…
I had to carry Wanger for 6 innings yesterday and in the end, went to the gym and tore a calf muscle… Now I’m hobbling around… Would either of you care to enlighten Harry about Louise and the 89MA…
It’s really the “one call” I recall her making (and it’s the ONE THING that seems to have worked on a consistent basis going all the way back to before 2003)…
September 16th, 2009 at 12:27 pm
@LB
“If the Fed continue QE here, we will see the MOTHER of all bond market breaks and then we are all DOOMED. Right CV?”
Perhaps you saw, FWIW, I was reading an article in Bloomberg this AM talking about a Goldman call on the 10YY going to 3%…
September 16th, 2009 at 12:31 pm
What technology boom are you expecting to come within the next few years HW? Having worked in the technology field my entire career I’m very curious to see what you come up with.
September 16th, 2009 at 12:33 pm
As I stated in another comment to an earlier post about Bernanke,
“Bernanke, like Geithner, is bought and paid for. No longer meaningful other than another Baghdad Bob type mouth breather.” This is just another lie confirming this. He’ll look you in the eye and feed you a load of Bull.
September 16th, 2009 at 12:34 pm
@Thor
“Vaporware 2.0″… It’s the latest rage!
September 16th, 2009 at 12:35 pm
cvienne:
I’m trying to respond to HW right now, but the comments aren’t going through. I hate when TBP starts dropping comments that seem acceptable.
In short: HW is tripping on ’shrooms if he thinks fundamentals are getting better.
HW — explain these fundamentals away:
1. unemployment
2. the deflated US consumer
3. budget and trade deficits
4. RRE and CRE loan defaults and their cancerous derivatives (if you can’t look around at all of the see-through CRE inventory, you must be blind).
5. systemic hidden and/or deferred losses
6. ghost fleets of ships
7. declining asset prices
8. the withering dollar
9. the incestuous bond/dollar (Fed/Treasury) circle jerk
10. government support of entire industries (please don’t ignore the fact that it all has to be paid for, on top of existing debt)
11. insider selling
12. lopsided P/E ratios
13. impending state and municipal defaults and bankruptcies
14. failed banks
15. sanctioned dishonesty in accounting principles
September 16th, 2009 at 12:36 pm
@harrywanKer
“The economy got the appropriate stimulus needed and, as we are starting to see, will kick off the next boom phase for the economic growth of this country.”
so what’s going to be driving this new “boom” phase. perhaps we can all sell beanies babies back and forth to each others?
http://en.wikipedia.org/wiki/Beanie_Baby#Sociology_of_Beanie_Babies
September 16th, 2009 at 12:41 pm
Ireland is creating a Bad Bank:
http://www.bloomberg.com/apps/news?pid=20601087&sid=ah73GDbwTXfg
September 16th, 2009 at 12:44 pm
CV: If they continue QE, then LB and CV’s TLT position is also DOOMED. Next Wednesday FOMC is PIVOTAL.
Let’s hope Goldie has this one correct. LB has had enough DOOM in his portfolio for one week. Been filling Wanger’s pockets all morning. Still, what goes around comes around…. nice to see Roubini back on the DOOM team, we missed ya, Nouriel…
LB is 99% confident that QE is over. Trust me on this Wanger, you do not want to see a bond market break especially under what are already tight consumer credit conditions.
The end of QE = end of DGDF = end of the equity rally, although a blow-off to SPX 1100 is not out of the question.
September 16th, 2009 at 12:46 pm
Meanwhile, back at the Ranch:
“…Never in the history of the United Nations has a U.S. President taken the chairmanship of the powerful UN Security Council. Perhaps it is because of what could arguably be a Constitutional prohibition against doing so. To wit: Section 9 of the Constitution says:
No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.
Nonetheless, the rotating chairmanship of the council goes to the U.S. this month. The normal course of business would have U.S. Ambassador to the UN Susan Rice take the gavel. However, this time will be different. …”
“…The Financial Times says:
Barack Obama will cement the new co-operative relationship between the US and the United Nations this month when he becomes the first American president to chair its 15-member Security Council…”
http://rightsoup.com/while-we-were-looking-the-other-way-obama-to-be-first-president-to-chair-un-security-council/
~~
Thor,
see: “Federal Proposal Would Spend $154 Million on Vehicle Tracking Tax
Oregon congressman wants to spend taxpayer money to develop nationwide vehicle tracking and taxing technologies.
A Member of Congress proposes to use taxpayer money to fund the development of technology to track motorists as part of a new form of taxation. US Representative Earl Blumenauer (D-Oregon) introduced H.R. 3311 earlier this year to appropriate $154,500,000 for research and study into the transition to a per-mile vehicle tax system.
The “Road User Fee Pilot Project” would be administered by the US Treasury Department. This agency in turn would issue millions in taxpayer-backed grants to well-connected commercial manufacturers of tolling equipment to help develop the required technology. Within eighteen months of the measure’s passage, the department would file an initial report outlining the best methods for adopting the new federal transportation tax.
“Oregon has successfully tested a Vehicle Miles Traveled (VMT) fee, and it is time to expand and test the VMT program across the country,” Blumenauer said in a statement on the bill’s introduction. “A VMT system can better assess fees based on use of our roads and bridges, as well as during times of peak congestion, than a fee based on fuel consumption. It is time to get creative and find smart ways to rebuild and renew America’s deteriorating infrastructure.”…”
http://www.thenewspaper.com/news/28/2899.asp
the 168. Track n’ Trace ‘Economy’, it’s the ‘new-new’ Thing..btw, that being, just, one ex. of, more than, many…
September 16th, 2009 at 12:47 pm
@LB
“Ireland is creating a Bad Bank:”
—
And right on cue… Baucus is creating a Bad Healthcare Bill
http://www.bloomberg.com/apps/news?pid=20601087&sid=af9Txpla2K5w
or as “sheep boy” would put it… A BAAAAAAAAAAAHHHHHHD Bill
September 16th, 2009 at 12:48 pm
wow-
my head is spinning
September 16th, 2009 at 12:52 pm
@LB
“CV: If they continue QE, then LB and CV’s TLT position is also DOOMED. Next Wednesday FOMC is PIVOTAL.
Let’s hope Goldie has this one correct. LB has had enough DOOM in his portfolio for one week. Been filling Wanger’s pockets all morning. Still, what goes around comes around…. nice to see Roubini back on the DOOM team, we missed ya, Nouriel…
LB is 99% confident that QE is over. Trust me on this Wanger, you do not want to see a bond market break especially under what are already tight consumer credit conditions.
The end of QE = end of DGDF = end of the equity rally, although a blow-off to SPX 1100 is not out of the question.”
—
Well summarized… Although CV only goes down with TLT & the dollar…(not much exposure in short equities)… Hugh Hendry probably goes down as well… At least we can all have fun together drinking a pint in the pub with this guy…
http://www.bloomberg.com/apps/news?pid=20601079&sid=araLnp36jyOw
September 16th, 2009 at 1:04 pm
@cv
baucus is a first class d-bag — bought and paid for by the insurance cos. talk about a boon to his paymasters…mandating coverage for all (w/ gov’t subsidies), but no public option to compete with these vampire squid of healthcare.
September 16th, 2009 at 1:06 pm
@I-Man
…and, of course (per my 12:52), my brah the I-Man is invited to the pub (to PAY for the drinks), with his “cool winnings” from being long silver
September 16th, 2009 at 1:07 pm
Cherry picking.
What about non-CPP-recipients? In other words, the total of banking including people that haven’t gotten TARP or have pulled out.
September 16th, 2009 at 1:11 pm
HarryWangner,
“rootless: you’ve raised 5 economic points that either minimally impact the economy or I can outright refute.”
Well, you can start now with refuting or explaining why the impact is supposed to be minimal.
How can a mountain of private debt of 40 trillion US-dollars, i.e., a private debt to GDP ratio of 300%, be w/o significant impact on the economy? The required interest payments on this debt alone are far exceeding any additional income that can be generated by GDP growth. Or is a GDP-growth of 10, 15, 20% or more a year a realistic expectation?
“Commercial real estate is not collapsing. This will turn out to be another of the great “myths” of this “crisis”.”
The same claim was made about residential real estate back then. It wasn’t collapsing either. What are the other great myths supposed to be to which you are referring here?
Moodys/REAL Commercial Property Price Index (CPPI):
http://web.mit.edu/cre/research/credl/rca.html
If these aren’t collapsing prices in commercial real estate, what are?
“The economy got the appropriate stimulus needed and, as we are starting to see, will kick off the next boom phase for the economic growth of this country.”
That’s what the spin doctors want the others to believe. I just haven’t seen any argument with substance to make this case. Repeating the same propaganda again and again about the great times ahead because there have been “two days” of “positive news” won’t do it.
rc
September 16th, 2009 at 1:12 pm
@bubba
You get what you pay for (or, vote for, as the case may be, oftentimes one and the same)…
Or, as f411 would put it… “You reap the whirlwind that you sow”… Hosea or no hosea, I’m still trying to figure that one out…
I mean, this spring I sowed the seeds of some corn, cucumbers, tomatoes, arugula, lettuce, spinach, peppers, onions yada yada… I reaped the “fruits” of those seeds…
I guess I was lucky there were no underground tornadoes this summer
September 16th, 2009 at 1:13 pm
Bad debt is just being rolled over (hoping for a recovery) in order to avoid writedowns:
http://www.bloomberg.com/apps/news?pid=20601109&sid=adBwmubi0Fhk
This will end badly. Anyone got a view on the outlook for IG debt for next week if QE ends?
LB believes that long IG:short HY and long Tsys:short TIPS might be good trades going forward.
September 16th, 2009 at 1:15 pm
RC, no doubt Wanger thinks, don’t worry, be happy – b/c CRE is “contained”.
September 16th, 2009 at 1:19 pm
@lb:
Might want to float that by John Jansen at Across the Curve or some other bond/credit blog.
September 16th, 2009 at 1:22 pm
Re: CRE
Around my area (not the farm), the “other” area… An area that’s STILL only around 5.5% unemployment, there are more abandoned RE complexes than you can count…
There used to be a restaurant that was located on PRIME lakefront property (center of the town “cultural” area), that has gone out of business and the place has been FOR LEASE for over a year now…
The neighboring restaurants to that are off over 50% in receipts (and are barely hanging on)…
This is a fairly wealthy area… 3rd wealthiest county “per capita” income in counties in the USA (with low unemployment)…
September 16th, 2009 at 1:31 pm
ahab says be long and strong-
higher and higher- Naz- to the end of 2010- of course-
after the next 20% run in S&P- 10% correction- then off to the races-
like shooting fish in a barrel
September 16th, 2009 at 1:36 pm
VennData,
“What about non-CPP-recipients? In other words, the total of banking including people that haven’t gotten TARP or have pulled out.”
Commercial and Industrial Loans at All Commercial Banks:
Series ID: BUSLOANS
Source: Board of Governors of the Federal Reserve System
Release: H.8 Assets and Liabilities of Commercial Banks in the United States
Seasonal Adjustment: Seasonally Adjusted
Frequency: Monthly
Units: Billions of Dollars
2008-01-01 1456.1
2008-02-01 1479.4
2008-03-01 1513.1
2008-04-01 1532.3
2008-05-01 1539.4
2008-06-01 1554.6
2008-07-01 1567.8
2008-08-01 1572.9
2008-09-01 1588.6
2008-10-01 1644.8
2008-11-01 1638.0
2008-12-01 1618.6
2009-01-01 1601.5
2009-02-01 1586.6
2009-03-01 1562.8
2009-04-01 1543.5
2009-05-01 1526.1
2009-06-01 1502.4
2009-07-01 1487.3
2009-08-01 1453.0
(http://research.stlouisfed.org/fred2/series/BUSLOANS?cid=49)
Title: Consumer (Individual) Loans at All Commercial Banks
Series ID: CONSUMER
Source: Board of Governors of the Federal Reserve System
Release: H.8 Assets and Liabilities of Commercial Banks in the United States
Seasonal Adjustment: Seasonally Adjusted
Frequency: Monthly
Units: Billions of Dollars
2008-01-01 790.6
2008-02-01 793.6
2008-03-01 799.4
2008-04-01 805.1
2008-05-01 809.7
2008-06-01 814.4
2008-07-01 824.2
2008-08-01 830.4
2008-09-01 834.9
2008-10-01 851.5
2008-11-01 857.3
2008-12-01 861.8
2009-01-01 871.1
2009-02-01 882.0
2009-03-01 873.0
2009-04-01 860.5
2009-05-01 860.7
2009-06-01 859.0
2009-07-01 853.1
2009-08-01 846.6
(http://research.stlouisfed.org/fred2/series/CONSUMER?cid=49)
Title: Real Estate Loans at All Commercial Banks
Series ID: REALLN
Source: Board of Governors of the Federal Reserve System
Release: H.8 Assets and Liabilities of Commercial Banks in the United States
Seasonal Adjustment: Seasonally Adjusted
Frequency: Monthly
Units: Billions of Dollars
2008-01-01 3612.4
2008-02-01 3629.9
2008-03-01 3663.8
2008-04-01 3652.7
2008-05-01 3647.3
2008-06-01 3635.1
2008-07-01 3623.0
2008-08-01 3623.0
2008-09-01 3660.3
2008-10-01 3817.1
2008-11-01 3819.7
2008-12-01 3820.2
2009-01-01 3803.4
2009-02-01 3818.4
2009-03-01 3827.8
2009-04-01 3834.8
2009-05-01 3882.7
2009-06-01 3869.4
2009-07-01 3845.6
2009-08-01 3820.0
(http://research.stlouisfed.org/fred2/series/REALLN?cid=49)
You can check out more data here:
http://research.stlouisfed.org/fred2/categories/49
September 16th, 2009 at 1:39 pm
“Its hard to see how a credit dependent economy can grow as credit contracts.”
Isn’t that the problem, Barry? We have an economy based upon consumer spending (73% of GDP) and consumer spending is dependent upon debt. Consumers cannot spend more because incomes are down in this decade. The only way to make up the difference is to borrow. Consumers cannot borrow more forever. That bank lending is going down is merely a reflection of the inevitable.
Unless you advocate that fiscal policy should be to encourage consumers to borrow more than they can afford in order to pump up GDP numbers? That would be a dramatic departure from your previous positions, Barry. Could you clarify?
Deleveraging the economy is a good thing, thus bank lending going down is a good thing. GDP will be what GDP will be. GDP is a poor indicator of economic health, and one of the reasons is that using it as a primary measure leads governments to set policies to encourage citizens to impoverish themselves with long term debt in order to purchase short term depreciating consumer goods. A foolish course by any measure, except by GDP.
September 16th, 2009 at 1:39 pm
Across the Curve is out of the office. Tried posting at Accrued Interest.
cv: Fairfax or Montgomery?
September 16th, 2009 at 1:43 pm
@LB
Howard
September 16th, 2009 at 1:44 pm
ahab: You are repeating what I said. Have you seen the light on this finally?
“ahab says be long and strong-
higher and higher- Naz- to the end of 2010- of course-
after the next 20% run in S&P- 10% correction- then off to the races-
like shooting fish in a barrel”
September 16th, 2009 at 1:46 pm
@LB
and I should have said “median household income”
September 16th, 2009 at 1:52 pm
It’s too easy to assume everything the government says is all lies; therefore, a prudent person might make an attempt to determine, on a case by case basis, if what they are saying may be true. After all, it does happen from time to time!
For example, what would make the government’s assessment that the reason for the recent decline in lending activity being due to “decreased demand from borrowers” true?
Here are a few possible reasons this may be true (all inter-related and making qualified borrowers more scarce):
1. Consumer debt loads remain high and income levels are not significantly increasing, making debt to income levels higher and credit capacity lower.
2. Mortgage interest rates are off recent lows.
3. Unemployment (or concern over it) is increasing.
4. Interest-only resets persist, having a negative effect on consumer cash flow and credit capacity for re-financing.
5. Federal stimulus (i.e. $8,000 tax credit) has seen its peak.
While it may be true that banks are not eager to lend, it may be a bit of an overstatement to say that they are hyper-intentionally “constricting lending.”
At a minimum, I would agree with the government’s assessment that the “decreased demand from borrowers” is mostly true. Perhaps it would be a more accurate statement, however, to say that there is a combination of less risk appetite on the part of the banks with lower quantities of qualified borrowers.
September 16th, 2009 at 1:59 pm
Marcus Aurelius asks: HW — explain these fundamentals away:
1. unemployment (definitely improving, no growth yet but coming as rate slows)
2. the deflated US consumer (Retail Sales show otherwise)
3. budget and trade deficits (our country faces these situations decade after decade, nothing new)
4. RRE and CRE loan defaults and their cancerous derivatives (if you can’t look around at all of the see-through CRE inventory, you must be blind). (CRE is vastly overstated as “another shoe to drop” – already happening without much problem)
5. systemic hidden and/or deferred losses (this sounds too conspiracy-minded to respond)
6. ghost fleets of ships (too much being made of this, I could go on for pages about the silliness of “hot” topic.)
7. declining asset prices (been worse in the past and recovered)
8. the withering dollar (dollar at this level is great for the economy – can argue this for pages as well)
9. the incestuous bond/dollar (Fed/Treasury) circle jerk (Fed has done an excellent job injecting money to make this recovery happen).
10. government support of entire industries (please don’t ignore the fact that it all has to be paid for, on top of existing debt) (Look at what’s happening now – money being paid back and will continue to be paid with interest which nets money for government).
11. insider selling (Another silly argument that gets a lot of press. Of course they’ll take profits on stocks that are up in some cases 200% – wouldn’t you?)
12. lopsided P/E ratios (SPX p/e is about 17 right now, slightly above historic average.)
13. impending state and municipal defaults and bankruptcies (CA was the biggest risk and that was resolved)
14. failed banks (non issue – have spoken about this for days on end.)
15. sanctioned dishonesty in accounting principles (commentary, nothing numbers based here so I can’t reply)
-Hope that gives you some insight.
September 16th, 2009 at 2:02 pm
r_c,
you mean ’spend ‘all day’ doing my own Research to peruse available Fact Sets?’
that’s tooo much to ask!~
past that, nice digging~
September 16th, 2009 at 2:02 pm
Kent, all good points. In addition banks are focused on rolling over corporate, RE and PE debt here in order to avoid large write-downs and are anxious to avoid creating new bad consumer debt.
September 16th, 2009 at 2:05 pm
@Kent
“Perhaps it would be a more accurate statement, however, to say that there is a combination of less risk appetite on the part of the banks with lower quantities of qualified borrowers.”
—
Yeah, if I were a bank like Citi, or BofA, and “knew” I was getting into a risky game of mortgage backed securities, then proceeded to LOSE that game (and watch my equity price lose 90% of its value – essentially become WORTHLESS)…
I sure would be more worried about myself and the free money I was getting from the taxpayer to right my balance sheet than I would about those horrible UNQUALIFIED BORROWERS (who had pretty decent balance sheets “pre-crisis” on an asset to debt basis) but now find themselves depleted because they lost their job in the process, and the SAVINGS they had socked away on 401k’s was in BAC & C stock (and subsequently got wiped out)…
I really feel bad for the banks… and understand their conscientious effort now to find QUALIFIED borrowers to lend to…
September 16th, 2009 at 2:14 pm
The 10-year has not budged at all today. HY spreads are narrower but no-one is selling bonds. Since the credit market is usually wiser than the equity market, is this a signal of what we will hear from FOMC next week?
September 16th, 2009 at 2:20 pm
marcus aurelius & cvienne: I replied to your long question regarding various economic indicators but it wasn’t posted for whatever reason. Too bad because I had countered every point.
September 16th, 2009 at 2:25 pm
Sure you did, Harry.
September 16th, 2009 at 2:26 pm
emmanuel: Really I did. Sucks since I spent so much time on it. Oh well. Regardless my portfolio is on fire again. QLD, DDM, AAPL all making me very happy today – again.
September 16th, 2009 at 2:30 pm
@Harry
I’m prepared for the day, NO, the very MINUTE, that the market tops, you will also post a message that
says
“SELL! SELL!”
I mean, the timestamp would be milliseconds BEFORE the Goldman frontrunners hit their program buttons…
Alas, that won’t be posted either (may be it will be on another thread that you can refer to us a few months down the line)…
September 16th, 2009 at 2:33 pm
@Harry
actually Harry, you know I’m just teasing you here… I’m impressed with this rally (and I hope it continues for you, and I’m more happy for your success than I ’sound’ like here)… I get teased a lot because I like to make predictions, so I understand your position…
I’m VERY CURIOUS what happens when it reaches its Louise Yamada moment… That’s coming about 12 points overhead…
September 16th, 2009 at 2:35 pm
@ CV 1:06:
LOL.
Too bad those “profits” (if I-Man should take them) are already earmarked for a future date with either:
a. shorting crude
b. shorting SPX
c. long TLT (or LQD… hmm… LB)
d. all of the above
Another day, another stop raise.
Dont hate the player, hate the game breddahs.
September 16th, 2009 at 2:48 pm
Good call last week, I-Man. Respect, and less Bud Lite, more microbrews for you. That’s a good thing, bro.
We are just now in the area of SPX corresponding to October’s waterfall decline. Remember knifing right through 1066? SPX could easily fill the gap up to 1095-1100 on what feels more than ever today like “panic buying”.
At 1100, more than a few people may decide that they are no longer underwater, and it’s time to say goodbye. The window of opportunity is closing fast ahead, so I-Man and Wanger, gather ye rosebuds while ye may.
September 16th, 2009 at 2:48 pm
I think the nation’s housing market is facing new downward pressure as holders of subprime-mortgage bonds inundate the market with foreclosed homes at prices that are much lower than where many banks are willing to sell.
“Experts say this is a bad omen for residential real-estate prices and homeowners trying to sell or refinance, because the fire sales, many to cover soured subprime loans, put downward pressure on the value of nearby homes. All of this undermines federal efforts to stabilize the housing market and revive the broader economy.
“While the banks are trying frantically to get loans off their books, they face the problem of large shadow inventories of housing being dumped on the market, which would depress prices further,” said Anthony Sanders, real-estate finance professor at George Mason University in Fairfax, Va.”
With high joblessness, it is only normal that subprime-mortgage holder would like to sell their properties since they are not sure of the employment status in the coming months.
Read More: http://www.housingnewslive.com
September 16th, 2009 at 2:52 pm
cvienne: regarding Yamada, what moment is she looking at? 12 points SPX – 1080?
September 16th, 2009 at 2:54 pm
leftback: I don’t see today as “panic buying”. There’s not enough volume. Just the markets reacting to excellent economic news on consecutive days. Yesterday they were a bit timid until confirmation of more numbers today.
September 16th, 2009 at 3:14 pm
@Wanger
89weekMA…
Re: Panic buying… I don’t see today as panic buying either…
IMO – There’s a rush to get this thing up to the 89weekMA ahead of opex Friday and the Yom Kippur Rosh Hashanah interval…
That about sums it up for me (and why I was such a “quick out” when I tried shorting at 1054 and stopped out right there)…
September 16th, 2009 at 3:24 pm
Keep your eyes on that massive resistance area looming above us. Quite a few people would “break even” up there.
All they need is some sucker to sell to.
September 16th, 2009 at 4:02 pm
BR says:
“…we see that bank lending is still heading in the wrong direction: Downwards. Its hard to see how a credit dependent economy can grow as credit contracts.”
It can’t, and will not. This is exactly where it needs to go…for a long, long time.
September 17th, 2009 at 2:24 am
The chart is merely a depiction of the D-cycle. When assets fall in value (deflation), there is less demand for borrowed money. Thus less lending.