Consumer grows increasingly levered

We’ve addressed this issue previously, but Doug Kass summed up the specifics perfectly:

The facts are indisputable – the consumer has grown increasingly levered just when interest rates are rising and the large amount of mortgages based on teaser rates are about to be reset.

The facts speak for themselves:

• Non-discretionary consumer spending (for items like food, energy, medical expenses and interest payments) which vacillated in the 44% to 47% range until 2000 has now risen to 54%.

• Household debt/household assets is at an all-time record high (up from 14% six years ago to nearly 19% today).

• Despite the outsized gains in the value of the housing stock, the magnitude of the cash outs have resulted in an historic low in the ratio of home equity/home market value.

This ratio stood at 57% in 2006 compared to a peak of 70% twenty years ago.

• Household debt/GDP has never been higher. It is now at 88% compared to only 63% after the recession of the early 1990s.

• Mortgage debt/GDP has doubled over the last twenty years (63% versus 31%).

As we discussed yesterday in the post on the BusinessWeek Cover Story, most people instinctively understand their own financial situations.

All is not well on the home front . . .

Category: Retail

The Risk to Equities from Rising Rates

Category: Federal Reserve, Fixed Income/Interest Rates, Investing

iPod Price Cuts

Category: Music, Technology, Television

Still Short Gold . . .

Category: Commodities

Government Budget Number Crunching

I do Larry Kudlow’s show whenever he asks, and while I am certainly not the
political wonk he is, I do keep track of the budget process. I want to see how the deficit is shrinking or growing, what changes to the tax code might be coming, and which sectors of the economy are getting a spending boost from Uncle Sam.

That’s a lot of stuff to watch — Fortunately, there’s a terrific set of charts today via the online WSJ: Crunching the Numbers (click each for larger graphics).

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Gainers and Losers:
 

A broader view of what’s growing and shrinking in Bush’s 2007 proposal, in budgetary authority

Infobudget06bigpic

Sources: Office of Management and Budget, AP      
*Includes miscellaneous, undistributed offsetting receipts

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Receipts and Outlays
A look at how the federal government is counting on bringing in revenue, and how it plans to spend it in fiscal 2007. All figures in billions unless noted.

Infobudget06receipts

Did you know that thee Estat Tax weas such a modest slice?

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Read More

Category: Economy, Politics

Unemployment Levels and Labor Participation Rate

Category: Employment

State of the Union: Not Very Happy

Category: Politics, Psychology

The Street Get Inflation Exactly Backwards

Category: Commodities, Employment, Inflation

Chart of the Week: AVERAGE HOURLY EARNINGS

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CRB Index, 5 years

Category: Commodities, Technical Analysis