[jimmydean]

Record personel debt levels against us but if America stops spending things will reverse fast as the entire equity market is based on consumer confidence.

50%+ non-institutional investors in the market compared with about 12% in the last depression. A consumer confidence crisis would follow with a market crash.

Rising oil prices are hedging against discretionary spending which will in itself drop consumer confidence.

Also I can't help but think that the latest bullish tendency of most investors lately is simply just another contrarian indicator. I think we are more likely to see a 7000 DOW rather than an 11000 one

[SidneyTawl]

http://www.markswatson.com/m31102.gif

[MicroHydro]

$this->bbcode_second_pass_quote('jimmydean', 'I') think we are more likely to see a 7000 DOW rather than an 11000 one

[I_Like_Plants]

And yet, according to the sites I read, like www.financialsense.com, consumer confidence is up.

I sold off the SUV, that should show anti-confidence. I bought a bike and a bike-trailer, I guess a sign of confidence but it really shows I'm disinclined to get another car any time soon. I took an overnight trip to Napa recently, stayed in a nice little hotel, are those signs of confidence? In reality it was an equipment delivery, a quick little email, a quick BIG sale, I was happy to deliver since it helped me pay off the SUV.

What I'm saying here is, superficially, I've been spending more lately but it's not confidence, it's preparation for gearing way down. Insurance co's hurting because I'm not sending them a monthly tithe. Finance co's same because they're not getting their monthly lb of flesh out of me now. Credit cards ought to be unhappy, I'm not putting a dime on them if I can avoid it and paying them down as much as possible.

Wonder if the "consumer confidence" is actually more spending due to people preparing for down times, even though most of 'em are not consciously aware of it?

But yes, 'murricans stop spending and we're in deep doody.

[Zentric]

JD: I'm thinking there's about just as much chance that the Dow could go to 13,000 as 7,000. It might be the Bush plan to let the entire country go to hell with the exception of the 30 companies of the Dow. Let these particular companies make profits at the expense of society, let their share prices rise, and then Bush can claim how great the economy is doing - and <sigh> would probably get away with it.

Since the Dow companies are multinational, maybe their profits would be primarily based on a rosier situation abroad or a rosier currency exchange rate - although things continue to deteriorate in America. But Sheeple won't make this distinction.

Maybe the next secret on Wall Street is their knowledge that we're already gripped in a strong inflationary environment (we are, aren't we?) despite what the bogus CPI reports are telling us, and that an otherwise steady-state economy with the Dow at 10,500 today would therefore imply automatically a Dow 11,500 next year, and a Dow 12,500 the year after that.

Maybe China will revalue their currency and their goods will all of a sudden become 15% more expensive. Maybe this will trigger further inflation which, perversely, could cause an inflation-based "rally" on the stock market.

Manipulation is rampant. If tomorrow a cheesburger costs $10 US, and the Dow rises to 15,000, I suspect you will not altogether be thrilled at your 50% increase in net worth, because you might actually end up with 30% less buying power. In this instance, the suckers holding cash or US bonds would probably fare far worse though.

To the extent possible, maybe you shouldn't play the game unless you've been given the script.

[jimmydean]

Good replies.

I_Like_Plants, could be some of us bears are spending to prepare but if we look at the crazy trends in the housing market I think the average person is just consuming more debt. Sales of ultra-luxury houses ($3M+) are at an all-time high and home builders are building new houses as fast as they can. Fannie May re-introduced the 40 year mortgage ... "to make housing more affordable" lol. I too have held off buying a new vehicle since my 9 year old Toyota still runs and is fairly fuel efficient.

Zentric, if we do see an inflation spike that should cool the stock market down as interest rates would have to rise making borrowing more expensive resulting in a cooling of the housing market as well. Maybe your right though that wall street knows the "secret" of this. There is quite a lot of activity of public companies being bought out and privately held by the wealthy. They are exchanging current paper for real assets, perhaps foreknowledge of inflationary times.

If the credit bubble doesn't burst because the FED prints more money we are going into inflationary times (btw nice graph Sideny). Key will be knowing when to cash out before it's too late I guess.

[jdmartin]

$this->bbcode_second_pass_quote('I_Like_Plants', 'A')nd yet, according to the sites I read, like www.financialsense.com, consumer confidence is up.

I sold off the SUV, that should show anti-confidence. I bought a bike and a bike-trailer, I guess a sign of confidence but it really shows I'm disinclined to get another car any time soon. I took an overnight trip to Napa recently, stayed in a nice little hotel, are those signs of confidence? In reality it was an equipment delivery, a quick little email, a quick BIG sale, I was happy to deliver since it helped me pay off the SUV.

What I'm saying here is, superficially, I've been spending more lately but it's not confidence, it's preparation for gearing way down. Insurance co's hurting because I'm not sending them a monthly tithe. Finance co's same because they're not getting their monthly lb of flesh out of me now. Credit cards ought to be unhappy, I'm not putting a dime on them if I can avoid it and paying them down as much as possible.

Wonder if the "consumer confidence" is actually more spending due to people preparing for down times, even though most of 'em are not consciously aware of it?

But yes, 'murricans stop spending and we're in deep doody.

[Kez]

$this->bbcode_second_pass_quote('jimmydean', '.').. if America stops spending...

[Kez]

$this->bbcode_second_pass_quote('I_Like_Plants', 'W')onder if the "consumer confidence" is actually more spending due to people preparing for down times, even though most of 'em are not consciously aware of it?

[marko]

$this->bbcode_second_pass_quote('Kez', 'A')mericans won't stop spending unless someone or something reaches out and slaps the hell out of them, and FORCES them to stop spending... Americans are going to spend until something forces them to stop, i.e. Citibank cancels all of their credit cards at the same time the bank takes their house.

[NEOPO]

Ditto.
My vote is with human nature and all of its wonderful idiosyncrosies

Muricans will not stop spending until they have nothing left to spend.

Here is a little for instance on the so called "bubble" that has made overspending possible:

My friend bought a home in 2003 for 165k.
His home is now worth 360k and he can cash out upto 90% of the equity.
He is thinking about doing so to have cash to invest in a business.
He does have some insider knowledge that may help his business make it but if it doesnt....... he loses his home and will be seriously in debt for a very long time.

Perhaps a 50 year mortgage or 100 year mortgage will afford people like my friend a second chance if the bubble pops and/or his business tanks.

[jimmydean]

Good points Marko, housing could be the fuse that ignites the bomb in U.S. economy.

Something is inherently with money supply and regulation when you can get a 40 year mortgage with ZERO down. Fannie May has something like ~$1+ trillion dollars loaned out. Greenspan did seem concerned about this a few months back but I don't see anything being done about it.

Can't help but think that U.S. housing and the mad credit market are the triggers for wider spread mayhem in the economy. That said there are a few other European countries in trouble as well with unemployment that could kick off the party first

[marko]

$this->bbcode_second_pass_quote('jimmydean', 'T')hat said there are a few other European countries in trouble as well with unemployment that could kick off the party first

[I_Like_Plants]

Yep the UK has just passed the peak of their real estate party and the hangovers are starting.

I think in the US and in the UK alike, most people are going to ride their investments right down to the bottom, just like they did here in the dot-bomb.

[spot5050]

$this->bbcode_second_pass_quote('jimmydean', 'R')ecord personel debt levels against us but if America stops spending things will reverse fast as the entire equity market is based on consumer confidence.

50%+ non-institutional investors in the market compared with about 12% in the last depression. A consumer confidence crisis would follow with a market crash.

Rising oil prices are hedging against discretionary spending which will in itself drop consumer confidence.

Also I can't help but think that the latest bullish tendency of most investors lately is simply just another contrarian indicator. I think we are more likely to see a 7000 DOW rather than an 11000 one

[I_Like_Plants]

I've just realized a day or so ago that since the car payment isn't part of my reality, I can afford to give a grand to the most usurious of my credit cards, where if the car were still in the picture, the payment would be $400 at most. The minimum is somewhere close to $300, so I'd be paying down hardly any pricipal.

the bastards may not know it, but I've declared war.

With every sprint across an intersection on my bike the war is being fought, and I like to think this way I'll win.

And in a bit less than a month from now, I'm entering a bike race, all black bike, I think I'll find me a black shirt to wear too, team dark horse lol. If I do well in the bike race I'm joining a local racing club and will show 'em California produces better motors than Detroit in gas-scarce times

[kenohio]

Americans will never stop spending, but the extra money that is being sent overseas for oil will come from somewhere. Right now, I think the minority of people are cutting back in other areas of their budgets to make room for the larger expenditures on heating oil, natural gas and gasoline. Many more are just adding a little bit more to their credit cards or cashing some equity out of their houses to keep living at the same level.

The equity cash-out and putting extra onto credit cards will hurt us down the road. Eventually the equity runs out and the credit cards max out. With the extra money spent on interest the economy as a whole loses even more spending power as consumers have less money for consumption of goods.

Most people still think the increase in energy prices are temporary. They are still buying SUVs but expect more incentives to make it happen. They are still building bigger and bigger houses, and fully expect them to double in value within five years. We shall see.

When these people have to start conserving the economy will take one heck of a hit.

[I_Like_Plants]

That's the point, I had an SUV a few weeks ago. Bingo, I've declared war on the userers, am paying down a buncha shit, and getting out of debt and will stay out.

If I had mad street-caricaturist skills, I'd drop what I'm doing now, go rent a room in palo alto or the city, and tell all my creditors, Chuck You, Farley. Ride and draw and eat and drink and observe all the little flowers growing in the cracks in the street (which I do much more now anyway since I'm car free)

Hehehe it's amazing, there are major banks depending on me, my bike, and my messenger bag, to keep on doin' what I'm doin' and making the payments. Now that I don't have a car, I'm not worried about their takin my car.

[ab0di]

I just got a notice from a CC company that the monthly minimum payment is going to be 3.5% of the balance. This is up from 1.5%. I don't carry balances so I really don't care. But I wonder what's going to happen to spending when someone with $10k in CC debt finds his monthly CC payment going from $150 to $350.