Tuesday, March 17, 2009

A Popular New Year's Resolution: "Stop Paying My Credit Card Bills"

Well, after a 16% trough-to-peak rally in just a week and a half, things might be about to get very interesting indeed for the S&P 500. The index touched and briefly breached the support-turned resistance at 767, the old reaction low from 2002, but failed to close above it. With the Fed announcement on Wednesday, the TALF on Thursday, and triple witching on Friday, Macro Man frankly wouldn't be surprised by any weekly close between 700 and 800.Spoors aren't the only asset price at a critical juncture. EUR/USD, which has attracted a reasonably bullish following over the past week or so, managed to breach an old high of 1.2992 yesterday, registering the first "higher high" since the Great Chinese Screwjob (or whatever it was) last December.
Still....price action since it breached 1.30 has been less than impressive. The market got excited by yesterday's January TIC data showing huge net sales of US assets, but Macro Man finds this data to be so misleading as to be worse than useless. The only month out of the last four reported that the TIC showed a net inflow into the US was December. This was, coincidentally or not, the only month of four when the DXY actually fell. So perhaps what the TIC is caputring is fire-sales of USD assets for foreign banks, etc. in desperate need of dollars. Inquiring minds want to know....

Elsewhere, an interesting recent release that has garnered a modest amoutn of attnetion is the credit card deliqeuncy data, recently released for January. Bloomberg carries figures for fifteen issuers in the USA, UK, and Canada. All fifteen saw delinquency rates rise in January from December. Who knew that "stop paying my credit card bill" was such a popular New Year's resolution?
Particularly notable was the sharp rise in delinquencies at Citi. While comfortably large spreads have no doubt propelled Citi's markets division to decent profits so far this year, per recent comments from The Bandit, the deterioration in its bread-and-butter consumer credit business must be eye-watering.
Macro Man doesn't do single name stocks, and frankly has no idea (or at least one that's he's prepared to make public) whether C is a buy, sale, or hold. But the underlying dynamic, one of rising non-performing loans (and concomitant non-performance of structured credit products that bundle them together) is far from bullish. Stories are beginning to ciruclate that the Fed is struggling to find many interested parties to participate in the TALF. If that goes down like a lead zeppelin, the risk must be that equities swiftly follow.

13 comments:

Anonymous said...

looking at a euro etf FXE it closed on 50MA

SPX 50% at 771 of 667-874 was good and the good ole RUT hit 400 precisely

long bond futs US that huge '03 high on continuation charts at 125-0...fed seen buying long end today i think 'mortgage' related

fomc decision tomorrow, seems like there is always short covering in SPX the morning of a decision

cheers!
-deac

Anonymous said...

In a "fair" world, you should pay your debts, including your credit card.

But in a "fair" world, the inept and incompetent bank CEOs would have been fired instead of being propped up by corrupt politicians using taxpayer money

Since the banks are stealing from taxpayers, what right do they have to complain if taxpayers steal from the banks?

Bernanke/Geithner can protest until they turn blue, but we all know the reason the Goldman puppets continue to fail is that they cannot truly fix the economy without admitting that the CEOs of Wall Street were never qualified

Anonymous said...

Actually mass defaults on credit cards should be great for banks (or those who buy these debts when the banks go under). The interest rates are massive, the fines on top of that stack up nicely as well. Unlike companies that can go bankrupt, the vast majority of consumers *will* be forced to pay these debts off in the end. Even if you're unemployed for the next five, ten years, whenever you get a job (or a pension) you'll have to pay. In the end it's just a deferred payment. Of course banks need the money NOW but if you have the luxury of time...

Anonymous said...

"...the inept and incompetent bank CEOs would have been fired instead of being propped up..."

Hold on a minute, just exactly how many of the Top 20 banks CEOs from 2 years ago are still in the saddle?

Anonymous said...

Its a done deal. You can see in crude today. Fed is going to QE.

-mpm

ryanonthebeach said...

There is something to this New Year’s resolution. I wonder what percentage of the CC defaults are people that are just pissed n’ fed up with the banks, have a bit too much debt and figure, @#$@# them. Besides everyone else’s credit rating is going to be screwed too?
“Unhappy with the bank bailout n’ bonuses, stop paying your CC!”

Macro Man said...

mpm, someone might wanna tell the bond market!

Anonymous said...

10 yr is 3.00%.
how nice and round
Fed will tell them tomorrow.

Anonymous said...

Anon 6:10

Quite a few CEOs are still in office.

Not one was fired for cause. Not a single one.

Sure, a few were encouraged to resign or retire early -- but they left with massive severance packages.

If they had been fired for cause, they would have forfeited their severance packages -- this did not happen.

How many bankers do you know that were laid off because the bank was in trouble (not because the employee screwed up) ... these people got a few weeks to a few months severance, pretty much what they would have got had they been fired.

How many Joe Averages have lost their jobs because of over-capacity (again, not the fault of said employee) and they got a small severance or none at all.

The CEOs were NEVER fired. They got severance packages, for screwing up, that were 100x what other people make in an entire career. The banks are insolvent, so this money was stolen from the US Treasury

I am all for paying Wall Street types generously for performance -- but I find no merit what-so-ever to criminal CEOs stealing the taxpayer blind.

These people are not paid for performance -- they destroyed their employer and robbed the tax payer on the way out the door

Anonymous said...

buy strangles (750/770) or vix? i did the latter...
still not convinced QE will happen (dry powder / would have done it already / wait to see how it plays out in uk... etc), and crude is hardly the barometer actually think it made a double top today.
€$ action is dreadful so still bearish € but surprised at its resilience, guess we need a proper catalyst. Good luck tom all, JL

Anonymous said...

Pay for performance also requires punishment for risk---realized or unrealized.

Nobody gets a free call option.

Anonymous said...

It was the banks fault and the banks should pay!

After watching my family's net worth tumble, through no fault of our own, I stopped paying my credit cards last November. Just recently I was able to settle with the first company for about 60 cents on the dollar. I'm sure the rest will follow, since they are in worse shape than I.

Sure, I've hurt my credit score but frankly I am not concerned. I have a mortgage, with a decent rate, that I will continue to pay. And I own my cars outright. (Anyone that would take out a loan on a new car AFTER LAST FALL is asking for trouble, IMO. Save your money!) No one is certain the banks will ever lend freely again, and who needs them? Last fall, we all came dangerously close to watching our Wal-Marts become trading posts. The system collapsed, and if it wasn't for the government throwing money at the banks a Mad Max-type economy might have replaced capitalism. And who knows, it still could since no one is sure the "bad bank" solution will work.

No matter what, don't let the banks bully you. At this point, they need us MORE than we need them.

Anonymous said...

Re: attaching pensions or SS..can't be done..they are exempt according to my BK attorney who advised that the BK will be on credit bureau for 10 to 12 years but if I stop paying credit cards they will be off in 7 years.
Since there is no equity in my home...40k underwater..he said pay the mortgage and maybe one card and forget filing BK. Am starting with this months cc payments and an unsecured loan that I used for remodeling my condo.