Consumers credit crunch changes retail picture more than Amazon

The state of the consumer can be summed up in two pieces of data that were released this week.

First, total US household debt was $12.84 trillion in the three months to June, up $552 billion from a year ago, according to the New York Federal Reserve Bank report published on Tuesday. Almost 5% of that sum or $600 billion of that debt is in default.

Secondly, the only retailers to have decent earnings this week were the off-price stores. TJ Maxx, which owns that brand along with Marshall’s and Home Goods, beat profit estimates and guided higher, while being one of the few retail chains to be opening new stores.

Target was the other bright spot for the retail sector as it also beat the Street’s revenue and profit forecasts by remodeling stores and ramping up 2-day delivery services.

The off-price retail sector is booming when you compare it to Macy’s, Nordstrom and other department stores, as consumers look to price versus brands. While Amazon’s pricing could be included in the sector, it has less to do with the department’s stores demise than the credit crunch.

A line in the Fed report sticks out to me, which said the growing number of credit cards balances maxed out “ticked up notably.” This is the canary for cash-strapped consumers, who earlier reports from the Fed said were making more credit card purchases for everyday staples like gas and groceries.

Is this a matter of convenience or is the credit card used as a bridge to pick up milk on the Wednesday before payday?

Not sure if an answer to that can be derived, but it points in an ominous direction when you take into account that real wages have been flat on an inflation basis for over a decade at the very least.

 

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Used auto sales are getting the hook

Here’s one job that’s sure to be hiring, but you will not see it on the Bureau of Labor Statistics employment data for August.

It’s the Repo Man.

All those subprime auto loans for eight years, 0 percent down and no credit check, were not all that secure, but then again the car makers sold the vehicle and put the risk on someone’s’ books.

Much like the housing crisis, the finance companies making these risky loans securitized the loans and sold the bonds to investors, which are creating some cracks in the $1.2 trillion market for auto financing.

Investors starving for yield are grabbing these securities with two fists. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion exchanged hands, according to a Wells Fargo report.

However, the glut of vehicles arriving on the back of tow trucks onto lots has accelerated leading to a 4.1% price decline on used cars in August.

Also with so many cheaper cars on the lot that are only one or two years old, new car sales are hurting. July’s sales numbers were stunning when compares to the record number of 17.5 million cars sold in 2016.

General Motors reported a 15.4% sales decline in July compared to the same period a year ago, selling 226,107 cars and trucks. Ford Motor said sales slid 7.4% last month to 199,318 vehicles. Fiat Chrysler posted a 10% decline in July, selling 161,477 vehicles.

“So, what i can I do to put you in this beauty?”

“Not much obviously. Give me that one-page loan form, I’ll sign it and pick up the car tomorrow. Maybe I’ll be back in six months to pick up a different model.”

Does sound like another recipe for disaster.

July jobs report bigger than Mueller’s motions

Friday’s job number of 209K beat the Street’s 180K estimate with hourly earnings ticking up 0.3% as mid-year raises kick in.

Equity futures markets are up 60 points on Dow unchanged from prior, despite the news out of Washington of a special grand jury being impaneled.

The dollar also strengthen on the job news.

The fact that the markets shrugged off Special Counsel Robert Mueller’s actions, speaks more to the continued DC gridlock, which the equity markets see as a buying opportunity.


I would like to acknowledge the passing of a great newspaperman and researcher Jim Marrs.

Marrs was a prolific writer with 14 published tomes and his book, “Crossfire” was used by Oliver Stone for his film, “JFK”.

Marrs was a cub reporter in Dallas on the day of the assassination and worked tirelessly for many years talking to sources within the Dallas police department and Secret Service to construct an alternative narrative to the events on Nov. 22, 1963.

Marrs taught a course on the Kennedy assassination at the University of Texas at Arlington.

Marrs was 74 years old at the time of his death.

One day inside the bifurcated America we have today

Apologies for the late post. Still trying to get better from my dental accident.

On Friday we get the July employment picture from the Labor Department. If you look at the labor situation against the stock market record-breaking run up this summer, then you get the picture of a bifurcated America.

As the retail sector sheds stores and thousands of part-time workers these numbers don’t hit the headline number, since they are not full-time jobs. However, as some of these companies while paring down their headcount, their stocks have price support as expenses are slashed with the closings and firings.

Yes there are pockets of the US doing very well as stock charts move up from the left axis toward the right. New York, Los Angeles and selected hubs of the 1 percenters have been having a field day over the last 10 months since the election. This despite the fact that many of these despise the president.

But look at most of America, there’s a bleak outlook for the future. They put Trump into the White House, but little has changed for the better in their lives. Congress has been stonewalling the administration on any initiatives to help most Americans who have been suffering since 2008.

So Friday we will get 180,000 jobs created, which is not true because it’s based on guesstimates, and the unemployment rate will probably remain around 4.3%. But none of those numbers will affect most Americans, but the top-echelon Americans will make plenty of cash when the market moves higher on the news.

That’s the example of one day inside the bifurcated America we have today.

As jobs go this one could be the greatest title in the world, literally

On Friday the Department of Labor will release the July employment data. The Street’s consensus estimate is 180,000, which is lower to the June report of 222,000.

The reason I bring this up today is a reader sent me a link to what I believe could be the most interesting job in the world.

National Aeronautics and Space Administration is looking for a Planetary Protection Officer. How great of a job is that? The salary is up to $187,000 a year.

The duties include from the listing: The Planetary Protection Officer (PPO) is responsible for the leadership of NASA’s planetary protection capability, maintenance of planetary protection policies, and oversight of their implementation by NASAs space flight missions. The PPO also supports the Safety and Mission Assurance (SMA) Technical Authority and serves as a principal advisory resource for the Chief, SMA and other senior officials on matters pertaining to planetary protection. The PPO is the Agency’s focal point for interactions with external organizations on matters related to planetary protection.

This job title sounds like it would make a great movie as well as a fantastic cocktail conversation.

“What do you do for a living?”

“I’m the chief Planetary Protection Officer for NASA.” Cue the theme song from “Star Wars.”