2023 Investing Thread

[soflagator]

Consumer debt hits record $16.9 trillion as delinquencies also rise

Debt across all categories totaled $16.9 trillion as balances rose across all major categories.

www.cnbc.com

Mortgage and auto are important, but it’s the unsecured debt that’s insane. Still not sure how it’s possible that between being forced to stay home(no dinners, movies, vacations, etc) for a year plus—over two in some areas—getting thousands in stimulus and enjoying historically low rates for much of that time, these people are still sitting on that type of credit card debt.

Maybe it’s just the time window of when they looked. I put everything on Amex and pay it once a month around the 5th. Maybe that’s what happened here.

 

[FireFoley]

Mortgage and auto are important, but it’s the unsecured debt that’s insane. Still not sure how it’s possible that between being forced to stay home(no dinners, movies, vacations, etc) for a year plus—over two in some areas—getting thousands in stimulus and enjoying historically low rates for much of that time, these people are still sitting on that type of credit card debt.

Maybe it’s just the time window of when they looked. I put everything on Amex and pay it once a month around the 5th. Maybe that’s what happened here.

I do not think that is what happened. The vast majority of these people do not pay off the credit card debt monthly, instead opting for the MINIMUM payment if any payment at all. The then will settle for cents on the dollar and apply for and receive another 2 or 3 cards. Every restaurant I go by is packed, even in the less affluent areas. It is this type of spending and debt that may never be paid off. The homes and cars can be repo'ed and given to a worthy owner. CC debt falls on us.

 

[Detroitgator]

Mortgage and auto are important, but it’s the unsecured debt that’s insane. Still not sure how it’s possible that between being forced to stay home(no dinners, movies, vacations, etc) for a year plus—over two in some areas—getting thousands in stimulus and enjoying historically low rates for much of that time, these people are still sitting on that type of credit card debt.

Maybe it’s just the time window of when they looked. I put everything on Amex and pay it once a month around the 5th. Maybe that’s what happened here.

Remember, didn't Amazon stock soar during Covid?

 

[soflagator]

I do not think that is what happened. The vast majority of these people do not pay off the credit card debt monthly, instead opting for the MINIMUM payment if any payment at all. The then will settle for cents on the dollar and apply for and receive another 2 or 3 cards. Every restaurant I go by is packed, even in the less affluent areas. It is this type of spending and debt that may never be paid off. The homes and cars can be repo'ed and given to a worthy owner. CC debt falls on us.

Yeah I was being facetious.

 

[soflagator]

Remember, didn't Amazon stock soar during Covid?

Yes. But they still had time to pay those things off. Plus those purchases were supposed to be in lieu of tue usual, going out spending. So even if just stimulus alone was applied, there should still be a net gain. Instead it’s been a backslide. I said very early in that the wealth gap would grow because of Covid, but this is still more than I expected.

 

[Detroitgator]

Yes. But they still had time to pay those things off. Plus those purchases were supposed to be in lieu of tue usual, going out spending. So even if just stimulus alone was applied, there should still be a net gain. Instead it’s been a backslide. I said very early in that the wealth gap would grow because of Covid, but this is still more than I expected.

Hey, people sit around, they buy schit!

But on a serious note, I agree on all you said.

 

[Bernardo de la Paz]

CC debt falls on us.

Ehhhh... I think it falls on the people actually making those minimum payments at 27% apr.

 

[FireFoley]

Ehhhh... I think it falls on the people actually making those minimum payments at 27% apr.

Not after they settle for 10 cents on the dollar.

 

[Bernardo de la Paz]

Not after they settle for 10 cents on the dollar.

But they pay those minimums for years before they default.

Sure some of them get ahead by defaulting early at the expense of the ones that struggle through those payments for many years before ultimately giving up.

 

[Egor's Assistant]

The way I read the data.... we had credit card balances at record lows during the Covid-Cash giveaways. Household savings also reached new highs during that period. Now we're on the other side of that wave of infused Trillion$. Prices have soared, spending on essentials has soared, interest rates have more than doubled. So now we have record high Credit Card balances, with rapidly increasing rates. Savings has all been spent on gas, eggs and milk. Not hard to see what follows next. People stop buying because they've run out of credit. A couple trillion dollar inflationary wave crashes the economy in yet another self-inflicted wound.

Where's a rabbit to hide his loot? 6 month T-bills? Hah!

 

[soflagator]

The way I read the data.... we had credit card balances at record lows during the Covid-Cash giveaways. Household savings also reached new highs during that period. Now we're on the other side of that wave of infused Trillion$. Prices have soared, spending on essentials has soared, interest rates have more than doubled. So now we have record high Credit Card balances, with rapidly increasing rates. Savings has all been spent on gas, eggs and milk. Not hard to see what follows next. People stop buying because they've run out of credit. A couple trillion dollar inflationary wave crashes the economy in yet another self-inflicted wound.

Where's a rabbit to hide his loot? 6 month T-bills? Hah!

Short term debt instruments, as has been discussed, effectively playing the other side of that trade. Maintain mostly cash, as there will be plenty of great bargains before long , equities or otherwise. And look for companies that have been doing well the past few years. There are always exceptions.

Or just load up on NFTs.

 

[Concrete Helmet]

The way I read the data.... we had credit card balances at record lows during the Covid-Cash giveaways. Household savings also reached new highs during that period. Now we're on the other side of that wave of infused Trillion$. Prices have soared, spending on essentials has soared, interest rates have more than doubled. So now we have record high Credit Card balances, with rapidly increasing rates. Savings has all been spent on gas, eggs and milk. Not hard to see what follows next. People stop buying because they've run out of credit.

This is correct. Savings went way up until the freebies were cutoff and now consumer debt is at an all time high AND has grown at a faster rate than EVER experienced before.

Second and even more detrimental is 50% of corporate debt(this includes companies in the S&P500) is issued in BBB rated corp. bonds which are simply fluffed up by the ratings industry from junk.....what happens when this debt starts to roll over into higher and higher interest rates. Most people don't realize how frequently corps have "refinace" part or all of their debts....The will have NO other option but to eliminate employees(mass layoffs) and raise prices(inflationary)

The other option is default and closures.

 

[Bernardo de la Paz]

Prices have soared, spending on essentials has soared, interest rates have more than doubled. So now we have record high Credit Card balances, with rapidly increasing rates.

It was a 7.7% increase year over year which is basically a push factoring in inflation.

It's a shame income isn't rising at the same rate, but if it were it would take much longer to slow the inflation.

 

[Concrete Helmet]

Interesting data from former Fed employee and self proclaimed insider

 

[soflagator]

This should help.

Key Fed inflation measure rose 0.6% in January, more than expected
Key Fed inflation measure rose 0.6% in January, more than expected

 

[Concrete Helmet]

This should help.

Key Fed inflation measure rose 0.6% in January, more than expected
Key Fed inflation measure rose 0.6% in January, more than expected

Wouldn't it make sense that it would be up since the price of everything has gone up? People aren't buying more stuff....they're paying more for less. Some of the stuff the Fed uses to measure is simply assbackwards....

 

[FireFoley]

Wouldn't it make sense that it would be up since the price of everything has gone up? People aren't buying more stuff....they're paying more for less. Some of the stuff the Fed uses to measure is simply assbackwards....

Here is what I have noticed to make your point which I agree. The things people buy to survive are not coming down in price, from my purview. Sure fuel will be volatile but always is, regardless. The price increases I have seen of the things I buy all the time at the grocery have stuck and seem to be cemented at 30-80% higher. Restaurant prices are obscene and it makes it worse than ever b/c the food sux normally, but it sux a whole lot worse at these elevated prices. I have ceased eating out.

 

[Concrete Helmet]

Here is what I have noticed to make your point which I agree. The things people buy to survive are not coming down in price, from my purview. Sure fuel will be volatile but always is, regardless. The price increases I have seen of the things I buy all the time at the grocery have stuck and seem to be cemented at 30-80% higher. Restaurant prices are obscene and it makes it worse than ever b/c the food sux normally, but it sux a whole lot worse at these elevated prices. I have ceased eating out.

I guess the stock market is finally starting to figure out that we are one year into "tightening" and it's barely moved the needle backward on house prices or rent....as you mentioned fuel always fluctuates a little, while food prices due to shortages may subside the "cost" of rising wages on production of food and other goods will remain. I think I heard the other day that Home Depot is raising the starting rate for their employees to $17 an hour....This is going to linger until there are severe layoffs in the service sector IMO....Or at least until 2024 due to the election.

 

[FireFoley]

10 Year Treasury solidly thru 4% this AM and sniffing 4.1%. If this keeps up yours truly might start sniffing out longer on the curve and taking that risk free rate. Curious is to if Crete might be doing the same thing with all his millions?

 

[Concrete Helmet]

10 Year Treasury solidly thru 4% this AM and sniffing 4.1%. If this keeps up yours truly might start sniffing out longer on the curve and taking that risk free rate. Curious is to if Crete might be doing the same thing with all his millions?

I'm not sure where these millions you speak of are but if you would kindly tell me I'll take my happy ass to a tropical island somewhere for an extended vacation...

I have been sizing up the longer durations but in the meantime I picked up some more 6 months and 18 months just today....and yes I sold off some stocks to buy them with. I think we will see another 15-25% down cycle in stocks before June and these bond rates are just too good to pass up.