Quote of the Week
“We don’t develop courage by being happy every day. We develop it by surviving difficult times and challenging adversity.” – Barbara De Angelis
So far this year as of this writing (10:05AM Wednesday January 18), the S&P 500 is up 3.2% YTD and the Nasdaq is up 6.1% YTD but the Bear Market is not over. As I stated in last week’s letter, all Bear Markets have Bear Market rallies. What I want you to think about is the data so don’t fall prey to “recency bias”.
Let’s take a look at some of the current data.
*Probably first and absolutely the most important is the coming fight in Congress over the debt ceiling being raised.
*The Savings Rate continues to sit at a multi-decade low.
*Credit Card Balance Growth is at multi-decade highs as of the latest data.
*The interest rate on that revolving credit accelerated to multi-decade highs as of the latest data.
*Real Income growth has now been negative for a record 21 consecutive months.
*Luxury Goods Consumption is negative -7.4% Y/Y while Luxury Homes Sales in now at -38% Y/Y. Wealth destruction for the wealthy is in overdrive and there is no return on all that capital they own as the balances of the populous retrenches.
* Yesterday the New York Fed Consumer Survey showed the Share of Households Reporting a Large Purchase fell to a 2-year low while Expected Growth in Spending fell to a 20-month low.
*The latest update to the Census Household Pulse Survey showed the ” Difficulty Paying for Usual Household Expenses” series is back up to cycle highs.
*Goldman Sachs, JP Morgan, Citi Group show declining earnings with Goldman Sachs down -70% Y/Y
*U.S. corporations are in a profit recession with profits down -6.4% so far this reporting period. Keep in mind that corporate earnings drive stock prices up or down.
*Auto loan delinquencies (60 days or more) are up +25%.
*Auto loan delinquencies for sub-prime borrowers is at 7.1% which is the highest since 2006. This is during a period when unemployment is at an all time low and incudes the Great Recession of
*Consumption is cratering and it got a fresh confirmation across the goods economy this morning
with Retail Sales again printing a negative number and with steep negative revisions to the November report.
*Empire Manufacturing Survey is the worst since the Great Recession.
The above statistics are not consistent with a rising stock market and the rate of change of the above data is accelerating.