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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: CalculatedRisk who wrote (41437)9/13/2005 3:42:08 PM
From: russwinter  Read Replies (1) of 110194
 
Snippet from 9/13 Contrary Investor:
contraryinvestor.com

Let's quickly cast our eyes offshore for a moment in trying to decipher whether other potential detrimental storms lie out on the horizon, gathering strength as they approach consumer landfall. First, as you might remember, tucked inside the recent Bankruptcy bill is the fact that minimum credit card payments are set to increase in the very near future. As we understand the legislation, minimum 2% of principal balance payments are going to 4%. A doubling in the cash amount of minimum payments. Now we know that many a card holder out there pays in full each month. But there are also plenty of folks sending in minimum payment checks. As of the end of June of this year, there was $2.1 trillion dollars of outstanding consumer credit balances in this country (revolving and non-revolving credit card debt). Assuming minimum payments were being made on this debt, the increase from 2% to 4% mandated minimum payments would total an increase of $42 billion monthly. Of course this is coming right in front of the 2005 holiday shopping season. Glad tidings, right? Although this is a well known fact, we see very little attention being paid to the ramifications of this legislation on consumer spending late in '05 and continuing onto '06. Wanna bet Wal-Mart is paying full attention? You better believe they are. Of course Wal-Mart are the same folks who have been yakking about higher energy costs hurting their business at the moment.
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