Average Household Still Needs to Trim $26,172 in Debt:
$26,172: Amount of debt the average U.S. household would need to cut to bring balance sheets back to 1990s levels. Americans have made progress in paring back their debt, partly by cutting their credit-card use and mostly by walking away from mortgages and other loans. But they still have a long way to go. blogs.wsj.com
This is on-topic, because:
1. Chips are mostly used in consumer (and business) discretionary items. When consumers cut spending, they stop buying new cellphones; when companies need to cut spending, they defer replacing their PCs. You have to buy food and gasoline, but you don't really need the latest smartphone.
2. Discretionary spending can't rebound, until debt levels revert to the historical mean. Since wages aren't going up, debt reduction will mostly happen via defaults.
3. This is going to take many years. It won't be fixed, this year or next.
4. Any future growth, for chip (and chip-equip) companies, has to come from China, Brazil, and India. It won't come from the U.S., Europe, or Japan, all of whom have huge unresolved LT debt problems.
5. Those growth areas are all experiencing unacceptable inflation, and their central banks are all raising interest rates, tightening lending standards, cutting government spending, which they will continue till they have achieved the goal to killing inflation. It doesn't matter, that the Fed is still ultra-loose, because the U.S. is losing its position as the center of the world's economy.
6. Killing inflation always means killing discretionary spending.
7. Conclusion: Sell chips and chip-equips, consider shorting them, and don't buy them back till inflation is killed in China. |
