To: McNabb Brothers who wrote (2945 ) 2/22/2002 9:16:49 PM From: John Madarasz Read Replies (1) | Respond to crashed through 200 and 50 dma's...and the long term downtrend line from the highs, and all on 45% higher volume than average.The Danger Of Runaway Household Debt Or Why The Fed's Options Are Limited. ...As household debt continues to rise relative to income, one would presume that most lenders, save perhaps for Fannie Mae and Freddie Mac, would start to withdraw from the household lending markets. In the event, household spending could slow dramatically, throwing the economy into a recession. Given the already shaky financial condition of the US corporate sector, another recession in the near term would almost assuredly result in massive corporate bankruptcies - even more massive than what we have seen in the past year ... investavenue.com ...Unless the recent plunge in withholding is due to some unknown reason other than lower withholding rates, a 4% drop in year over year taxable income is quite worrisome. No current economic forecast includes a big drop in consumer income and therefore, consumer spending. While everyone is saying that the supposed pickup in January retail sales - ex autos - is significant, we don't. Indeed, after backing out autos and higher gasoline prices, retail sales did not show any gain. Then again whatever the lack of a big decline was likely due to mortgage, credit card and installment borrowing. If the withholding decline is real then retail sales data as well as consumer confidence numbers should start to show unexpected drops in the coming weeks.Consumer spending appears to be funded by debt not income. According to the Federal Reserve's H8 released on February 15, consumer loans at banks rose to $567.1 billion, seasonally adjusted, as of February 6, 2002 vs. $560.2 billion in December, That $6.9 billion five week gain translates into 14.7% annualized. What's more comparing February 6 with October, 2001 - before the consumer borrowing binge started -- bank loans to consumers still on bank balance sheets is up 11.3%. trimtabs.com
