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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (81555)	5/7/2007 10:21:27 PM
From: bart13	Read Replies (1) \| Respond to of 110194

Banking Index slow to rise, still one of the few not to hit new highs during this recent run for the ages .. And as Don Coxe observed recently and has for years, if it doesn't it's one of the most consistent & reliable indicators for a down market ahead.

To: John Vosilla who wrote (81555)	5/8/2007 9:23:01 AM
From: TimbaBear	Read Replies (1) \| Respond to of 110194

If tapped out consumers that have maxed out their credit cards is a major problem it should show up in charts of the likes of JP Morgan Chase, Bank America and Capital One. The "if tapped out" part is the open question. I'm not at all certain the American consumer is tapped out yet. The refinancing boom that resulted from wildly escalating housing prices probably served many folks for a while as they paid off many cards with some of the proceeds. For a while there was probably a nice feeling of being more in control by not having all those credit card payments every month and this would have led to some resistance to rebuilding the balances. However.... without consumption changes to reflect more accurately the actual real purchasing power of the household, it was only a matter of time before those cards were again broken out and used. What I am wondering is whether the new rate of credit card debt increase is any different than the previous rate. I suspect it is and the reason it is is because of the much higher average mortgage servicing demands with an income that has probably fallen in constant dollar terms. In a former life I was a mortgage loan originator and saw many cases of refinancing used to pay off all other debt. I also saw the cases in later years where the extraneous debt was at or near the previous levels. How prevalent that phenomenon is in current society is an open question. It is easy for me to point a finger and say that "they" are all spendthrift vagabonds, but I don't really have a clue as to what percentage of folks might really have their spending so out of control vis-a-vis their income or how many might have taken the refi boom as their one real chance to improve their outlook for good. As to the out of control batch.... I wonder if the 46 million Americans who don't have health insurance might provide a clue? That would be 46/300 or about 15% of the population. If this provides an approximate sampling would that imply something like 20% or more of the credit holders being on the edge (assuming those with credit are fewer than the total population)? And how many who have health insurance are still on the edge as well? More questions than answers, I'm afraid. But I think that the big banking concerns you named have a combination of outside business (M&As, derivatives, etc) that would make them more difficult to use as a barometer for consumers reaching a blowup stage as it would likely also take an event in one of those other revenue streams to hit their price charts enough to show.