The numbers out today were consumer installment credit numbers for March. Zeev is right in that a good part of consumption is financed by credit. Maybe you are interested in some details about these numbers.
Installment credit is composed of revolving and nonrevolving credit. Revolving credit includes credit and charge cards, nonrevolving credit largely reflects auto loans as well as closed-end loans made to pay for boats, education expenses, vacations etc.
Monthly year-over-year growth rates for consumer installment credit (sorry, lost some color in those):
That about $ 900 million increase consisted of a decline in nonrevolving credit of $ 1.5 bn and an increase of $ 2.4bn in revolving credit.
Since credit growth reflects consumer spending patterns I am following some other time series such as bank loans. These not only include consumer credit but also commercial and industrial loans as well as real estate loans. The weekly year-over-year growth rates of these bank loans are here (up to April 23rd):
I'm posting this because it nicely illustrates the main pillars of the US economy and how they are doing.
Late in April commercial and industrial loans were down about $60 bn from last year, or some 6.3% to $943bn. That was the lowest amount since the Asian Crisis in autumn 1998. The peak was around $1.1 trillion in early 2001. And these loans have declined again since stabilizing somewhat in autumn last year. It really doesn't look at all like any of the corporate investments are bound to revive as the market is anticipating right now, at least not now.
Consumer loans in that time series are only running at around $590 bn and represent bank loans of all commercial banks in the US. I wonder where the other $ 1.1 bn are coming from :) Anyhow, as with consumer installment credit here also, the growth rate has retreated lately.
Record low interest rates have caused a boom in real estate loans and that clearly is that part of the US economy right now that keeps us going. Then again, who has not yet re-financed and who has not yet built a home if he had the intention some two or three years ago? The end of the real estate boom appears just to be a question of when, not if.
I have enough anecdotal evidence to expect not very much of a rebound in corporate investment anytime soon. Now the consumer is slowing down as well according to forementioned numbers. People still get laid off.
On the other hand, the market is going through the roof because participants appear to bank on exactly that investment rebound, that is nowhere visible. I mean, not even remotely!
So, if we ever had an instance where FA and TA did not jibe, then we are living through a live example of that right now.
As some might have guessed, I am leaning a little bit to the fundamental side. -GGG- But I have come to respect TA some years ago.
What we are having here is a market, that according to some very smart TA people I follow, has just broken some major downtrend lines, we have increasing volume, tons of indicators that say that we are bound to go a lot higher. Sorry, I'm at a loss to understand this, never ever has a bull market started from such elevated valuation levels. Since fundamentals are acutally worsening by the day I simply can't believe in any sustainable large-scale market advance from these levels.
Zeev, I'd very much appreciate your take of this situation if you find the time. Thanks and TIA.
Sorry for the lenghty post, I just thought that if we'd better go with TA if it doesn't jibe with FA, we ought to have a look at both first. -G-
QQQ max pain rose to 27 but we were well above that. The Wed before expiry week is often the turn. Was that the turn today? The last two months turned down to touch pain and rocketed higher. Threepeat or a sustained move down now?
MSFT 25 CSCO 15 INTC 17.5 SPX 875 DJX 83 JPM 27.5 C 37.5 IBM 85
This is the first time since January that all three indicies, as well as all the key stocks were all above max pain at this point in front of expiry.
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