The Flexible Friend.....Some Credit Card Data

Thank god the credit crisis and the recession that never started are already over.....But i assume it´s hard even for a bull trying to explain the already sky high delinquency rate.... Nice to see that the Fed ( just a few weeks ago ) and other central banks are willing to take the securitized credit card debt as collateral. Lets hope the haircut will be big enough and the way too often toxic waste won´t be rolled over indefintely.......... This post ECB Concerned Over Swap-O-Rama Exit Strategy from Mish is showing that there are already schemes in place to "design" securities to limit the haircut & to make them available as collateral . One more reason to be bullish on gold.... Especially when you take a look at this graph Federal Reserve Balance Sheet

Gottseidank ist die Kreditkrise und die nicht eingetroffenen Rezession bereits vorbei....... Dann aber sollten die bereits jetzt astronomischen Rückstandsraten bei den Kreditkarten selbst für die Daueroptimisten aber für noch mehr Beunruhigung sorgen. Immerhin ist es gut zu wissen das zur Not die Fed ( erst seit einigen Wochen ) und andere Zentralbanken auch die verbrieften Kreditkartenforderungen als Sicherheit akzeptieren. Bleibt nur zu hoffen das die angenommenen Risikoabschläge ausreichend sein werden und das diese oft fragwürdigen Papiere nicht auf alle Ewigkeit prolongiert werden ..... Wie dieses Posting ECB Concerned Over Swap-O-Rama Exit Strategy von Mish zeigt hat es nicht lange gedauert bis die Marktteilnehmer Strategien entwickelt haben um dieses System zu Ihren Gunsten zu nutzen. Wenn man das mit einem Blick auf die grafische Darstellung der FED Bilanz kombiniert hat man leicht einen gewichtigen Grund mehr langfristig eine bullishe Meinung zum Gold zu haben....UPDATE: Das paßt wie die Faust auf Auge.....Zentralbanken können auch bankrottgehen FAZ & Sind Verbraucherkredite der nächste Krisenherd? FT Deutschland
Credit-Card Firms May Look Alluring, But Threats Loom WSJ
The quickest way to pay top dollar for something you don't need is to make an impulse buy on your credit card. Investors eyeing shares in credit-card companies as a quick way to profit from an economic recovery should also resist the temptation to buy right now.

A growing feeling that stand-alone credit-card lenders will weather the economic slowdown has started to lift shares in firms like American Express Co., Discover Financial Services and Capital One Financial Corp.

But recent credit-card data indicate that none of the big card companies -- including the large card units at banks like Bank of America Corp., Citigroup Inc. and J.P. Morgan Chase & Co. -- are in the clear. Rising defaults could weigh on earnings for longer than expected.

Since the credit crisis began, investors have expected rising charge-offs -- the term given for losses caused by defaults -- at credit-card companies. Two big negatives were identified: Job losses and, for many borrowers, a sharply reduced ability to use home-equity loans to pay off more expensive card balances.

Credit did deteriorate. Moody's Investors Service reports that, for the card lenders it tracks, the annualized charge-off rate -- which measures defaults as a percentage of loans outstanding -- rose to 6.05% in March from 4.64% a year earlier. The charge-off rate peaked at just over 7% during the 1991 and 2001 recessions, according to Moody's.

Credit-card bulls -- believing that a recession may be avoided -- think charge-offs won't go to recession highs. If so, firms like Capital One could look forward to sharply higher earnings as lower defaults would allow lenders to ease off on the expense of building their loan-loss reserves.

But two key data points indicate defaults climbing higher, not falling fast.

First, card borrowers are starting to pay back less of their outstanding balances each month. Analysts at Oppenheimer & Co. say that a sustained decline in the amount borrowers repay each month, compared with a year-earlier, can be a leading indicator that borrowers will start to fall behind on payments.

Oppenheimer calculates that, for the companies it covers, borrowers paid back 19% of their balance on average in April, down from 19.7% in the year-earlier period. American Express's borrowers paid down 23.8% of their balances in April, down from 25% a year ago, according to Oppenheimer. Conversely, Capital One borrowers paid down 18.5% of their balances last month, up from 17.6% a year earlier.

Also worrisome are data from Moody's suggesting that borrowers are finding it harder to become current on credit-card loans once they fall behind. The ratings firm notes that the amount of loans on which borrowers have skipped three or more payments has started to rise more quickly than loans that have missed one or two. Once borrowers are three payments behind, fewer of them ever catch up.

Federal Reserve data say revolving credit outstanding -- which tracks credit-card balances -- increased 6.7% in the first quarter, compared with the year-earlier period. Borrowers are taking on more debt to support spending through the slowdown.
It's a gamble for card companies to lend more to people who are turning to relatively expensive debt because they're cash strapped.

And it's a bad bet for investors to load up on the card companies taking that gamble.

Sustainable?

I must admit that i havn´t heard of this indicator before. I especially like the long time view. The chart is clearly showing that something isn´t working.... Keep this in mind when the spin masters once again point to the "stronger than ever balance sheets" and that companies are awash in cash etc......This is coming from the same guys that said the same thing about the banks balance sheets 12 month ago...... But when you believe the experts news like Capital access: US drops from global top 10 shouldn´t be worrisome.... ;-).......

This graph from the FT Germany is showing the difference from the cashflow minus capital spending, dividends & net equity emissions from non financials vs the national income....

On top of this they are pointing out that the S&P 500 is currently trading at 20.4 time 2008 estimated GAAP earnings.....So much for the "cheap market" spin that is still en vogue....

And we all know that the estimates from Wall Street Finest are still way too high.

Examples like The Great Private Equity Cash Robbery of 2007 from & Big Buybacks Begin to Haunt Firms from Jeff Matthews may explain why the balance is looking so streched......

GAAP tut ganz schön weh FTD Kapital
Tut man es frecherweise doch, schaut man bei der Recherche zunächst mal ziemlich verdutzt aus der Wäsche. Laut S&P notiert der S&P 500 nämlich sage und schreibe mit dem 20,4-Fachen des geschätzten US-GAAP-Gewinns - von 2008. Selbstredend kann man diese Zahlen nicht ernst nehmen, da die Gewinnschätzungen ja durch die - ganz bestimmt nur vorübergehenden - Kalamitäten im Finanzsektor entstellt sind.

> Hier ein Beispiel von Wall Street Finest das zudem zeigt wie abseits aller Realität selbst die Schätzungen für 08 sind.

> Zudem empfehle ich jedem The Great Private Equity Cash Robbery of 2007 & Big Buybacks Begin to Haunt Firms von Jeff Matthews zumindest eine Teilerklärung dafür zu finden warum die Bilanz des Charts so übel aussieht.

Probieren wir es also mit einem anderen herkömmlichen Bewertungsansatz: der Dividendenrendite.

Doch gemessen an Zahlungen über die vergangenen vier Quartale beträgt auch die weiterhin gerade mal zwei Prozent, wobei ironischerweise der Finanzsektor mit einer Rendite von 3,3 Prozent hervorsticht und insofern nur noch vom Telekomsektor überboten wird. Legt man die Dividendenerwartungen für 2008 zugrunde, ergibt sich für den S&P 500 eine Rendite von 2,2 Prozent. Schön, aber wenn in Europa 3,8 Prozent winken, dürfte man von Amerika doch wohl zumindest drei Prozent erwarten. Nur müsste der S&P 500 schon dafür um gut ein Fünftel fallen.

Nicht doch, werden viele nun einwenden. Immerhin kaufen die US-Firmen Aktien zurück wie wild. Doch wie etwa die Citigroup zeigt, kann man sich darauf ebenso wenig verlassen wie auf die verheißenen Dividenden. Und wie lange werden die nichtfinanziellen US-Kapitalgesellschaften in der Kreditkrise wohl noch eine Finanzierungslücke nach Investitionen, Dividenden und Netto-Aktienrückkäufen von acht Prozent des Nationaleinkommens durchstehen? Ein paar Wochen vielleicht.

> Ich muß gestehen das mir dieser Indikator bisher noch nicht untergekommen ist. Was ihn aber besonders aussagekräftig macht ist die Tatsache das er über mehrere Jahrzehnte aufzeigt das besonders in letzter Zeit etwas nicht "gesund" ist. Behaltet das im Hinterkopf wenn mal wieder die Arien auf die so starken Bilanzen und die hohen Cashbestände von "Expertenseite" hingewiesen wird......Das sind oftmals dieselben die vor 12 Monaten identisches zu den Bankenbilanzen zu sagen hatten..... Bleibt zu hoffen das bei Meldungen wie Capital access: US drops from global top 10 die Experten nicht allzuweit daneben liegen.... ;-)

UK : Egg/Citigroup Clamps Down On Riskier Credit Card Customers

Probably no coincidence that Citigroup is forced to make the move first and one of the largest US pawnbroker & payday lender is entering the market at the same time..... Once again their risk modeling wasn´t quite perferct...... How can you buy a UK credit card company close to a top in the UK housing market...... But i think it is very safe to say that others will have to follow ( not only in the UK ) Citi in this kind of tightening.....I suggest to read this Total UK personal debt statistic February 2008 from Credit Action to understand the magnitude of the mess especially in UK .

Sicher kein Zufall das ausgerechnet Citigroup den ersten Schritt machen muß und gleichzeitig das größte US Pfandleihaus & einer der größen "Kredithaie" in den UK Markt eintritt..... Es sieht so aus als wenn die mal wieder genau zum Top eine riskante Investition getätigt hätten.... In diesem Fall bin ich mir sicher das Citi mit diesem Schritt nicht lange alleine bleiben wird. Andere Anbieter ( auch länderübergreifend ) werden sich dieser Art der Kreditverknappung anschließen müssen.... Um einen Überblick über das Ausmaß gerade in UK zu bekommen empfehle ich einen Blick auf diese Übersicht Total UK personal debt statistic February 2008 von Credit Action zu werfen.

This quote sume it up / Dieses Zitat spricht Bände

"We can certainly understand the concerns, but even if people are up-to-date with repayments, they are people we decided we no longer wish to lend money to regardless of their status." Egg spokesman

Egg customer anger at credit move BBC
Angry customers of internet bank Egg have hit out at its decision to cancel their credit cards.

Egg says 161,000 cards belonging to people whose credit profiles have deteriorated since they signed up will stop working in 35 days' time.

But people who insist they have good records have been contacting the BBC to say they are on the list.

A spokesman for the bank said those affected were customers it no longer wanted to lend to "regardless of their current status".

Credit cards are being withdrawn from 7% of Egg's customers who it deems to pose an unacceptably "high risk".

This could include those who have missed repayments or exceeded their credit limit.

'Arbitrary action'
Cardholders will be able to continue making minimum monthly repayments on their balances but will not be able to spend any more after the deadline.

The move follows a "one-off" review after Egg was bought by US-based Citigroup for £575m last year.

The bank is not demanding immediate repayment of balances or making any changes to customers' terms and conditions or their interest rates. ....

Gillian Cox, of Farnham, Surrey, said she was "absolutely furious" to learn her credit card had been cancelled in what she described as an "unbelievable arbitrary action".

Mrs Cox said she and her husband are "retired, no mortgage, no debts" and "always paid the balance off in full each month".

She added that she had contacted credit reference agency Experian who said she was marked as having an excellent credit rating, "thus totally negating Egg's claim that this measure is about credit risk".

'Stop spending'
A spokesman for Egg said: "We are sorry some customers are upset after receiving notification we are ending their credit card arrangement, but they are people we do not feel it is appropriate to lend any money to."

He added: "The decision was taken after an extensive one-off review of our credit card book following acquisition by Citigroup."

Der Spiegel London - Die Internetbank Egg greift durch. Die britische Citigroup -Tochter will rund sieben Prozent ihrer zwei Millionen Kunden die Kreditkarte sperren. Offenbar haben es Egg und Mutterkonzern Citi mit der Angst zu tun bekommen - sie fürchten, die Risikokunden könnten sich übernehmen und ihre Darlehen nicht zurückzahlen können. Offiziell heißt es: Das Kreditrisiko der "riskanten" Kunden sei zu hoch.

Egg teilte zwar mit, der Schritt habe nichts mit der weltweiten Kreditkrise zu tun. Es handele sich bloß um eine "Neubewertung der Risiken", nachdem Egg im vergangenen Jahr von der Citigroup gekauft worden war. Die Maßnahme zeigt aber, dass Banken weltweit konservativer bei der Darlehensvergabe werden und hart gegen Risikokunden durchgreifen.

Die Egg-Mutter Citi hatte sich bei riskanten Kreditgeschäften so sehr verhoben, dass an den Finanzmärkten sogar zeitweise Insolvenzgerüchte zirkulierten. Citi hat im Zuge der Kreditkrise mehr als 18 Milliarden Dollar abschreiben müssen und damit einen Verlust im vierten Quartal von rund zehn Milliarden Dollar verbucht. Mit der Wahrheit über das Ausmaß der Krise rückte Citi nur scheibchenweise heraus. Egg will die Karten innerhalb von 35 Tagen sperren, die Kunden wurden bereits angeschrieben.

Trendspotting - Credit / Daily Show

Demetri Martin dispenses tips on credit card usage - and accumulating massive debt

Ohne Humor ist der Umgang in den USA mit Kreditkarten nur schwerlich zu ertragen :-)

Maxed Out

Have a nice weekend

Allen ein schönes Wochenende

Credit Cards & Junk Default Rates

Pimco is out with a new report A Hard Day’s Knight: The Global Financial Market Confronts Uncertainty, Not Just Risk (and the Difference is Important) I have taken the two charts out of context to point to two post i have done in the past few days.

Pimco hat einen neuen Report herausgebracht. Ich habe hier mal 2 Charts aus dem Post zum Anlaß genommen um meine Posts aus den letzten Tagen zu ergänzen. A Hard Day’s Knight: The Global Financial Market Confronts Uncertainty, Not Just Risk (and the Difference is Important)

Topic One "Credit Cards"

I think it is safe to say that the credit card spread will "adjust" sooner than later.......

Ich denke man braucht kein Hellseher zu sein um vorherzusagen das der Spread für die Kreditkarten sich demnächst wohl "anpassen" wird....

Topic Two "Junk-Grade Defaults"

Keep in mind that over 50% of US bonds issuance was junk in 2007. Compare this table with the precitction for defaults from Moody´s .....

Behaltet bei Betrachtung dieser Tabelle im Hinterkopf das im Jahr 2007 über 50% aller US Anleihen die begeben worden sind in die Kategorie "Junk" fallen. Vegleicht die Tabelle mit der Prognose der Ausfälle von Moody´s .....

Bank Data Reveals Stretched System / Minyanville

I´m pretty sure that the endgame will hit the "experts" with surprise and will shock the markets in the future at least for one week until the Fed steps in....... ;-)

Nach meinen Erfahrungen dürfte das Ende vom Lied mal wieder alle "Experten" überraschen und die Märkte in ferner Zukunft für maximal eine Woche in einen Schockzustand versetzen bis die Fed zur Rettung eilt....... ;-)

" Well, I´d better go now. I´m almost at the wall..."

Thanks to The New Yorker

Minyan Peter / Bank Data Reveals Stretched System
On Friday, several pieces of key bank data were reported by the Federal Reserve:

First, for August, non-mortgage consumer debt rose at an annual rate of 5.9%, up from 4.7% in July. The bulk of the increase came from revolving debt, principally credit cards, which rose at 8.1% versus 7.5% in July.

To frame the revolving credit figure, here is some historical data:

Year	Annual Growth Rate
2003	2.3%
2004	3.8%
2005	3.1%
2006	6.3%
June 2007	7.1%
July 2007	7.5%
August 2007	8.1%

That credit card debt growth is accelerating at a time when retail sales growth is slowing suggests that more consumers are turning to their cards to finance their basic monthly cash flow. As I have said previously, it appears that the credit card banks have become the consumer lender of last resort. How long this can continue, particularly with the slowdown in personal income growth, (from 0.9% monthly income growth in January to 0.3% in August) remains to be seen.

Second, the weekly report on system-wide bank balance sheets showed a surprising $100 bln increase in bank assets for the week following the Fed Funds rate cut. I, and others, had expected to see a decline in bank balance sheet assets, figuring that the rate cut would have paved the way for banks to move some more liquid loans or securities off their balance sheets and into the secondary market. That this did not happen suggests that either corporate borrowers are hoarding liquidity by drawing down credit lines or the secondary markets have not fully responded to the rate decline. At the same time, system-wide net assets (a proxy for capital) showed a $15 bln decline for the week.

For the record, since May, when it peaked, net assets (again, a proxy for capital) for large U.S. banks has dropped by $55 bln - or 7% (from $740 bln to $685 bln), while over the same period, total assets for large banks has grown by $228 bln - or 4% (from $5.607 trln to $5.835 trln). Furthermore, substantially all of this growth was funded through non-deposit debt sources.

To return large bank capital ratios to their peak May levels would require either an $85 bln increase to capital or a $640 bln reduction in assets.

While the “all clear” whistle may have blown for the stock market, the growth in system-wide bank balance sheets, particularly credit card balances, coupled with a meaningful decline in large bank capital levels indicates to me that our banking system is being stretched.

Earnings Quality And Credit Cards

Minyanville Peter has done a great job of digging into numbers at Target. It looks like credit card lenders have in essence become the consumer lenders of last resort and on top of this Target (and others) are getting creative ( I assume this is nothing new) in putting aside lower loss provisions to make their latest number. But why should they act in a different way than lots of banks.....? This move in the face of the coming recession is very shortsighted and underpins my view that the earnings quality ( not only in the US) is often "subprime". This doesn´t make the market more attractive......

Minyanville Peter hat Ihr wirklich einen tollen Job gemacht und hat sich stellvertretend für etliche Firmen die genauen Daten des Target ( nach Wal Mart die Nummer 2 in den USA) Ergebnisses angesehen. Und die zeigen zwei wenig erbauliche Trands. Zuerst bleibt festzuhalten das die Kreditkarte nach Wegfall der Immobilienrefinanzierung und anderer Kreditmöglichkeiten mehr denn je der letzte Strohhalm für den bis über beide Ohren in Schwierigkeiten US Konsumenten ist. Zum anderen wird einmal mehr deutlich wie "kreativ" (sicher nichts neues) die Firmen werden müssen um Ihre letzten Quartalszahlen zu "treffen". Immerhin haben die ja in etlichen Banken erstklassige Vorbilder (bloß das es dort um Mrd geht....). Und das ganze im Angesicht der kommenden Rezession. Sieht für mich doch extrem kurzsichtig, fahrlässig und auch offensichtlich aus. Das Pendel wird dafür in den kommenden Jahren umso stärker zurückschlagen. Einmal mehr ein Beleg für meine These das die Gewinnqualität (nicht nur in den USA) oftmals "subprime" ist. Das macht die schon jetzt nicht billigen Märkte nicht gerade attraktiver......

Minyan Mailbag: A Bird's-Eye View of the Credit Conundrum
Finally, no one is talking about it yet, but I think the market will soon begin to realize that the credit card lenders have in essence become the consumer lenders of last resort.

As consumers have been shut out of the mortgage and home equity world, the last available credit is plastic. One statistic that I have found very troubling is the degree to which credit card balance growth is running ahead of retail sales growth - a key sign that the consumer is stretched.

In normal times, you would expect aggregate credit card balance growth to run about in line with GDP and retail sales growth. This year it is running almost 2.5 times that. Clearly consumers are using their cards for far more than purchases. And my guess is that for many Americans their credit cards have become the latest, but potentially last, source of financing available.
Because of the oversized credit card balance growth, however, I think the market is missing what is really happening within card issuer portfolios – particularly loss and delinquency data. Today, no one seems to be very concerned about the increases in reported losses and delinquencies. However, when you start to normalize these statistics for the enormous balance growth we’ve seen, the increases in both are quite dramatic.
To put this all together, take Target’s (TGT) latest financial results and you can see the numbers for real. First, credit card balance growth was up 14% year-on-year - almost 1.5 times Target sales growth of 9.5%. Second, thanks to this balance growth, reported year-on-year delinquency ratios are up only a little bit (60+ days delinquencies of 3.5% versus 3.4% a year ago), but the dollars of delinquent accounts are up almost 18% - to $242 mln from $205 mln – and, as an aside, “late fees and other revenue” are up more than 36% year-on-year.

Digging even deeper, you come away with more unanswered questions. First, annualized net write-offs for the quarter were up 17% - 5.4% of loans versus 4.6% during the year ago quarter. But behind that, masked by 14% balance growth, there is a 32% increase in the dollars charged off.

Further, and to me more troubling, Target dropped its loan loss allowance from 8.3% of loans at the end of July 2006 ($501 mln) to 7.4% at the end of July 2007 ($509 mln). Had Target kept its provision at 8.3% of loans, the incremental cost would have been over $64 mln or almost 40% of the pre-tax quarterly earnings of Target’s credit card business.

Alternatively, had Target kept its provision at the same 1.8 times net charge-offs as last year (an 8.3% allowance on 4.6% in net write-offs), the required ending provision would have been over 9.7% of loans - at an incremental cost to the company of almost $144 mln – all but eliminating earnings from the credit card operation for the quarter. Put simply, when measured in dollars (rather than percentages of balances) Target’s nearly flat year-on-year loan loss allowance does not synch with the increase in loan balances, delinquencies, charge-offs, and late fees.

ANGST Backed Securities / Economist

Here we go...... I don´t know how the the Economist got to this number( see new link Asia Times further down). But if this is true it is clearly a form of a bailout......And this would explain in some part why the window is tapped from Citi, JPM & Co.... If this is true I think we will see much more during the next days especially from weaker players......At least they are now channeling the liquidity where it is needed....

Es geht los......Ich habe keine Ahnung wie der the Economist zu dieser Annahme kommt ( siehe neuer Link von der Asia Times weiter unten). Sollte sich das als wahr herausstellen erfüllt das für mich den Tatbestand eines "Bailouts". . Das würde auch zum Teil erklären warum Citi, JPM & Co.... dieses Fenster so intensiv genutzt haben. Sollte das den Tatsachen entsprechen gehe ich jede Wette ein das wir hier in den nächsten Tagen besonders von den schwächeren Marktteilnehmern haufenweise Transaktionen sehen werden..... Immerhin sollte so die Liquidität zielgerichtet erhöht werden....

The Fed has been offering 85% of face value for AAA-rated paper presented at its discount window, even collateralised-debt obligations stuffed with subprime mortgages (as long as they are not—yet—impaired).

Thanks to Solvent Celt !

Hat tip to Professor Bear for provinding this link

Central bank impotence and market liquidity/ Asia Times

‘Chairman Bernanke has now summoned his own clean-up team into action. The Fed hopes that by assuring banks that they can now access cash on less punitive terms from the Fed discount window, collateralized by the full “marked to model” face value of mortgage-backed securities, rather than the true
distressed value as “marked to market”, for which they could find no buyers at any price in recent weeks as the market for such securities has seized up, it can jumpstart market seizure for mortgage-backed commercial paper and securities.’

Here is a another view from iTulip

Bernanke: Talks the Dove, Acts the Hawk / iTulip

Paper losses / Economist

Central banks struggle to restore calm without breeding complacency

....Some commercial paper is easy to understand: a big company sells an IOU, which it repays in, say, 90 days. This stuff got the American financial system into trouble in 1970, when Penn Central Railroad defaulted on $82m-worth. The recent problems stem from a different brand of paper, backed not by the good name of a big company, but by assets, such as mortgages or credit-card receivables. Mostly held off-balance-sheet by bank-sponsored “conduits”, this market has boomed in recent years. It now accounts for roughly half of the more than $2 trillion of commercial paper outstanding. But issuers have been caught out by a cashflow mismatch, says Louise Purtle of CreditSights, a research firm. Funding is short term but the proceeds are invested in longer-term assets, leaving issuers vulnerable when investors start to doubt the quality of those assets and want out.

That is what happened at the start of this week as money-market funds sold these IOUs, causing rates to spike as never before (see chart). This paper suffered from two main layers of mistrust. First investors are worried that the banks won't always be able to support the conduits.
The second worry, about the mortgage collateral, is particularly stark. Rating agencies badly misjudged default rates in subprime mortgages and are now having to downgrade reams of securities linked to them. With the credibility of ratings in tatters (there have even been calls for Warren Buffett to take over Moody's), investors have been left without a compass. For the time being, many would rather pull back than trust in their own analysis of credit risk. They are staying on the sidelines because they can't work out what securities are worth, not because they don't have the money to buy them.

Ratings may be in doubt, but they remain powerful. The Fed has been offering 85% of face value for AAA-rated paper presented at its discount window, even collateralised-debt obligations stuffed with subprime mortgages (as long as they are not—yet—impaired). Josh Rosner, a critic of the rating agencies, thinks it extraordinary that, despite their obvious flaws, they “continue essentially to regulate the behaviour of even the central bank”.

Home truths
Even if stability returns to markets, the repricing of risk is likely to continue. How far it goes will depend largely on the state of the mortgages that serve as collateral for many of the newfangled instruments that were, until recently, hawked with glee on Wall Street. The outlook is not good. Not only do subprime delinquencies continue to rise, but defaults on prime and Alt-A loans (those to good- or middling-quality borrowers) have started to climb too. Figures released this week showed foreclosures in July up by 9% compared with June, and by 93% over the year before. ....

A jam in the flow of credit to homebuyers threatens an already vulnerable economy. If consumers seek to pay down debt in response to falling house prices, spending will suffer, especially with unemployment creeping up. ...

got gold..... ?

Credit Crunch Moves Beyond Mortgages / WSJ

The WSJ has a very good (free) story about the tightening credit conditions for consumers. Please click on the headline to read the entire story

Das WSJ hat eine sehr gute Geschichte wie sich die Kreditbedingungen abseits der Hypothekenmärkte für den US Konsumenten spürbar verschlechtert haben. Klickt bitte auf die Überschrift um die Details zu erfahren.


Thanks to Solvent Celt

Individuals See Higher Rates,Harsher Terms on Credit CardsAnd Other Consumer Loans

.....because more consumers -- increasingly locked out of home-equity loans and lines of credit -- are using their credit cards more. This month, for example, the Federal Reserve said consumer credit rose at an annual rate of 6.5% in June to a record $2.459 trillion, the second straight sizable gain. The increase was led by an 8.4% rate of increase for revolving credit, the category that includes credit-card debt.

Doug Eddings, a 35-year-old small-business owner in Portland, Ore., says three of his credit-card issuers all took steps in recent weeks to tighten his credit, either by raising his interest rate, halving his available credit or freezing his accounts.

First, he received a notice from Chase in June, notifying him that it was going to raise the interest rate on his Chase Amazon card to 29% from 17%. Soon after, another lender, HSBC Holdings PLC's HSBC North America, dropped his $5,000 credit line on his Best Buy store card to $2,105 -- just $5 above his current balance. ....

> On top of this i think this Interview from iTulip with James Scurlock, Creator of "Maxed Out" is worth listening

> Um das Bild abzurunden bietet sich zusätzlich der folgende Link an Interview from iTulip with James Scurlock, Creator of "Maxed Out"

Couple Learn the High Price of Easy Credit / NYT

debt everywhere..... this example illustrates what many families are experiencing. and with a recession under way..........

schulden so weit das auge...ich denke diese familie steht stellvertretend für viele in den usa. und das alles im auge einer kommenden rezession.......

this sums it up :-)

Snl_dontbuystuff
Hochgeladen von shosterman

here another debt statistic / hier noch ne schuldenstatistik

In 1980 it took $1 of new debt to create $1 of GDP (debt levels were much lower and capital usage was much tighter so new credit found its way into production), whereas today it takes $7 to $8 of new debt to create $1 of GDP.

YPSILANTI, Mich. — On a recent evening, Christine Moellering, 40, sorted through the plastic laundry basket where she keeps the family bills, statements and coupons.

“The Sears one is 32.24 percent,” Ms. Moellering said, reading a credit card statement with a balance of $5,955, including $155 in monthly finance charges. The high interest rate took her by surprise. “That’s nice,” she said sarcastically.

Ms. Moellering, and her husband, Mark, 39, earn average salaries for their age (together about $66,000 a year), live in an average-priced home and have an average cost of living. But like many other households these days, they have found that their day-to-day economic life has come to depend not just on how much they earn or spend, but also on how well they shuffle what they owe among a broad array of credit cards, home equity loans and other lines of credit.
Americans spent one in seven of their take-home dollars on debt payments last year, up from one in nine in 1980.


thanks to http://www.itulip.com/

>that is despite low fed funds rates interest rates compared to the double digits in 1980.....

>und das obwohl die zinssätze der fed deutlich unter den zweistelligen aus dem jahre 1980 liegen.....

Behind closed doors, the decisions families like the Moellerings make about their debt — when to pay it off, when to shuffle it to lower-interest sources and when to let it revolve and build — can determine how much their salaries are worth....

Their credit card debt came to $22,228, including $380 in monthly finance charges. Interest varied from 12.1 percent to 32.24 percent. The Moellerings also have a mortgage of $93,000 and a home equity loan balance of $68,574, at 8 percent interest. ......

Just a generation ago, financial profiles like the Moellerings’ would have been unusual. But changes in federal regulations since the 1980s, along with consolidation in the banking industry and changed consumer attitudes toward borrowing and saving, have made credit more widespread, more heavily marketed and more confusing, with offers of more credit — at low rates — extending to even the least reliable risk. In 2006, the industry mailed out nearly 8 billion credit card offers, up from 3.5 billion in 2000.

Credit card debt, less than $8 billion in 1968 (in current dollars), now exceeds $880 billion, more than tripling since 1988, adjusting for inflation, according to the Federal Reserve Bank. Penalty fees alone cost consumers $17.1 billion in 2006 — up from $12.8 billion in 2003, adjusted for inflation, according to R. K. Hammer, a bank card advisory firm. In part because of the debt burden, the consumer savings rate fell below zero percent in 2005 and has stayed there.

..... Mr. McBride said, as home values have increased and interest rates have dropped, home equity loans have enabled families to carry more debt — to buy more things — at lower cost.......

thanks to http://calculatedrisk.blogspot.com/

For the Moellerings, juggling balances and interest rates has enabled them to pay for things they could not otherwise afford, like their 2004 wedding and house renovation, or to eat out occasionally, when “we’ve both had a bad day at work,” Mr. Moellering said. He earns $36,000 a year as a software applications designer.

As foster parents of two children they also receive about $1,200 a month in reimbursement from the State Department of Human Services, which goes toward “food, general living and ballet lessons,” Ms. Moellering said.

When the Moellerings pay a bill late or exceed their credit limit, interest rates have shot up, increasing the monthly cost of transactions and heaping penalty fees on top.

The bills in Ms. Moellering’s basket described an uneven track record of managing balances and interest rates.


On March 27, Mr. Moellering used a debit card rather than a credit card to make nine purchases, ranging from $5.38 to $48, hoping to avoid finance charges. But he miscalculated their checking account balance. Each purchase incurred an overdraft charge of $32, or a total of $288 in penalties, more than the $221.82 cost of the purchases. (After some pleading, the bank, National City, forgave four of the charges, leaving the Moellerings with $160 in penalties, plus interest on both the fees and the principal.)

When the couple met through Yahoo personal ads in 2003, they did not discuss debt. She wrote that she liked snow; he said he looked like Babe Ruth. She had about $6,000 in credit card debt at the time, mostly from paying for books and living expenses after a return to college. She used credit cards rather than applying for lower-interest student loans. “I never tried to get student loans,” Ms. Moellering said. “I was working full time and taking care of my sick mom and trying to go to school, so I never had time, so I just ad hoc’d.”

Their debt escalated when they decided to get married. They paid for rings, a reception, a honeymoon and a new bathroom — about $50,000 in a seven-month stretch.

“In such a short period of time, there’s no way to do it other than credit card debt,” Mr. Moellering said.

He paid for some of the expenses through a home equity loan, and paid contractors with promotional checks that came with low interest for the first year. When money gets low, the Moellerings skip paying credit card companies rather than miss a mortgage payment.

“And if the cat gets sick or something, then suddenly we’re trying to figure out, what kind of card can we use to pay this $500 vet bill,” he said.

In the last two years they have managed to cut their credit card debt by $20,000, Ms. Moellering said, and have built a savings of about $5,000, thanks to a Christmas gift from a relative. Ms. Moellering contributes to her retirement account at work. Both say they could manage better if they only had the time.

CompuCredit’s Charge-offs Jump 81% in First Quarter

more proof that things are worsening.....

ein beispiel mehr dafür das die dinge sich in den usa nicht gerade bessern.....

hat tip to Regis!

CompuCredit’s Charge-offs Jump 81% in First Quarter

Net charge-offs for credit card issuer CompuCredit Corp. – which specializes in issuing cards to consumers at the lower end of the FICO scoring range – totaled $86.1 million in the three months ended March 31, and the net charge-off ratio was 13.4%.

>shocking to see the stock down over 9% on bad news.....

>merkwürdig ne aktie nach schlechten news auch mal 9% einbrechen zu sehen.....

First-quarter 2006 net charge-offs for the Atlanta-based company were 81% lower at $47.6 million and the net charge-off ratio was 8.1%.

First-quarter 2007 delinquencies in the 30+ day bucket totaled $454.1 million, up 33.6% from $340 million a year earlier. Delinquencies in the 60+ day bucket reached $350 million, rising 36.8% from $255.9 million during the same quarter of 2006.

CompuCredit on Tuesday reported a first-quarter managed net loss of $9.5 million, compared with $54.8 million of managed earnings in the first quarter of 2006. Total interest income was $86.1 million in the March quarter, up 49.7% from $57.6 million in the year-ago quarter.


“Factors adversely affecting our results included lower-than-expected fee assessments due to lower-than-expected delinquencies, the timing and extent of our marketing efforts, and the final transitional effects of discontinuing billing finance charges and fees on credit card accounts that become over 90 days delinquent,” Chairman and CEO David G. Hanna explained.

>read the bold part above twice! to bad that he isn´t mentioning the massiv write-downs..... the nar should hire the guy.....

>lest den fett gedruckten part oben bitte zweimal !? dreist hier nicht die massiven abschreibungen zu nennen.....

In spite of the “unexpected loss,” Hanna is confident of strong results for the remainder of the year, he told analysts during the company’s conference call late Tuesday. “We remain happy with the fundamentals and underlying credit quality of our business,” he added.

>pure comedy....

Give the Consumer Credit / Minyanville

the first signs that the morthahe equity withdraw is slowing...... click on the headline to read the other 4 things you need to know

klar die ersten anzeichen das die geldqulle der zusätzlichen beleihung der immobilien dem ende entgegen geht.....bitte auf die überschrift klicken um den rest von minyanville zu lesen

Give the Consumer Credit
You have to give the consumer some credit. No, seriously, you have to. Because that's apparently how they're paying their bills.

Consumer borrowing increased in March by the most in four months according to the Federal Reserve's Consumer Credit figures.

Consumer credit (non-mortgage loans) to individuals increased $13.5 billion, or 6.7% at an annual rate, to $2.425 trillion, the Fed said.

Economists were expecting a more modest increase of $4 billion.

Use of revolving credit, primarily credit cards, rose at a 9.2% pace in March.That was up from a 2.9% growth rate in February and was the biggest increase since November.
Perversely, this is good news for the economy because it shows consumers are willing to do whatever it takes to keep on paying their bills and buying stuff, even if it means turning to higher interest credit cards.

According to the Associated Press, consumer borrowing is a sign of "resilience."
"Consumers boosted their borrowing in March at the fastest pace in four months, showing resilience in the face of rising energy prices and a painful housing slump," the Associated Press reported.

While using the term "resilience" to describe a jump in consumer borrowing largely made up of credit card debt itself violates most tenets of logic, that was only the beginning.

"Consumer spending is indispensable to a healthy economy," the AP rightly said.

Then the article followed the "consumer showing resilience by borrowing at the fastest pace in four months" observation with this: "The economy grew at an anemic 1.3 percent pace in the January-to-March quarter, the weakest in four years."

So consumers "showed resilience" by borrowing at the fastest pace in four months... while the economy grew at its slowest pace in four years?

Huh?
We don't think this is resilience at all. It's desperation