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2022-11-16 08:41 by Karl Denninger
in Macro Factors , 439 references Ignore this thread
MARTS?
[Comments enabled]

This was rather unexpected...

Advance estimates of U.S. retail and food services sales for October 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $694.5 billion, up 1.3 percent (±0.5 percent) from the previous month, and 8.3 percent (±0.7 percent) above October 2021. Total sales for the August 2022 through October 2022 period were up 8.9 percent (±0.5 percent) from the same period a year ago. The August 2022 to September 2022 percent change was unrevised from virtually unchanged (±0.2 percent)*.

Uh, so much for "interest rate increases are causing a recession and thus must be stopped."

Nope.

Indeed even furniture and home decorating stores were up on a seasonal basis, and barely down on a non-adjusted (this thing called "fall" tends to reduce traffic in same, natch.)  Gasoline sales were up very materially but people are paying it.  And both non-sotre and general merchandise were up, along with groceries.

Where's the money coming from?

Credit cards, which we already knew and said debt hit records.

This is not sustainable but it also contains no signal to tell The Fed to back off.

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Greenrebellion 864 posts, incept 2009-01-03
2022-11-16 08:53:35

You have two inflationary trends in my view. A shorter cycle supply shock that is resolving and a longer cycle monetary shock from easy money / overspending my gov.

The supply shock is easing which is masking the fact that the true inflationary problem isn't easing as much as some assume it is.
Greenrebellion 864 posts, incept 2009-01-03
2022-11-16 08:58:31

The other aspect that most aren't talking about is:

Fed is pushing on a string with rate hikes. Most corporations significantly extended duration and locked in fixed rates during ZIRP. I've gone through dozens and dozens of 10-K's for largest US companies in recent weeks and it is interesting to see just how much corporations capitalized on low interest rates in recent years.

Also, home mortgages in USA are fixed rate for the most part. Fed interest rate policy is not nearly as impactful as it was in the past.

Australia on the other hand has mostly variable mortgages, so their interest rate policy hits economy much faster.

Fed has much work to do and will need to remain at elevated rate for some time.
Dwva68 21 posts, incept 2022-03-27
2022-11-16 09:36:33

Yes, GreenR, they're going to have to put people out of work to stiffen up their string! I think Powell was clear about that. Absent a collapse in inflation (which I don't expect) I don't see the Fed pivoting until the unemployment situation overwhelms the inflation situation. We're nowhere near that!
Tappedout 189 posts, incept 2020-09-21
2022-11-16 09:44:34

My wife and I feel as if we are well positioned financially, for how we want to live the last 1/3 (If lucky) of our lives. We don't really need to change anything, as far as expenses go, but we have.

That's part of the psychology of inflation. Even people that don't need to worry, cut their expenses.

We've cut back significantly on eating out. The families are not traveling for the holidays this year. Instead of gists, we are giving money toward airline tickets for future visits.

And since we are spending more time at home, we are spending a little on improvements. So the topic is not a surprise to me. Neither was the report that 49% of restaurants missed their lease payments in October.

We all know retail lives and dies by the holiday season. Anyone else been getting "Black Friday is Now" emails for the last month?

There shall be weeping and gnashing of teeth.

The good news is that maybe there will so many cries for bailouts that Americans start to question why we are paying Ukrainian "salaries"
Bradmenz 23 posts, incept 2021-12-12
2022-11-16 10:11:23

Speaking of interest rates...

Refinanced the house 1st qtr 2020 at 3.5%. Had I known the bargain of a century was just a few months away, I would have waited, oh well.

CapitalOne is paying 3% on savings accounts, no fees, no minimums, no restrictions. Their CDs are 4+%.
Maybe not pre-2008/9 levels, but a helluva lot better than the last decade or so.
Greenacr 693 posts, incept 2016-03-15
2022-11-16 10:11:29

The Consumer is addicted and is going to keep spending by whatever means ....... until they can't. Won't be long before this train goes off the rails.

Layoffs feel like they are beginning to pick up steam with the canary being Fedex laying off during Peak shipping season. Look for those to really begin to snowball come January.
Eleua 21k posts, incept 2007-07-05
2022-11-16 10:16:08

@Tappedout

Quote:
The good news is that maybe there will so many cries for bailouts that Americans start to question why we are paying Ukrainian "salaries"


Too many Americans cant name the continent they are standing on, nor able to tell you what language they speak in Idaho, or who won the civil war.

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Diversity + proximity = WAR

-They wanted camps; I want ropes.
Tickerguy 190k posts, incept 2007-06-26
2022-11-16 10:15:57

Yep.

The insidious thing with inflation is that it bends behavior.

For example I can afford to pay for the higher gasoline prices. Formerly I took the Kroger rewards "cents off" and used them, but was cavalier about it. You see they'll give you the discount on 35 gallons but my car only holds 13 if its damn near empty with the "heh asshole you're about to run out of gas!" light on.

Well........ not no more. NOW I go take two extra 5 gallon carboys with me basically every time, so instead of 13 gallons I get 23. If my truck is somewhat empty I take the two carboys plus the TRUCK, and will use their entire 35 I can buy with the discount. This in turn means I don't go to the gas station as often, of course, and it also means less of my money goes into the gas station pump.

Big difference? No. Does it change whether I can eat? No. But will I take the additional hassle of hauling the cans and dumping them into the tank a week later? You bet. Will I eventually stop doing that? Maybe if inflation is PERCEIVED to be gone and not coming back.

For me it has nothing to do with whether I can afford it, but it changed my behavior anyway.

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The difference between "kill" and "murder" is that murder, as a subset of kill, is undeserved by the deceased.
Ingar 426 posts, incept 2017-02-14
2022-11-16 10:27:49

One would think that with the dangerous escalation of credit card debt that Americans either expect some sort of financial collapse where debts won't be collected or they are going on one last spending spree before filing for bankruptcy.
Perhaps the stupid party should steal a page from Creepy Joe's campaign manual and come out with a platform for credit card debt forgiveness. Credit card debt slaves probably wildly outnumber student loan debt slaves. That's a larger voting block to tap into.
Flappingeagle 4k posts, incept 2011-04-14
2022-11-16 11:01:52

Quote:
One would think that with the dangerous escalation of credit card debt that Americans either expect some sort of financial collapse where debts won't be collected or they are going on one last spending spree before filing for bankruptcy.

The vast majority definitely does not think that far ahead. If they did, there would be almost zero credit card debt, no use of payday lenders, and so on.

Past studies have shown over and over that the bottom 50% of the country cannot lay its hands on $500 cash if there is an emergency. What we are experiencing now is simply a slow-motion emergency for the bottom 50%. We should also be afraid that it is extending up to the bottom 60% or even higher.

As for the FED, I would not be surprised to see another .75% raise in December. We might only get .50% but that could be due to their being another meeting in January with another opportunity for a raise.

Flap

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Here are my predictions for everyone to see:
S&P 500 at 320, DOW at 2200, Gold $300/oz, and Corn $2/bu.
No sign that housing, equities, or farmland are in a bubble- Yellen 11/14/13
Trying to leave
Rufust445 973 posts, incept 2007-08-11
2022-11-16 11:07:18

Eleua wrote..
Too many Americans cant name the continent they are standing on, nor able to tell you what language they speak in Idaho, or who won the civil war.
The short memories, ignorance and stupidity of the sheeple have been coin of the realm for politicians, banksters, and businesses for many decades.

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"The stock market isn't bullish, it's bull$hit." -- Alan King
Indianarube 917 posts, incept 2020-03-22
2022-11-16 11:07:24

In the 2008 debacle, credit card companies reduced credit limits on nearly all of their customers. When that begins again, the party is over.
Flappingeagle 4k posts, incept 2011-04-14
2022-11-16 11:17:46

Quote:
In the 2008 debacle, credit card companies reduced credit limits on nearly all of their customers. When that begins again, the party is over.

Ah yes, pulling the rug out from under their customers. When that happens there will be a "thud" from many people hitting financial rock bottom.

Flap

----------
Here are my predictions for everyone to see:
S&P 500 at 320, DOW at 2200, Gold $300/oz, and Corn $2/bu.
No sign that housing, equities, or farmland are in a bubble- Yellen 11/14/13
Trying to leave
Joancrawford 485 posts, incept 2013-10-14
2022-11-16 11:36:42

Eleua-Too many Americans cant name the continent they are standing on, nor able to tell you what language they speak in Idaho, or who won the civil war.

If you haven't started drinking this morning, you just might want to start.


https://www.bitchute.com/video/TGv7aPu1o....

Hint-It's not just Gen Z

Brace for impact, bitchez!

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Time may be a great healer, but it's a lousy beautician.-Dorothy Parker

Boys don't make passes at girls with fat asses.-slightly modified DP
Marquiri 64 posts, incept 2015-02-24
2022-11-16 11:36:55

@Indianarube,

Funny you bring that up. Last weekend I got an email from Capital One:

"Were writing to let you know about an upcoming account review scheduled for January 2023. Over the last several months, the highest balance on this account has been significantly lower than your credit limit. Because of this, your credit limit could be decreased following this review."

I rarely, if ever, exceed 5% of my available credit balance in any given month, but this is the first time a credit card company has advised me that they may decrease my limit.
Baltgayveteran 118 posts, incept 2021-09-16
2022-11-16 11:37:12

"Advance estimates of U.S. retail and food services sales for October 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $694.5 billion, up...8.3 percent (0.7 percent) above October 2021...."

Isn't the 8.3% mostly from inflation?
Tickerguy 190k posts, incept 2007-06-26
2022-11-16 11:37:29

Yes

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The difference between "kill" and "murder" is that murder, as a subset of kill, is undeserved by the deceased.
Kennington 351 posts, incept 2013-09-12
2022-11-16 12:00:06

"For me it has nothing to do with whether I can afford it, but it changed my behavior anyway" - I think that's true for a lot of us. Wanting to afford, ergo actually buying, and being able to afford, are two dramatically different positions.

As an aside, had to get some dog food. The bugger demands Fresh Pet which I usually purchase at Target on the way home after one of our daily 5-6 mile hikes. Bottom line, I've never seen it that busy, ever! I know Target is getting crushed today from a market perspective but the store I was in was insane. You literally thought they were giving stuff away it was that busy.

Anyway, my rescue pooch got her food. Glad I'm not long Target as a result of my antidotal evidence per my visit.
Themortgagedude 12k posts, incept 2007-12-17
2022-11-16 12:00:37

People are up against credit card limits - this will stop. But like you say I don't think this keeps Jerome from making another 50-75 bps hike

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I think its time we ask ourselves if we still know the freedoms that our founding fathers intended for us. Ronald Reagan 1964
Whitehat 11k posts, incept 2017-06-27
2022-11-16 12:01:40

@Greenrebellion -- very insightful and accurate. It is interesting to consider the variable market in a macro, overseas, and then there are going to be local effects here as towards the end of any RE bubble there are always the variable rate crowd as a last desperate measure. Compounds the problem at the end. Lots of "investor" purchases are not fixed product. heh, heh, heh. Thank you.

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smiley Je souhaite

Quod tu es, ego fui, quod ego sum, tu eris
Emdeplam 2k posts, incept 2008-01-10
2022-11-16 12:15:43

Need credit card forgiveness for equitys sake. Perfect issue going into 2024
Margbp 101 posts, incept 2021-12-02
2022-11-16 12:15:46

My daughter and her husband have oodles of disposable income but she tells me the other day their favorite potato chip has gone up $2 a bag and she's not paying that! She's started shopping at Aldi. Calls me when she's found a bargain at the store & will buy several.

On the other hand, there are family members who are buying now in anticipation of the unknown-- whether the goods/services will even be available or higher prices. However, they are spending cash on home improvements, or tools or appliances --stuff that will be around for awhile but not consumables like restaurant meals or groceries at more expensive stores or entertainment.

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It is difficult to get a man to understand something when his desires depend upon his not understanding it.
~Upton Sinclair slightly paraphrased
Moconserv 389 posts, incept 2013-02-13
2022-11-16 12:31:01

OMG @ Joancrawford..... I had to stop watching.... I knew it was bad but not that bad. Yeah - think I'll have a drink now.

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Embrace the suck.
Edward.fish 389 posts, incept 2021-12-17
2022-11-16 12:31:12

Flappingeagle wrote..
The vast majority definitely does not think that far ahead.

@Flappingeagle -- To be fair, the younger adult generations (say Millennial & GenZ) have had their knees cut out from under them again and again and again, to the point where it's really understandable when they express sentiment like: "Why bother? Nothing's going to change anyway." -- Consider the "Win" of having a family, house, and a job that pays for them and enough to take a vacation once in a while... it's essentially impossible when (e.g.) house prices increase in a year by more than your yearly salary.

Remember, also, that Millennials have been economically and career-wise kicked repeatedly: (1) 9/11 and the economic downturn, coupled with a big induction into the military which delayed or denied [i.e. death] many entries into the workforce; (2) 2008/2010, the "Great Recession" killed a lot of jobs and made it difficult to get promotions because "You're lucky to even have a job!" while the Affordable Care Act incentivized cutting the time of hourly workers and birthed the so-called "Gig Economy" thus normalizing jobs which don't support a worker; (3) 2020, wherein "Shutdowns" killed off tons of businesses and flooded the market, most notably causing the tech side of things to revert back to their "7+ years experience required; entry level!"-style unrealistic 'normal'; (4) this inflation/economic-destruction, which was kickstarted by Trump and looks to be ever-fueled by whoever is in power. -- Considering all this, and this is just the career/economic side of things, is there any reason that the younger generations should consider the future? (Ideologically, yes; but on the gut/emotional level, it is all just The Beatings Will Continue.)

I suppose on the upside, the younger generations have learned the lesson that "Things Can Always Get Worse"... but that's a shitty consolation-prize, TBH.

Flappingeagle wrote..
Indianarube wrote..
In the 2008 debacle, credit card companies reduced credit limits on nearly all of their customers. When that begins again, the party is over.

Ah yes, pulling the rug out from under their customers. When that happens there will be a "thud" from many people hitting financial rock bottom.

@Flappingeagle, @Indianarube -- That might actually be the goal: while it might be considered tinfoil, this might be The Plan. @Tickerguy did mention the rent and real-estate the other day, and taking advantage of a dire situation to enslave the people has a historical precedent: Joseph & Pharaoh.

There was a story a while back about Blackrock (IIRC) buying up all the housing it could, paying above market-value... and these "supply-chain shortages" seem to be awfully convenient to big-businesses for putting the squeeze on small business (just like the Shutdowns favored them) -- So, we absolutely could be witnessing the Grand Culmination of the non-enforcement of Title 15 of the US Code: capturing the entire market, the mega-corporations owning everything (and being owned by Blackrock), while you own nothing.

The most frustrating thing about all of this bullshit is that 98% of it could be solved by just enforcing the law.
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