‘Going Bust In Record Numbers’
A trio of reports from outside the US. “Struggling Britons, who are weighed down by loans and credit card debt, are going bust in record numbers. HSBC today revealed that it has been forced to write-off £2 billion in the first half of this year, much of it loaned to British customers.”
“While the bank said it has deliberately reduced its share of the unsecured lending market, loans and credit cards, as a result. However, the decision looks like closing the stable door after the horse has bolted. There is a raft of evidence that high street banks have been guilty of reckless lending over the past 4-5 years.”
From Australia. “The number of Victorians being sent to the wall by their mortgages has jumped dramatically, with home-loan defaults up a massive 50 per cent this year. Most of the claims, upwards of 95 per cent, relate to private home owners defaulting on mortgage repayments.”
“Ian Mackintosh said another rate rise would push many people into financial crisis. ‘A lot of people have next to no disposable income once their mortgage and other repayments are met, they simply have no room to move,’ he said.”
“(Credit counselor) Carolyn Bond, said: ‘We see a lot of people who are right on the edge, and it’s not going to take much to tip them over. But if an interest rise is going to worry you, or is going to cause you to default, it’s a message you are already in trouble.’”
The Australian. “Perth house prices have soared 10.1 per cent in the past three months. BankWest rejected suggestions that Perth was experiencing a housing bubble. David Willis, CEO of BankWest’s owner, said he was ‘reassured by the substance’ of the state’s growth.”
“Perth couple Brian and Eileen Bowden are among thousands reaping the benefits of the state’s robust economy as they prepare to extract a $100,000 profit on their home in just six weeks. ‘The people who we bought this house from made $100,000 off us, so it’s a non-stop cycle,’ Mr Bowden said.”
“BIS Shrapnel building services director Robert Mellor said the Perth market was in danger of overheating. ‘If we see another 10 per cent or 15 per cent growth in the next six months, I would be running very fast from the Perth market,’ Mr Mellor said.”
Anyone else notice a drastic rise in folks paying for groceries with credit cards? Friends that are in the biz are saying this summer has been like no other as far as that is concerned.
Who still believes we aren’t in trouble here?
I see a drastic decrease in the number of folks shopping for groceries at Trader Joe’s. I assume this has something to do with HELOCked homeowners who have no spare cash to pay yuppie premiums on their groceries…
Now that youi mention it, yes. TJs seems a little different with the fancy cheeses not moving and sich. The milk and beer and “Chuck” still fly off the shelves however. Since I have 3 girls I have to buy my milk there anyway so my very frequent observations confirm what you see.
Whole Foods Market stock price tanked today… Down nearly 12%.
I don’t see any rescue from the PPT for this “liberals infested” company anytime soon.
Our nearly-new Safeway “upgraded” their look with hardwood floors and all. And their prices have gone up. (Another funny thing is we have three Starbucks within a 1-mile radius out here in the exurbs). I like TJ’s for a few specialty items. I am quite pleased with their coffee as you mentioned Getstucco. I also thought of your recent advice when I shorted SBUX at the open today.
Places like the Safeway I mentioned seem to be upgrading at the wrong time — likely folks will be more interested in discounted food. I’ve only watched Cramer once, a few weeks ago. He was asked what products would do well in a recession, and he said generic breakfast cereals.
I was just at Trader Joes. It was empty for 5:30, but it is a Tuesday. I will try on Thursday and see if it is the same.
thank god! i thought i was the only person in the world who hated tjs! my wife is an ubersocialist. she loves shopping at tjs. everytime she comes back i remark that food tastes better when employees don’t get benefits; but hey they get to wear hawaiian shirts! btw i agree their coffee is a good value. just don’t drink the kind in the black can with the toucan on it - it’ll give you the shakes for a week.
hello from germany,
the owner of trader joes is one af the albrecht brothers. they own one of the most successfull discounters araound then world named aldi. they are together the 4th or 5th wealthiest people on earth.
jmf
I have noticed this…the other day a woman in front of me had to use three different cards to find the one that she wasn’t over drawn on…I was dumfounded, but oddly happy at the same time…I know that is sick.
Schadenfreude is an embarassing emotion…
Schadenfreude is an embarassing emotion…
Not if you are doing it right. >:)
Remember Dr. EviL: http://exurbannation.blogspot.com/2006/07/attention-fbs.html
Robert Cote,
You *must* put a keyboard safety warning on those posts! I have diet coke on my keyboard now. That was too funny
Schadenfreude… can be such an enjoyable emotion. By the time one gets the Dr. Evil pinkie motion down, the embarasment is long gone. Bwaaaa haaa haa haa!
Neil
Thanks Neil, just trying to give back a little. Sadly no one has laughed at my divorce joke: “Did you hear about the guy who got royally screwed in a divorce? Yeah, his wife got nothing and he got the house.” [rimshot] Thank you, thank you I’ll be here through the recession. Try the Top Ramen and soup made from ketchup. And don’t forget, your waiters are all former Realtors® so be sure to only tip them 6%.
I was out in Kirkland, suburb of Seattle last Friday night. The place is usually packed and you have to wait to get a seat at a decent restaurant. Last Friday, we walked right in, had a decent meal, had some dessert at the cormer store and found parking with no problem…it is happening all over folks, the indefatigable US consumer has hit the wall.
I always buy my groceries with a credit card. I buy every thing I can with a card. I get mileage, and I can track my expenses easier. Are you people really watching me and making some kind of market judgement because I benefit from using the card? Weird.
No, I card almost everything as well. In fact yesterday morning I actually had to check the limit on the one I wanted to use. 2% back, Disneybucks doubled, 20 days free use of the money, double warranty what’s not to like? I was at the Contractors Discount Warehouse. What did I buy? Windows, doors, cabinets and oh yes… granite countertops! Honest. Credit cards are great financial management tools but when you don’t know the limits on 2 of your cards before you go shopping then that person is not managing their money.
I have no problem with that. My wife and I use an Amex for most everything we can for the miles, and pay it off every month. But I’ve been in the position to look at peoples credit for over 10 years now, and let me tell you that folks like us represent less than 10% of people using this two-edged sword called revolving credit. Trust me when I say that if you see someone using a credit card, chances are great he/she are using it irresponsibly.
I buy everything I can with my cc for the miles, and don’t think anything of it–also pay it to $0 every month.
I do see how people get in trouble. The amount of credit extended to people who don’t understand how much that credit costs is staggering.
WW III has started.
My ‘ole man was a WW II combat vet with Patton’s 3rd Army at the Battle of the Bulge, and I’ve studied the conflict all of my life.
Only the knowledge of how bad it all got, keeps me sane in this incredibly f*cked up times.
But we’re in for another now.
American’s will rue their ignorance of history.
Just wait until the food and gaz rationing start for the bazillion of spoiled rotten people in this country.
You forgot one very important point. Even if that did happen, those with cash will still live well. If you have been responsible and saved economic hard times are great for you. A lot of people lived very well during the depression. They were the ones that still had big bank accounts when 1930 rolled around.
Rationing always creates a black market. Responsibility is a great policy in good times and bad. Frivolity always ends in disaster. Just ask some of the bagholders in Florida, Vegas, D.C., California, soon Long Island, etc.
Good night!
HD74MAN Well said!
I would love to quote you: “American’s will rue their ignorance of history.” This is so sadly true! The current housing issue is the least this gem is about!
John, believe me. It’s not just an American problem. Do you think that it’s different in Europe? It is not. It’s global. Try Paris or London to see how everything is crazy, wacky and out of control. Europeans have no excuse. They know history, but these morons want soo much to be American.
Rationing? What on earth for? Was there rationing during the Great Depression? There were plenty of goods but people had no money to buy them with. Production was even destroyed to try to prop up prices.
Rationing is required in times where government consumption has increased and price controls have resulted in excess demand. Like WWII.
We are headed for a severe recession if not depression, with asset fire sales galore.
I’ve paid for groceries with a credit card since I graduated and have saved almost as long (I pay my card off each month). Last winter all those groceries flew me down to San Juan for president’s day weekend. Most card rewards give extra incentives for using your credit card at the grocery store or at gas stations. Why turn down a freebie that’s cost will be spread to all the folks who pay cash and write checks, too?
UK reported rising Re prices in may-june
go figure
I have this link, titled ‘ Hamish McRae: How a US house price correction could come home to roost on this side of the Atlantic’ saved, but apparently it is now subscription only.
‘It is the little signs that give you an early warning that something important may be happening. In this case it is the matter of US house prices, for, as here in the UK and in some other markets, it has been a housing boom that has helped support consumption growth. Now, it seems, the boom is over.’
British poodles.
I have always thought the UK and Australia to be ahead of US in the RE cycle. So I look at them for clues to figure out what might happen here. So far the crash seems very slow there. Things have much more rapidly going downhill here.
But if UK and Australia can prolong the inevitable, reduce rates to bail out the debt stressed, why can’t US attempt to do the same ? The US FED, IMO, will definitely reduce rates, and try to engineer a soft landing. Greenspan may be gone, “Greenspan Put” may linger around much longer. It may backfire, but that doesn’t mean they won’t try.
Australia has not reduced interest rates since the bubble peaked in 2003. What happened is that the resources boom occurred and this is the primary driver of property prices in Perth which is the capital of the resource-rish state of Western Australia. The last 4 interest rate moves in Australia have all been up and today a 5th increase is expected to be announced.
CAN and AU real estate markets will get really toasted when the primary commodities bubble ends…
Absolutely. Keep away from Canada. We are on the hit list of Al Quaida. Thanks George W. and Stephen Harper.
Bernanke does not talk much about bailing out the asset markets. He seems more preoccupied with the notion of inflation targeting. But I admit it is too early to say which course he will take, which I guess explains why Wall Street still largely resembles a bastion of punch-drunk sailors…
Yes, the talk is about inflation fighting. Now let’s see if he walks the walk. My bet is he won’t. Very soon, there will be talk about “reviving the economy” or “preventing a recession” or such, and rate cuts.
Yes, Australia has not reduced rates. But isn’t there tremendous political pressure on the Reserve bank to stop the hikes ?
“But if UK and Australia can prolong the inevitable, reduce rates to bail out the debt stressed, why can’t US attempt to do the same ?”
It’s the scale. If AUS or UK consumers go on strike because the housing ATM shuts down, that doesn’t affect the world economy much. For AUS, a consumer slowdown doesn’t break the commodities boom.
Now try that in the US. It’s a much bigger economy. It has much larger feedback effects and repercussions.
If the US economy goes down, then commodity demand goes down and there goes the commodity bubble, taking AUS with it.
Big country vs. small country.
“Perth couple Brian and Eileen Bowden are among thousands reaping the benefits of the state’s robust economy as they prepare to extract a $100,000 profit on their home in just six weeks. ‘The people who we bought this house from made $100,000 off us, so it’s a non-stop cycle,’ Mr Bowden said.”
Non-stop cycle? Are you serious? Chalk this up as one of the dumbest things ever said. I’d comment but I am at a loss for words. Can somebody help me?
Yeah, but the CEO of the bank holding company doesn’t think there is a bubble, with 10% added in three month!
Take two new paradigms and call me in the morning.
Ha! that made me laugh.
The people who we bought this house from made $100,000 off us, so it’s a non-stop cycle,’ Mr Bowden said.
Don’t know if you remember but this quote is similar to the San Diego guy who was quoted in ‘05 as saying something to the effect of ‘Real Estate is like a merry-go-round you get on the ride and it never stops’.
Broke is the new black.
Or is red the new black?
Heh, nice one.
Perth has a resource based economy. Major industries are Oil & Gas, Gold, Nickel, Mineral Sands, Iron Ore, Pearls, Diamonds, Wine and Lobsters! For the source of Perth’s house price increases look no further than the price of these commodities. Prices in most of the rest of Australia are flat or falling.
better look to diversify into more dynamic industries, like Olive Garden, Ameriquest, and Walmart..
From London:
‘Building materials company Travis Perkins..said company’s core builders’ merchant chain and Wickes home improvement stores have been hit by a slowdown in consumer spending growth and in the housing market, and Travis Perkins has been cutting prices to drive volumes.’
I have a relative who manages a dispatch warehouse at Wickes. The main function of this warehouse is to assemble and deliver sunroom/pergola kits.
My mother and I visited the UK in May, and when we met I asked him straight out how he was going. He told me that his area was doing fine because their quality improvement was being cited as a significant factor in gaining market share, but that the overall company trend and the overall home improvement trend was down.
He did say the warehouse would go back to 5-day (from 6-day) operations after the summer, but was reasonably sanguine about the short to medium term as long as they can keep their on-time-no-defects ratio up.
However he and his wife are coming out to Australia for a holiday next year, and will be visiting us as part of the trip. Now that their children have finished their studies I wouldn’t be too surprised if while they were here he had a quiet look round. I’ve been throwing out hints for a while that there’s no shortage of positions here for good supply-chain people . . .
‘The people who we bought this house from made $100,000 off us, so it’s a non-stop cycle,’ Mr Bowden said.”
That’s correct… Until it stops!
I don’t know if there are more people buying groceries with credit cards, but I think you would have to be stupid not to put ALL your daily purchase on a CC. I don’t use cash for anything if I can help it, everything goes on the card, and for things like gas and groceries I get double miles. Everyone should be pimping out the CC companies, I have not payed for plane tickets or upgrades for some time. As long as you pay your bill in full every month there are no problems…
Agreed. I’ve got close to 250000 of those AmEx reward points burning a hole in my pocket and I’ve never paid them a dime of interest.
“As long as you pay your bill in full every month there are no problems…”
Not everyone on the planet has figured out how to do this just yet. I believe the problem may possibly have something to do with spending discipline?
Research also shows that when you use a card rather than cash on purchases you end up spending more money… I believe the study showed 12-18% higher on average…
Seeing cash leave your hands hurts a little more than swipping a piece of plastic… Imagine if you actually had to pay cash for things like cars, houses, and other big ticket items… Think people would recognize a little quicker how much money that really is if they couldnt put it on credit and delay payments on and on and on???
I don’t think the people who pay the card off every month are the ones pushing that 12-18% average higher.
BINGO! You hit the nail on the head.
Once you get serious about saving and managing money you realise there is little reason to use a card. I guess if you travel alot and can get miles with one you have a point but most people will spend much more $ than they get miles for. CC’s cause much more harm than good for the majority.
I use good ole cash for almost everything. If I need a card for ordering convience, I try to use a debit card. I just feel that CC companies are evil and try to not let them have any business of mine, if I can. I do have one with zero balance and have never run one up high or been late.
also, I get really annoyed with these folks that break out a CC for small purchases in a convenience store.
…..One reason I never use my debit card for online or catalogue purchases is the “return” factor: once the cash is withdrawn from checking, you have no leverage/protection should a purchase become a problem
Bravo. That is a great post! I like my wife to have cash at all times. This is a very unlady like thing now days. I take cash from the ATM or make sure she takes cash from the ATM. I notice that she always spends more when she pays with a debit card. Because it is only funny money, even though it’s a debit card. She is much better with cash. So am I!
I’m sorry you guys hate credit cards.
Debit card stolen == money out of your bank account until (and if) resolved. Credit card stolen == money out of the bank’s account. Not to mention cashback, forget miles… I don’t travel that much either. Extended warranties? Another plus. Tracking spending in one place? Another.
Cards are great. But hey, we’re all responsible here, so do what you like.
I never use debit cards for security reasons. I get all my cash from my local bank’s ATM.
CCs are best for air miles, hotel pts, and security as long as the balance is paid in full every month.
NYCBOY
Old trick all ways shell out the the USBucks and never go with them………..at all cost never enter a Mall.
This is an interesting thread. I use my credit card for everything too. I have never carried a balance over a month in my life and I only have the one credit card.
But I may have been really missing out since my card doesn’t give me any benefits — no miles, no nothing. Any recommendations on cards that do? Especially the mileage would be handy.
I use Southwest airlines credit cards. $1200 = 1 point. 1 purchased roundtrip = 3 points. After 16 points, you get a free roundtrip. The free round trip can be sold on the interweb for about $350.
The math is left as an exercise for the reader.
I pay $25 a year and tie my card to any airline I like. It usually comes out to a couple roundtrip tickets a year. I have one credit card and am proud to say I have not carried a balance since my undergrad years….and that was a long time ago.
We also use our CC for all our purchases. I pay it off at least once or twice a month (via internet). We get up to $300/yr for a percentage of purchases, and if you use thier merchant program, you can get even more. Citibank/Citicards Rewards card.
Thanks for the tips.
nn,
Couldn’t agree more. While I am sure we have all been guilty of pulling out the plastic for gas or groceries, if we didn’t have the cash with us, but covered in the bank, I can’t help but notice the rise in the tendency seeing more and more people use credit for everything. My favorite is getting in line at the local gas station and the guy in front of me has a USA Today paper and a bottle of coke and pulls out a credit card for $2.00. If cash is this tight now, wait for next year and beyond. “Cash will def. be king then.” I also wonder when I see this behavior how close we all are to a major depression, even those of us who have saved will be impacted. What is sad about this report Ben, is that this story will be us wometime in the next 12 months and it will be a lot worse since so many other countries and foreigners hold US credit. We are in for a severe economic problem the likes of which have never been seen before. How long can we keep propping up the economy with all these doping schemes like, “Buy now and pay no interest for the next 24 months”, or how about the 84-month car note. What next, no payments on the house for 2 years? How far can we go like this before it all collapses? Sadly, not much longer, me thinks!
Don’t forget about the govt’s printing press and helicopter delivery systems… Fooling games seem to be the policy prescription du juor.
“du jour” Fooling games always work. How about a little war in Lebannon, and another one in Syria and another one in Iran?
That’s the ultimate fooling game. Make a nice little war against the “bad guys”, show the scarecrow of Ben Laden and then everybody forgets the rest and waives the flag.
That’s what the fooling game will be about in the next months.
Yes, m’sieur, I agree. If the fooling game goes much further it will be just in time to turn into an employment game as construction workers, realtors, et al. require something to occupy their growing spare time.
At least it is better than having the guy whip out his checkbook for the $2! When I lived in MN, I swear that every person up there paid with a personal check, even for a pack of gum! Used to take for ever to get 3 people checked out at the 7 eleven store.
ooof da!
Could we be talking ATM here? I use cash for the small things - a cup of coffee, lunch, or a few groceries. But for 90% of my purchases I simply swipe the card. And I do view it as cash - albeit a far easier cash source to access.
There is a raft of evidence that high street banks have been guilty of reckless lending over the past 4-5 years.”
Whooweee!!!!!!!!!! Now there’s a fookin’ understatement!!!!!!1
“There is a raft of evidence that high street banks have been guilty of reckless lending over the past 4-5 years.”
No, say it isn’t so!
Off the topic
http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=P527616&page=1&property_type=SFR&mls=mls_so_cal&cKey=q5p1×23p&source=SOCALMLS
Here’s a fool that Increased there price from 669k to 690k on 7/31 for 1100sq ft home and other homes around this one and few blocks away or In same city Westminester, CA homes in sq ft, 1500sq ft to 1700sq ft going for 630k to 680k these days.
And he increase his price, I hope it wasn’t because of my review???
To Ben and all,
Here’s a link to a really, really good article relative to the hb stocks, housing, the overall economy, and where we might be going from here. Great charts too. Clearly shows how out of whack we are. The last two charts say it all.
http://www.safehaven.com/article-5643.htm
The first time I ever heard of an option ARM, I learned that it originated in Austrailia. In fact, it was the most popular loan product there. If there is a microcosm of an Option ARM freefall, this is the place to watch.
In general, Australia learned about the dangers associated with option-ARMs (we called them ‘low-start loans’) during the recession of the early 1990’s.
There were very few of these loans issued in the 1998-2004 (except for Perth) boom.
doesn’t a 4.98% 10 yr bond say it all ?
Yield Curve
IMO, the home prices in perth are not justified on the economic fundamentals of the local economy. Sure, there is a commodity boom, but this mostly benefits large producers, the average guy on the street does not earn a high income. There is a lot of speculation going on because of quickly rising prices and the heard mentality of people trying to get on board while they can. Perth is also an area that attracts a lot of foreigners, particularly from asia….hence, the speculation.
I use my tire guy as a way to check the economy. last week he told me that for the first time ever he has soccer Mom’s pulling in in big SUV’s to buy tires.
He said they stroke out when he tells them what a set of tires costs for those behemoths. They all call hubby and report the data on the cell. Finally they agree to the $800 or so.
The next step is a hoot. When the tires are on and the kids reloaded they go thru 6-7 credit cards putting 100 on this one 60 on that one and so on.
He said that the fact of the may matter is, this is the first time many of them have ever bought tires as they have been trading or leasing every year. Why not now?
Sorry, but I laugh about this every day reading these posts.
“the indefatigable US consumer has hit the wall” I wonder if Wall-Mart is responsible?