The Big Picture | Consumer Spending

What Are You Doing with Your Stimulus Check?

Friday, May 16, 2008 | 12:30 PM

in Consumer Spending | Economy | Taxes and Policy

Lifehacker has a poll asking people "What Are You Doing with Your Stimulus Check?"

Over 60% said they are either saving it all, or using it to pay down bills/debt:

Spending on essentials. 5.6%
Frivolous shopping spree! 12.6%
Saving it all. 23.8%
Paying bills or debt. 37.0%
A little of everything. 21.0%

Two caveats to this: As we have seen in so many surveys, what people say they plan on doing, and then what they actually do, are often two very different things.

Secondly, we don't know the demographics of Lifehacker readers -- geeks? middle class? higher educated? -- and they might skew differently than the nation as a whole.

Regardless, its an interesting data set.

~~~

Coming Soon: $200 Apple iPhone 3G

Wednesday, May 14, 2008 | 04:30 PM

in Consumer Spending | Technology | Web/Tech

Hints, signs and portents are starting to pile up that Apple (AAPL) will soon deliver unto the world the 3G iPhone that has been heralded in prophecy ever since the current model was born.

That's according to GMSV, who also note:

* Apple announced there are no more iPhones left in its U.S. and U.K. online stores.

* Piper Jaffray analyst Gene Munster says the devices are in short supply at many of the retail outlets as well.

* AT&T’s product listing includes a new option — “iPhone Black,” the rumored color of the 3G model.

* Apple has confirmed to Fortune that Steve Jobs will deliver a keynote address on June 9, the first day of Apple’s World Wide Developers conference.

* AT&T told retail employees not to schedule any vacation between June 15 and July 12 to ensure sufficient staffing for “an exciting Summer Promotional Launch.”

I have steadfastedly refused to buy the first gen, 2G iPhone. I have no need for a pricey gadget that only works on a slowpoke network, and neither do you. (Not that this small quibble prevented 10 million people from buying the gorgeous toy).

However, combine the above with Fortune's report of a forthcoming AT&T big price cut (bringing the price down to $199 for a 2 year contract) and I don't see how I can avoid becoming part of the iPhone nation. . .

The NonGuidebook Version of What to Do (and Not Do) in NYC

Wednesday, May 14, 2008 | 10:00 AM

in Consumer Spending | Currency | Psychology/Sentiment

Its that time of year: New York City is flooded with tourists. Thanks to the weak American Peso, the place is just thick with 'em.

There are lots of standard guides you might find helpful to use (i.e., NYC Guide for Tourists), but they are primarily designed for that gullible visitor, the double decker riding, Hawaiian shirt wearing, one born every minute visitor -- the Rube.

That's not you. You are much hipper than that. You want to be in the know, plugged in, well connected. Well, ya came to the right place. I'm going to give you the straight dope, the inside info that the guidebooks don't tell you about. This is real insider trading, "Blue Horse Shoe Loves Anacot Steel" type stuff that people go to jail for. Not you or me, but people. Some people. Mostly tourists.

Anyway, instead of relying on a Fodors or Let's Go NYC, consider these suggestions from a born and bred Nu Yawkah (I even got dah aksent dat gos wit da place). A Brooklyn born guy who works in finance and has worked in NYC most of his Adult life, this guy knows a thing or two about Gotham.

These suggestions will help make your stay in the city enjoyable and safe. It well help you get the most out of your visit here. As an added bonus, I get to keep all of you birkenstocked, rucksack wearing, slow walking, camera snapping touristas out from underfoot of us locals.

Enjoy.

~~~

A New Yorker's Guide for Tourists: 20 Ways to Make Your Stay in New York City More Enjoyable

1. DO NOT DRESS ALIKE. This is for your safety, as well as for the benefit of the typical New Yorker's highly refined aesthetic sense. At all costs, avoid wearing identical matching outfits. Worse than looking like hicks from the sticks, you will look like a group of out-of-towners begging to be mugged.

I don't mean literally mugged by a criminal element, but rather, robbed by unscrupulous taxi drivers and retail merchants alike. They will spot you as a rube, and be all too happy take advantage of your apparent naivete to lighten your wallets.

You might as well carry a sign that says "Rob Me!" -- and they will.

The corollary to this is to avoid festooning every item of clothing you have on with "New York, NYC, or Yankees" logos -- No one is THAT big of a fan -- for the same reason as above.

~~~

2. BATHROOMS: Here's the thing: There just aren't many public bathrooms in NYC.

Why? Its a long story, which I don't have time to go into, but there just aren't that many. Plan accordingly.

Your best bets are as follows:

Department stores
Starbucks
Barnes & Noble/Borders Bookstores
Restaurants
Hotels

The nicest public toilet in the city is Bryant Park at 42nd Street between 5/6. Sometimes there is a wait.

For those of you who have real, um, reallygottagonow issues, its best that you plan ahead. Get a copy of Where to Go: A Guide to Manhattan's Toilets. Thats right, the NYC toilet situation is so absurd that someone wrote a book about it.

On the plus side, the Rainbow Room and the Grand Havana Club have some of the nicest bathrooms I've ever been in -- floor to ceiling windows, right next to the urinals!

~~~

3. Tipping: The city has a service-based economy, and tipping is encouraged/demanded/insisted upon.

Some basic suggestions: 15% of the bill for "Fair" service, 20% for "Good" service. This applies to waiters, waiteresses, bartenders, cab drivers, call girls, etc. Note that you can easily ballpark 15% by doubling the tax (~16%). Chamber maids should get $5 per day.

Leaving a 5-10% tip is considered a complaint -- but stiffing (leaving nothing) is not perceived as a complaint, but as a sign of cheapness/cluelessness.

Note that for large parties (6 or more) some restaurants automatically add the tip to the bill, so double check that bill (don't double tip).

~~~

4. See a LIVE TV Show: This requires some advanced planning, usually 6 months to a year ahead of time. I suggest Late Show with David Letterman, The Daily Show, The Colbert Report, Late Night with Conan O'Brien, and Saturday Night Live (email SNL TIckets).

If you did not plan in advance for this year, no worries: Just diary this for next December or January to order tickets for Summer 2009.

Imagine where the US Dollar will be then -- we'll practically be paying you to come here!

~~~

5. Do a bunch of local New York things: Hang out in Central Park, Explore Brooklyn, wear black, enjoy the free WiFi in Bryant Park (use the bathroom there -- nice). Attend a lecture at the 92nd ST Y, go to Chinatown in Queens. Buy junk at a street fair, and eat street meat (don't ask). Have a cigar at the Grand Havana Room (members only). Catch an author speak at a Barnes & Noble (use the bathroom while you are there).

Spend a weekend at Fire Island or the Hamptons (make arrangements first). Go to a designer sample sale. Do the NYT crossword puzzle on mass transit. Jog around the reservoir in Central Park. Go to a Woody Allen retrospective. See the Mets at Shea.

The ultimate New Yorker activity? Buy the Sunday NY Times late Saturday night; skim it, then lounge around early Sunday morning, with the paper -- and a pot of strong coffee -- in bed Sunday morning. Heavenly!

~~~

6. iPod walking guides

Continue reading "The NonGuidebook Version of What to Do (and Not Do) in NYC"

April Retail Sales

Tuesday, May 13, 2008 | 11:59 AM

in Commodities | Consumer Spending | Retail

Retail Sales were rather unimpressive: Gasoline, Groceries, Food & Beverage were up, while pretty much everything else was flat to down.

If you want to get rid of the Easter factor, compare March/April 2007 with March/April 2008.

Perhaps some chart porn might be instructive:

click for larger charts

>
Retail Sales vs. March CPI
(sales versus inflation)

courtesy of Jake
>

Retail Sales vs. Consumer Discretionary Sector

courtesy of Bespoke Group

Retail Sales Versus Past Recessions

courtesy of CEO Economic Update

What Does Boating Tell Us About the Economy?

Monday, May 12, 2008 | 06:57 AM

in Commodities | Consumer Spending | Credit | Retail

Growing up on an island, I've always been intrigued by the boating world.

Many friends and neighbors have boats, and while I've spent time sailing and powerboating, I've never owned one. Mrs. Big Picture grew up with sailboats, as both her dad and two brothers liked to sail lightnings -- affordable, family fun. I, on the other hand, don't have that out of my system.

I don't know a single boat owner who has been able to justify the costs of ownership. And yet, there is a two year waiting list at any of the local marinas for slips (but moorings are available 100 yards from our home).

Why all of this boating chatter? I am tracking two interesting data points regarding recreational products: Sales and financing. We know that Boating sales began slip as far back as Summer 2006, when Oil prices were in the $50 - $70 range. Those with existing boats, however, continue to enjoy their usage. Even with Marine gasoline at $5, its only a marginal price increase relative to their total sunk costs.

Peter Greenberg -- the TODAY’s show Travel editor -- notes the schism between two groups of boating enthusiasts: those who already own, and those who want to:

"If you already own a boat or an RV, chances are good that you're planning to put your boat in the water and you've made plans for road trips in your RV.

That would seem counterintuitive, but the numbers speak otherwise. While retail sales for recreational boating topped $39 billion in 2006 — an increase of nearly six percent from 2005 — the last two years have not been as buoyant. In 2007, the industry saw a drop of 14 percent in unit sales, and nine percent in dollar sales. And this year will be worse. In fact, at the recent Miami boat show, many new boat dealers were downright depressed. "See that brand-new boat over there?" said the president of one upscale boat manufacturer. "I've sold it four times this week."

Translation: The prospective buyers couldn't close financing."

And indeed, that is what we see from several capital lending firms that used to finance boat purchases. The most recent firm to exit the business? None other than GE Capital:

"General Electric Co's (GE) decision this week to no longer lend consumers money to buy motorhomes and boats was more bad news for the recreational vehicle and boat industry.

While the move by GE Money is likely to prompt the many other lenders in this sector to tighten credit standards and push borrowing costs higher, analysts say it won't significantly worsen the industry's admittedly dismal fundamental outlook.

Even before GE, which operates one of the country's biggest and most sophisticated finance companies, announced its intention to exit the retail RV market, rising gasoline prices, falling home values and tightening consumer credit had taken their toll on motorhome and boat sales."

File this under obscure economic indicators: Boating is (obviously) a nonessential activity. This is only one tiny aspect of the enormous US economy. But how Americans spend our leisure dollars, speaks volumes about the availability of credit, as well as the overall economy.

Stay tuned . . .

Our Local Marina

Morgan Park, donated by J.P. Morgan

UPDATE: May 12, 2008 9:14am

On the train in this morning, I chat with Bob -- whose 42 footer is moored off of Centre Island. Bob notes that there are two boating worlds -- bigger than 100 feet, and everything else. The > 100 foot world is doing just fine, thank you. Even more amazing, there have been more 300+ footers sold over the past 3 years than in all of previous history.

Sources:
GE exit from boat lending bad, but won't sink sector
James B. Kelleher
Fri May 9, 2008 12:23pm EDT
http://www.reuters.com/article/reutersEdge/idUSN0651461020080509

WHY THE POWERBOAT INDUSTRY IS SINKING
Daniel Gross
Slate, Tuesday, July 18, 2006, at 4:55 PM ET
http://www.slate.com/id/2145890/

Even with pricey gas, travelers won’t abandon ship
Boaters and RV’ers don’t plan to retire their gas-guzzling toys this summer
Peter Greenberg
TODAYShow, 5:12 p.m. ET, Wed., May. 7, 2008
http://www.msnbc.msn.com/id/24508536/

Ask Your Doctor About GASTAXADROPPIN

Monday, May 05, 2008 | 03:30 PM

in Commodities | Consumer Spending | Energy | Politics

Bloomberg:

More than 200 economists, including four Nobel prize winners, signed a petition rejecting proposals by presidential candidates Hillary Clinton and John McCain to offer a gas-tax holiday.

Columbia University economist Joseph Stiglitz, former Congressional Budget Office Director Alice Rivlin and 2007 Nobel winner Roger Myerson are among those who signed the letter calling proposals to temporarily lift the tax a bad idea. Another is Richard Schmalensee of the Massachusetts Institute of Technology, who was member of President George H.W. Bush's Council of Economic Advisers.

The moratorium would mostly benefit oil companies while increasing the federal budget deficit and reducing funding for the government highway maintenance trust fund, the economists said.

"Suspending the federal tax on gasoline this summer is a bad idea, and we oppose it,'' the petition says. Economist Henry Aaron of the Brookings Institution is among those circulating the letter and said most signers are economists. Aaron said that while he supports Obama, the list includes Republicans and Clinton supporters.

Sad but true.

Ben Sargent via Yahoo!

Source:
More Than 200 Economists Denounce Clinton, McCain Gas-Tax Plans
Brian Faler
Bloomberg, May 5 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTzCmqCNyLho&r

Fuel Gauge

Tuesday, April 22, 2008 | 07:30 PM

in Consumer Spending | Energy

In light of today's ~$120 Oil, this is all too true:

Retail Sales Rise on Gasoline Prices

Monday, April 14, 2008 | 10:13 AM

in Consumer Spending | Economy | Inflation | Retail

Real Retail sales dropped in March, driven lower primarily by durable goods and automobiles.

Nominal sales -- non-inflation adjusted retail sales -- surprised to the upside. The 0.2% gains were due mostly to increases in essentials -- food, gasoline, and heating oil. Sales at Gasoline store were up 1.1 %, while food & beverage stores up 0.4%; nonstore retailers (home heating oil) was also strong. Outside of these basics, Consumer spending was less strong. Declines were in building materials (down 1.6%), and general merchandise (down 0.6%).

On a year-on-year basis, March Retail sales softened to +2.0% from +2.9% last month.

Bottom line: What little strength we saw last month was narrowly based, and due due to higher prices. In real terms, sales were negative. The impact of Retail Sales on Q1 GDP will be to pull it down further.

chart courtesy of Barron's Econoday

Sources:
ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES FOR MARCH 2008
MONDAY, APRIL 14, 2008, AT 8:30 A.M. EDT
http://www.census.gov/marts/www/retail.html

ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES 4.14.08 .pdf
April 14 Release
http://www.census.gov/marts/www/marts_current.pdf

Related:
U.S. Retail Sales Rise on Gain in Gasoline Purchases
Bob Willis
Bloomberg, April 14 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGV74CnL6F7Y&

Same Store Sales Boosted by Inflation, Retail Slumming

Thursday, April 10, 2008 | 11:29 AM

in Consumer Spending | Data Analysis | Economy | Inflation | Retail

The monthly retail data was released this morning -- and it was none too pretty. Same-store sales dropped 0.5% for the month of March, according to the International Council of Shopping Centers (ICSC). This was the biggest decline in almost a year.

Two of the trends we have discussed over the past year are still quite evident: Food and fuel inflation, and consumers moving further down market to warehouses and discounters to save money.

Bloomberg:

"Wal-Mart Stores Inc. and Costco Wholesale Corp. said March sales rose as consumers buffeted by job losses and declining home values sought discounts on food and electronics.

Wal-Mart, the world's biggest retailer, said sales at stores open at least a year increased 0.7 percent, within its forecast, helped by grocery and flat-panel TV sales. The Bentonville, Arkansas-based company raised its first-quarter profit projection.

"The discounters, the warehouse clubs, that's who we think are going to be the winners in this retail environment,'' Joseph Feldman, an analyst with Telsey Advisory Group in New York, said today in a Bloomberg Television interview.

Thomson Financial noted that the majority of retailers that have missed expectations are blaming the Easter effect and macroeconomic conditions.

Wal-Mart (WMT) is faring better than most, reporting a 0.7% rise in same stores sales. Their sales including fuel rose 1.1%. Also selling well are health care products and fuel.

One complaint about Wal-Mart's reporting: They refuse to "ex-out" food in their monthly data. How much of the 0.7% sales (ex-fuel) was boosted by rising prices of groceries is not really known. Hence, we do not get an accurate read on how much of their monthly sales revenue is improvement, and how much is food inflation.

Previously:
Retail Follow Up (July 2007)
http://bigpicture.typepad.com/comments/2007/07/retail-follow-u.html

Source:
Slowdown biting into discretionary retail sales
William Spain
MarketWatch, 9:18 a.m. EDT April 10, 2008
http://tinyurl.com/6ysjbv

No Spring in Retailers' March Sales As Most Chains Post Weak Results
KEVIN KINGSBURY
WSJ, April 10, 2008 10:04 a.m.
http://online.wsj.com/article/SB120782589550904633.html

Wal-Mart, Costco Sales Gain as Bargains Lure Shoppers
Cotten Timberlake
Bloomberg, April 10, 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aX8HN7OwZCdk&

Was 2007 Q4 GDP Positive -- or Negative ?

Monday, March 31, 2008 | 11:52 AM

in Consumer Spending | Data Analysis | Economy | Wages & Income

Many breathed a sigh of relief over the final revision of 2007 Q4 GDP. However, we took a closer look to at some of the data to see what was happening beneath the surface.

Our advice to those who think we escaped recession in Q4 2007: Not so fast.

As you might have guessed, actual below-the-headline data was less encouraging than even that weak 0.6% final number.

Under Gross Domestic Purchases, the BEA wrote:

"Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- decreased 0.4 percent in the fourth quarter, in contrast to an increase of 3.3 percent in the third."

Real gross domestic purchases are purchases made by U.S. residents of goods and services wherever they are produced (domestic and imports). They decreased 0.4% in the Q4, very significant drop when compared to the 3.3% increase in Q3. Add to that the Gross private domestic investment decline of 2.2% in Q4.

Given those huge swings, how was it possible that GDP in Q4 was still positive?

It all comes down to the Current-dollar GDP (and the implied implied price deflator). Current dollar GDP was lowered by a significant 0.3% more than was expected.

Why does this matter? Real GDP (after inflation) is obtained by dividing nominal GDP by the GDP deflator (x 100). The smaller the deflator is, the less of GDP gains can be attributed to inflation. Had the change to above not occurred, Real GDP would very likely have been 0.0% -- or worse.

UPDATE: March 31, 2008, 1:30pm

I just got off the phone with BEA -- in the current GDP release, the changes in Q4 Current-dollar GDP were due to lowered "Imputed Financial Services" prices.

Let me also emphasize that I am not in the "books-got-cooked" camp. I am merely trying to wrap my head around how Real GDP was the same, but current dollar GDP fell so precipitously when compared to the last revision . . .

~~~

Given the impact of Inflation on GDP, is there another measure that might provide a clearer picture of the economy's direction without the pernicious impact of rising prices?

It turns out there is: Last year, Fed economist Jeremy Nalewaik suggested a different measure: GDI, or Gross Domestic Income. Nalewaik argued in a 2007 paper that GDI "has done a substantially better job recognizing the start of the last several recessions than has real-time GDP."

According to Nalewaik, GDP-based models did much worse at forecasting recessions than did GDI: The past four recession odds at their actual starting points were only of 52%, 40%, 45% and, for the 2001 recession, just 23% according to GDP data. The alternative measure of GDI did much better, signaling odds of a recession of 78%, 44%, 72% and, for 2001, 70%.

And what of today? Recent data shows an annualized GDI decline of 1% -- its largest drop since the 2001 recession.

While many people are debating whether or not the economy will fall into recession, the GDI data suggest that we are already in one -- and have been for several months.

Sources:
GROSS DOMESTIC PRODUCT: FOURTH QUARTER 2007 (FINAL)
FOURTH QUARTER 2007
MARCH 27, 2008
http://www.bea.gov/newsreleases/national/gdp/2008/pdf/gdp407f.pdf

Estimating Probabilities of Recession in Real Time Using GDP and GDI
Jeremy J. Nalewaik
Federal Reserve, December 19, 2006
http://www.federalreserve.gov/pubs/feds/2007/200707/index.html

Did Economy Really Escape Fourth Quarter Drop?
Brian Blackstone
WSJ Real Time Economics, March 27, 2008, 2:02 pm
http://blogs.wsj.com/economics/2008/03/27/did-economy-really-escape-fourth-quarter-drop/

4th-Quarter Data Confirms Frailty of the Broad Economy
THE ASSOCIATED PRESS
Published: March 28, 2008
http://www.nytimes.com/2008/03/28/business/28growth.html
>

~~~

Changes in US Withholding Taxes

Monday, March 24, 2008 | 07:12 AM

in Consumer Spending | Credit | Economy | Taxes and Policy | Wages & Income

Matt Trivisonno, a software developer in Miami Beach who follows the market, has come up with a neat way to track changes in the Federal Government's witholding tax receipts.

After being rangebound for the prior 4 years, the year-over-year growth in withholding began rolling over in Q4 of 2007 -- a possible date marking the beginning of the current recession:

click thru for larger graph
Source: Matt Trivisonno's Blog
>

Note that withholding comes directly from Wages and Income, and would likely precede major shifts in consumer spending or credit.

See also:
In Debt Crisis, Uncle Sam Is Piling It On
Mark Gongloff
WSJ, March 24, 2008; Page C1
http://online.wsj.com/article/SB120632203228958435.html

~~~

Shopping for the Wife's Car

Sunday, March 16, 2008 | 09:35 AM

in Consumer Spending | Economy | Retail

So Mrs. Big Picture's Bimmer comes off lease next month, and I had the "pleasure" of doing some car shopping this weekend.

Normally, I just request some dealer quotes online via Edmunds.com. Its the absolute best way to buy a car -- low bid, no haggle, order on line or phone, show up and pick it up. I've also had good experiences with Swap-a-lease. But given the present environment, I thought it might be, um, educational, to hit the dealers.

Shopping for a car with the missus is near impossible -- we are not SUV people, and I cannot really argue with her claim that most news cars are "pods" -- boring, wind tunnel designed, egg-shaped look-a-likes. Which is why she almost ended up with the BMW M Z4 Coupe -- baddass, non-orb shaped, totally impractical vehicle as her daily driver (but not a POD).

She had mentioned a number of cars over the past year, so I picked out five of 'em as a replacement for the 330i: Infiniti G35X, BMW 535xi, Altima Hybrid, Acura TL, and AWD Chrysler 300. We looked at the cars in order of proximity to the house, and which side of the street they were on, making a big loop.

Warning: Anecdotal evidence follows.

First up: Nissan Altima Hybrid: She briefly considered a Nissan Murano last year, and was intrigued with the Altima Hybrid: 42 city, 36 local, definitely a more unique car. Last year, at $32k -- about $6k over a nicely appointed one -- it made no sense whatsoever. About 7 years with gas at $5/gal before it paid off. Apparently, the rest car buying universe felt the same, as they did not sell nearly as well as the Prius -- dealers have a bunch of 2007s lying around. The same car (new 2007) can be had right now for $22k. So we drove one -- kinda odd sensation, very different from a gas engine (its a 4 cylinder). She didn't like it.

She did like the 6 cylinder, 270 HP version much better (so much for her going green). I have to get her to admit how glorious the straight 6 in the 330i is (she's spoiled by it). Oh, and I put myself on the list for the GTR -- the production run of 1,500 means most dealers will get just 1 or 2. It was also noteworthy that the Nissan dealer was rather empty.

Next up: Infiniti G35x. Handsome car (Her: its a pod!), nice dashboard, and oddly, not nearly as roomy as its downscale sister car, the Altima. Priced competitively versus the BMW, but way pricey relative to what it is: A gussied up Nissan. Mrs. BP was unimpressed. And the Infiniti dealership was so totally jammed, we never even spoke to a salesguy. That demand explains the premium price.

As we came up on the BMW dealer, she said, "Keep driving; I'd prefer something different." As much as I like the 330, it was goodbye Bavaria. The 535's twin turbo engine is terrific, but the iDrive was the deal killer for me. Talk about lousy design and engineering -- motoring by Microsoft. But its her daily driver, and if she doesn't want another BMW, I'm not going to argue.

On to Acura: The Acura TL actually had the nicest interior of all the cars we looked at: Lovely luminescent dashboard, great ergonomics, very comfortable. Downsides: Its an automatic, its a bit small, bland exterior, the 254 HP V6 engine isn't nearly as smooth as the 330. Its essentially a purtified Accord. Oh, and, there's a new version coming out in 2009. But it was far and away the nicest interior we'd been in. Their leasing terms were extremely reasonable. And the dealership was also jammed.

Finally, the only "non-pod" we looked at all day: The Chrysler 300 AWD. Its a full sized (versus mid-size) with a HUGE trunk, and tons of room inside. Gas mileage was not great. The biggest weakness was the interior -- mediocre, cheap, kinda Chrysler-like, and for a high $30s car, I expected a lot more more. Oh, and the place was mostly empty.

~~~

That was my Saturday. Missus BP is leaning towards the Acura. Meanwhile, its threatening to get nice out. Time for me to go shred some rubber off the 330i's lousy run flats . . .

Bankruptcy & Countrywide

Wednesday, March 05, 2008 | 07:00 AM

in Consumer Spending | Legal | Real Estate | Taxes and Policy

A quick post before I head over to CNBC: Two NYT articles caught my eye this morning on the theme of consumer bankruptcy:

• Filings for Bankruptcy Up 18% in February http://www.nytimes.com/2008/03/05/business/05bankruptcy.html

Americans filed for bankruptcy in growing numbers in February, buckling under the combined weight of rising energy prices, a weakening housing market and sky-high personal debts.

An average of 3,960 bankruptcy petitions were filed per day nationwide last month, up 18 percent from January and up 28 percent from a year earlier, according to Automated Access to Court Electronic Records, a bankruptcy data and management company.

That piece must be combined with the following:

• Countrywide Is Sued Again by U.S. Overseer http://www.nytimes.com/2008/03/05/business/05lend.html

The United States Trustee has filed a second lawsuit against the mortgage lender Countrywide Financial, accusing the company of abusing the bankruptcy process.

In a complaint filed Saturday with the Federal Bankruptcy Court in Miami, the United States Trustee for the Southwest region, Donald Walton, accused Countrywide Home Loans, a unit of the mortgage lender, of wrongly asserting claims related to the property of two Miami borrowers, Jose and Fanny Sanchez, who reorganized their finances in bankruptcy.

The Miami suit comes on the heels of a separate lawsuit in the bankruptcy court in Atlanta also accusing Countrywide of abusing the bankruptcy process.

That new bankruptcy law turned out to be quite a clever stroke of social engineering in ways never envisioned by its drafters . . .

Sources:
Filings for Bankruptcy Up 18% in February
JENNY ANDERSON
NYT, March 5, 2008
http://www.nytimes.com/2008/03/05/business/05bankruptcy.html

Countrywide Is Sued Again by U.S. Overseer
REUTERS, March 5, 2008
http://www.nytimes.com/2008/03/05/business/05lend.html

Teenagers Shun CDs

Monday, March 03, 2008 | 06:01 PM

in Consumer Spending | Digital Media | Music

You knew music sales were bad, but I bet you didn't realize just how bad they are:

• 48% of teenagers bought no CDs at all in 2007, up from 38% in 2006.

• Apple iTunes (AAPL) has surpassed Best Buy to become the second-largest music retailer in the U.S. They now trail only Wal-Mart Stores (WMT)

• The number of CDs sold in the U.S. fell 19% in 2007 from the previous year while sales of digital songs jumped 45%, Nielsen SoundScan said.

• Legal online music sales jumped 21% to 29 million last year from 24 million in 2006. The increase in legal online sales was driven by people 36 to 50;

• In 2005, teenagers accounted for 15% of CD sales. In 2007, the figure was 10%.

The recording industry likes to blame downloading as the source of all their ills, but I am compelled to point out a few things to them:

a) the economy has been weakening for a year now;

b) teenagers today have a universe of entertainment options that didn't exist 20 years ago;

c) The RIAA litigation tactics has completely disenchanted what was once their biggest consumers.

Whoever thinks they can harass, menace, threaten and sue their biggest clients without repercussion obviously has never worked a retail business.

Teenagers have quite predictably responded with a giant "fuck-you-and-your-shiny-silver-discs, dude."

I am not surprised one bit . . .

Sources:
More teenagers ignoring CDs, report says
Michelle Quinn and Andrea Chang
Los Angeles Times, February 27, 2008
http://www.latimes.com/business/la-fi-music27feb27,0,4432240.story

Apple's iTunes: We're No. 2!
Bit Player, February 26, 2008
http://opinion.latimes.com/bitplayer/2008/02/apples-itunes-w.html

Consumer Spendables Indicator

Monday, March 03, 2008 | 07:00 AM

in Consumer Spending | Data Analysis | Economy | Investing

I'll give TrimTab's Charles Biderman credit: He is not the one trick pony I previously pegged him as.

To review: Back in August, I read this horrifically ugly quote from Biderman in Marketwatch:

"Fear and ignorance seem to be gripping retail investors these days," said Charles Biderman, chief executive of Santa Rosa, Calif.-based TrimTabs on Thursday. "There's no credit risk; no bank is going to lose money on this subprime fear," he added. "Income-tax collections are strong, and you don't have a housing collapse when wage income and job growth are surging. This is a complete panic by individual investors," he commented. "They just don't know what's going on."

That was a stunningly ignorant comment, and I was set to write off both Biderman and TrimTabs.

Bidderman proved skeptics like me wrong. Instead of merely remaining in consumer weakness denial, he went back to the drawing board to create a "by-the-numbers" quantitative method of tracking consumer spending. The NYT's Gretchen Morgenson discusses the details:

"TrimTabs calls its new measure the Consumer Spendables Indicator, and it sensibly includes these crucial sources of consumption cash: after-tax wages; after-tax income from nonwage sources, like capital gains, dividends, pensions, partnerships and self-employment; and net equity extraction from consumers’ homes, either through property sales or mortgage refinancing.

For the first time since the fourth quarter of 2003, TrimTabs estimates, consumers will have less money to spend this quarter on a year-over-year basis. The firm expects this figure to fall 0.6 percent from the same period in 2007.

While that may not seem like a meaningful decline, it becomes more significant when compared with the increases the index showed during the real estate boom.

Back when homes were everybody’s favorite A.T.M., mortgage equity extraction propelled the TrimTabs consumer indicator. Beginning in late 2004, quarterly comparisons with year-earlier periods shot up; they peaked at a growth rate of 17 percent in the first quarter of 2006. During that period, consumers had $1.69 trillion to spend; equity extraction accounted for $191 billion then, TrimTabs said, its peak amount."

That sort of intellectual flexibility is worth noting.

Biderman believes the recession has already started, and will not last much longer than the end of 2008. Quote: “I see this thing lasting longer than the bulls think but not as deep as the bears expect.”

I may not necessarily agree with that, but it is an intellectually defendable position. If Biderman;s forecast turns out to be true, then the window for your ideal equity buying opportunity will open up sometime between May and July . . .

Previously:
Blaming the Retail Investor
Wednesday, August 01, 2007 | 11:45 AM
http://bigpicture.typepad.com/comments/2007/08/blaming-the-ret.html

Source:
The Buck Has Stopped
Gretchen Morgenson
NYT, March 2, 2008
http://www.nytimes.com/2008/03/02/business/02gret.html

Roll Out the Barrel . . .

Friday, February 29, 2008 | 04:00 PM

in Commodities | Consumer Spending | Energy

We'll have a barrell of fun!

~~~

Inflating Our Way Into Recession

Wednesday, February 20, 2008 | 07:37 AM

Chart courtesy of Bill King, M. Ramsey Securities
>

For quite some time in these pages, we have been lamenting the mistaken belief amongst some on Wall Street that there was a free lunch to be had. Lowering interest rates, the Panglossians argued, would stimulate the economy, whose slowdown would prevent inflation.

If that argument strikes you as both circular and contradictory, welcome to the club. That obvious flaw was apparently lost on its authors, who required a 2 X 4 across the skull to show them the error of their ways.

That swing of the lumber took place yesterday -- even as demand supposedly weakened -- when Crude Oil passed $100 a barrel on a closing basis for the first time. OPEC nations are expected to reduce output when they meet next on March 5th.

But don't think its just Oil. The promiscuity of the US Federal Reserve has led to all manners of dollar-denominated commodity price surges:

-Gold soared $26
-Platinum exploded $91
-Iron-Ore Prices Up 65-71%
-Copper surged 20 handles
-Wheat prices surge to new high
-Soybeans traded at a record high.
-Fertilizer makers soared to record share prices

Then there's gasoline. A survey of prices shows the rising impact of inflation. Gasoline has rallied from $2.22 on Feb. 7 to a record $2.62 yesterday. This is an 18% increase in less than two weeks – and drive season buying is still way ahead of us. These increases have yet to work their way through to the consumer; the economic impact of energy costs still lay off in the future.

One would imagine that expectations of ebbing inflation would be dashed by now. One would be wrong.

As we have seen time and again on the Street of Dreams, Wall Street pundits take months, if not years, to accept what is before their very eyes. Whatever you want to call it -- cheerleading or Cognitive dissonance -- it is a fact of life that the obvious takes much longer to be accepted than is logical. Hence, this simple numerical inflation fact, reflected in global food prices, record energy and both industrial and precious metal inflation, will be ignored for as long as possible.

Maintaining this denial of reality is becoming increasingly difficult. Yesterday, Wal-Mart reported Q4 earnings,, and its becoming increasingly difficult to deny reality. Net sales rose 8.3% to $106.3 billion, while earnings rose 4% to $4.1 billion, or $1.02 a share. The big increase in sales reflected a combination of new store openings and of course, gasoline and food price increases.

Sales at stores open at least a year were sluggish, up 1.6% rise over the year-ago period. Excluding fuel costs, sales rose 1.4%. However, Wal-Mart (Costco also) do not break out food prices from their reports. Hence, Wal-Mart sales were likely much weaker than the headline number, reflecting inflation. We suspect that's why the company lowered its Q1 and FY ’08 forecasts.

So why this foolhardy approach? Why, as Bill King calls it, "Inflate or Die" ? Several theories abound, led by Fed hubris and/or incompetence.

I'm not sure I buy that. A more likely possibility is what John Cassidy describes in A Bankers' Bailout:

"The rescue operation brings to mind John Kenneth Galbraith's dictum that in the United States, the only respectable form of socialism is socialism for the rich."

Indeed.

~~~

Consumer Prices (CPI) is out today at 8:30am. Producer prices (PPI) are ~~mysteriously MIA~~ due on February 26. . .

Sources:

Weakening Demand? Oil Still Passes $100
By NEIL KING JR. and ANA CAMPOY
February 20, 2008; Page A3
http://online.wsj.com/article/SB120346863077378499.html

Opec worries drive oil price to $100 close
Andrew Clark in New York
The Guardian, Wednesday February 20 20
http://www.guardian.co.uk/business/2008/feb/20/oil.globaleconomy

With Iron-Ore Price Hikes Like This, Who Needs a Monopoly?
Heidi Moore
Deal Journal, February 19, 2008, 12:13 pm
http://blogs.wsj.com/deals/2008/02/19/with-iron-ore-price-hikes-like-this-who-needs-a-monopoly/

Wary of economy, Wal-Mart cautions on '08
David Goldman
CNNMoney.com, February 19 2008: 10:43 AM EST
http://money.cnn.com/2008/02/19/news/companies/walmart_earnings/?postversion=2008021908

The Bankers' Bailout
John Cassidy
Portfolio, March 2008 http://www.portfolio.com/views/columns/economics/2008/02/19/Massive-Bailout-Planned-for-Banks

Quote of the Day: Hard to Ignore Soaring Food Prices

Tuesday, February 19, 2008 | 11:55 AM

in Commodities | Consumer Spending | Economy | Federal Reserve | Inflation

Last week, the WSJ observed that 3 major food companies were having "their lunches eaten by soaring commodity prices. Costs at Campbell Soup, J.M. Smucker and Hormel Foods rose faster than sales in the prior quarter ended in October, helping to push their share prices lower at a time when such defensive stocks ought to be in high demand."

While had Campbell reported a 6.7% year-over-year revenue growth, its costs of goods sold rose 8.7%. Same thing at Smuckers: a 17% sales growth, but a 19% jump in costs. Even though Spam-maker Hormel had an 11% drop in hog prices, high feed costs hurt its Jennie-O Turkey Store division.

After years of absorbing these cost increases, its reached the point where there is little choice but to pass price increases on to consumers. According to an AC Nielsen survey, eight U.S. branded-food companies had raised prices by more than 2% over the 12 weeks ended Jan. 26. Annualize that, and its a nearly 9% price increase:

"This is all hard to ignore...unless of course you're an economist. They often disregard food prices when measuring inflation."

And that's our quote of the day.

Thanks, Mark!

Source:
It Is Hard to Ignore Soaring Food Prices
Mark Gongloff
WSJ, February 15, 2008; Page C1
http://online.wsj.com/article/SB120303447307470075.html

Understanding What Recessions Are

Tuesday, February 19, 2008 | 06:00 AM

in Consumer Spending | Economy | Retail

One of the misunderstandings about recessions is what actually happens in the real world. A recession is where economic growth stops, and you are left with flat to contracting sales.

Note that economic activity does not grind to a halt -- the year-over-year growth rate merely slips into the negative. This is often misstated, in some variation of "Gee, how it can it be a recession -- I was out shopping and the stores were pretty crowded." Whenever you see that, the speaker is either technically misunderstanding what a recession is -- or alternatively, is painfully long and hoping for the best.

Of course, Growth may falter, not total economic activity. With the $13 trillion US economy, economic activity certainly won't fall to zero dollars. Everyone is still eating, driving to work, using electricity, phones, buying iPods, etc. If economic activity were to fall to an annual run rate of b