Wednesday, March 14, 2007

Maxed Out Momma Says “Recession Time”

No, she didn’t say “recess time.” Unfortunately, the cards she’s reading point to a downturn in the economy -- i.e., one of those smiley faces with the frown.

As defined by an economic recession is extended decline in general business activity; typically two consecutive quarters of falling real gross national product.

For her stats, Momma turns to the Census Bureau Reports, published March 13th, listing ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES. Jolly good reading if you can stand the details. I started to snooze after Table 1B, but the indefatigable maternally Maxed is made of sterner stuff. Thus, she managed to tweeze out these disturbing little nuggets:

  • MoM adjusted total retail would have been negative except for the increase in gas sales.
  • Grocery store receipts are negative YoY when adjusted for price increases.
  • MoM adjusted for restaurants and bars is negative.
  • YoY adjusted and non adjusted for restaurants is negative when price increases are taken into account.

Help, Starling! Throw me a rescue line here; I’m in over my head. What is a YoY when it’s up and dressed? Let's hope he notices and shows up with a few helpful terms in hand.

Meanwhile, Maxed Out Momma explains her contention that we’re declining and expands on her bad news:

samuelbrittain.comConsumer credit from last week (Jan preliminary) showed moderate increases, no doubt because consumers were appalled by the credit card binge in November. The bottom line is that Q4 2006 total consumer debt rate of increase doubled from Q4 2005. Q4 2006 revolving credit (credit cards, basically) rate of increase nearly doubled from Q4 2005.

What we are seeing in consumer credit is the end of consumer spending financed by mortgage equity extraction (MEW). And what we are seeing in retail is that the consumer cannot borrow enough on credit cards to sustain spending increases.

Now these two reports make it clear that consumer spending will be decisively weak all this year, and that is because of the income distribution involved in those total wage increases reported so positively by the media. The problem is that the top echelon is getting nearly all of it, while the bottom echelon is getting less than enough to compensate for price increases.

The end result is that the housing problems have spread throughout the wider economy. In short, we are experiencing contraction not just in manufacturing, autos and housing, but in consumer spending. Very shortly we should see the four week moving average of initial unemployment claims move past the 350,000 mark.

All I can say is I’m glad the Baron trained me to pay off our credit cards every month or to go without. Actually, it didn't take much training -- I've seen what credit card debt does to people. In fact, that may be why answering machines were invented. Nope, the only risk I take is in tiny stock purchases. For fun. Like two dollars a share.

Meanwhile, our sometime-neighbor, who only visits here occasionally, has taken up permanent residence for awhile to do some clean-up on his property. His construction business further south is in the doldrums so he has time on his hands. In addition, he’s stuck with a high-end vacation home he can’t get rid of.

Well, that’s my anecdotal evidence for Maxed Out Momma’s contention about the housing part of this pattern.

What’s yours?

In the meantime, go over to her site just to read her other posts so you’ll know what not to invest in.

Makes for grim reading.

[Post ends here. It’s bad enough without laying it on any more thickly]


Reliapundit said...

MoM is wrong. she';s been saying this recession is coming nearly as long as krugman!

GM just reported a profit!

the subprime losses are the equivalent of bad junk bind write-offs

and carl icahn is RIGHT NOW buying up homebuilding companies which have taken a beating lately. and are a BARGAIN!

things are not as bad now as they were in 2002 and 2002 was not that bad.


don't listen to the naysayers.

the economy is in great shape.

and another thing: trade deficits do not matter.

the quotient is all bunk. when we buy something from china we pay them money and we get goods (which we resell at a profit). this is a even-steven trade: china get the money and we get the goods. we no more have a "deficit" with china then you do with the grocery store.

the left has a vested interest in knocking down anything bush and the right do because they want power so they can put us back on the road to serfdom/socialism.

so when the market hiccups they scream CRASH! PLUNGE! RECESSION!


livfreerdie said...

I've always wondered what people did so they could afford those 300g + homes. Others go and get a 2nd loan, sub-prime or an ARM, pay off their credit cards then run those credit cards back up. The ARM goes up, credit card interest goes up but the cost of living increase doesn't come close to balancing the books! I've noticed in this area the shortage of 150-200g homes, you know, the ones people might be able to afford.


Dymphna said...

reliapundit --

From your mouth to God's ears.

Meanwhile, I think I'll check out Larry Kudlow. He's a real optimist...


You mean those hideous Mac mansions? I don't understand how people can bear to live in them, much less hock the rest of their lives for the experience.

Those things are going to be a glut on the market. I don't know when, but i predict it will be within ten years.

I keep trying to imagine what the utility bills run each wonder the mommies have to work and put the babies in daycare.

Reliapundit said...

technology will be making energy will be getting cheaper.

there will be no glut of homes.
if you don't like a mac mansion then don't buy one.

if they fall completely out of fashion then their price will drop and people will buy'em and fix'em they way they wanna.

free markets work very well.

lookit: many people will get hurt by the market: they buy high; pay high interest rates; have too much debt. and some of the lenders get hurt too.

that's life. but there is NO macro/systemic problem here, so do not worry.

the opnly big/huge prob looming is our federal entitlement debt for medicare/caid/soc sec.

the boomers might bankrupt the federal government.

but it all depends on how we respond to the challenge. so far we've punted - because of the dems.

Bill said...

YoY --- year on year

Dymphna said...

Thanks, Bill.

Reliapundit -- do you think there's anY "might" in the idea of the boomers bankrupting the gummint? Especially one where the dems are in charge?

Just the boomer federal employees could go a long way toward doing that.

Would that mean a lot of programs wouldn't get funded? Maybe the Dept of Health, etc., would close?

Ah, one can dream...

enuff said...

Now, if we’re smart(which does appear highly questionable at times), we’ll use any recession - not just here but worldwide - to undermine the thugocracies in the WoT.

It’s not like we’ve neither witnessed or are lacking historical precedence in periods such as this. There’s a reason the Ruskies want to see green from Tehran.

Dymphna said...

I thought it said we were eating out less, not eating less.

OTOH, if you need to eat cheap, pasta, etc., is the way to go. Of course, you may swell up like a balloon, but your grocery budget is manageable.

MyFriendFate said...


Your optimism is almost comical. Maybe deficits don't matter in an economic expansion. but in a recession they most certainly do! And if we aren't in one now, we inevitably will be one day. The sooner our countries financial obligations start to come due (socail security/medicare), the more we will be strained.

X said...

Graham's stock tip for the day: property. I learned thsi one from my dad, who know things. If you own property, especially some sort of urban property, you can rent it during a recession as people who aren't willing to buy are very willing to rent when money is tight. We got caught out in the last recession in the early 90s and lost everything, pretty much, so this time the family is getting ready, just in case the worst happens. And if it doesn't we'll own a nice bit of property that can be used as equity for other investments.