FedUpUSA

Archive for the ‘Consumer’ Category

As noted, yes you can.

JERUSALEM—Israel’s powerful dairy companies have surrendered to a three-week boycott and pledged to lower prices on cottage cheese, as Israeli consumers joined the wave of popular protest sweeping the region—in their case, to take on rising prices.

The people won and the big corporations lost.

Why?  Because instead of whining, complaining and bitching the people instead withdrew their consent, organized and boycotted.

“Facebook not only brought down the president of Egypt, it has now brought down one of the big monopolies in Israel,” said Efraim Sadka, an economics professor at Tel Aviv University. “This is really the first time that the consumers were really able to bring down the monopoly or a market power.”

The first time of many, one can hope.  As for the impact?  It was quite real:

A person close to Tnuva Food Industries, the Israeli dairy company that controls 70% of the cottage-cheese market, said sales dropped between 10% and 13% during the boycott’s first week. Other people familiar with the issue put the drop at between 20% and 25%.

Now that is an impact.

For those of you out there who believe that the consumer has no power, that the people just must bend over and take it whenever the government – or big business – say “assume the position!” here’s your example folks.

You have the economic power.  You.  Not they, you.

All it takes is your willingness to use it.

The Market-Ticker

Looking for the reason behind soaring apparel sales and weak sales at Best Buy? You can find an explanation in Sad Santa Letters that the United States Post Office opens a reads as part of “Operation Santa”.

With just nine days to go until Santa shimmies down those chimneys, letters to the big, jolly guy are coming in fast and furious. “The common theme this year seems to be a single mom with young kids, the parent has left — they don’t know who the father is, or the father left — and they can’t pay the bills,” said Pete Fontana, head of the United States Postal Service Operation Santa in New York.

“We had one little girl write in and say all she wants is a winter coat for her mom. Nothing for herself,” he said. “We had another letter for grandparents and they wanted to put a turkey with the trimmings for the holiday dinner … but they couldn’t even get their medicine.”

Other letters are similarly heartbreaking.

Eight-year-old Skayla told Santa that her mother doesn’t have a job and her father lives in the Dominican Republic, leaving it up to her grandmother to buy everything. She asked for clothes and shoes for herself, her 7-year-old sister and their infant brother, even including their sizes.

“Thanks Santa,” she wrote,” I LOVE YOU.”

How You Can Help

If you want to help make a Christmas wish come true, the best way is to Contact a local post office participating in Operation Santa.

Industrywide Demand for Electronics is SoftPlease consider Best Buy cuts outlook as results disappoint.

Dec. 14, 2010, 12:55 p.m. EST

The No. 1 U.S. electronics retailer’s profit fell as lower demand for televisions, notebook computers and videogames led to a sales shortfall in the U.S. While margin widened slightly, analysts said they were concerned that it came at the expense of sales.

Best Buy Co. shares tumbled more than 15% Tuesday, their biggest decline in more than eight years, after the retailer reported an unexpected decline in fiscal third-quarter profit and cut its outlook.

“There’s interest there from consumers on the latest and greatest, but really they are making trade-offs in their discretionary spending, not only across CE [consumer electronics], but within CE categories, where there are periods of time we may have historically seen them buy multiple large products in a year, they are being more choosey at this point in time,” said Muehlbauer [Best Buy's CFO] on a conference call with analysts.

Ample Warning

There was ample warning for that huge miss at Best Buy. On December 3, a report from SpendingPulse showed Retail Sales Led by Apparel, Consumer Electronics and Appliances Down.

Retail sales are way up year-over-year and apparel is leading the way. I have this email from SpendingPulse to share: ….

Year-over-year Total Apparel sales in November saw another sharp monthly increase. At 9.6% this was the largest year-over-year growth in 2010 for that sector following the previous record in October. Total apparel has enjoyed 8 out of 11 months of year-over-year gains so far in 2010. In November, all of the sub-sectors posted year-over-year growth.

For the second consecutive month, the Consumer Electronics and Appliances segment posted a year-over-year decline, although at -1.1%, it was not as severe as October’s decline. The Consumer Electronics sub-category was down by 1% while the Appliance sub-sector fell by 1.6% year-over-year.

Pent Up Demand For Clothes

The SpendingPulse report shows a pent-up demand, not for junk, electronics, or appliances, but for specifically clothes.

Repeating my ending comment from the above article: It’s nice to see shoppers focus on real needs instead of electronic garbage. However, pent-up demand for apparel cannot last forever, nor can apparel sales form the foundation for a lasting recovery.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

During the past week there has been a flurry of Federal Reserve reports and commentary concerning the levels of credit in the current economy. The two most notable were:

On July 8th they reported that the level of seasonally adjusted outstanding U.S. Consumer Credit (their G.19 report) decreased during May by $9.1 billion, representing an annualized rate of credit contraction of 4.5%. Although even this change is above the average for the preceding twelve months, it is much smaller than a quiet revision to the previously published April U.S. Consumer Credit figure — which is now reported to have decreased by $14.9 billion (a 7.3% annualized contraction rate).

To put these numbers in perspective, consumer credit has contracted during 15 of the past 16 reported months, and is down a record total $148 billion over that time span. The $14.9 billion in credit ‘lost’ during just April is the second highest monthly amount in history, second only to the $23.4 billion ‘lost’ during November, 2009. And the nearly 6% cumulative reduction in consumer credit over the past 16 months is the largest (on a percentage basis) for any 16 month span since September 1944 — when FDR was still in the White House and people were buying War Bonds instead of tightly rationed consumer goods.

On July 12th Federal Reserve Chairman Ben Bernanke noted that small businesses were not getting the loans that they need to create new jobs. The Federal Reserve’s own data reports that lending to small businesses dropped to below $670 billion in Q1 2010, down about $40 billion from two years prior.

The New York Times reported Mr. Bernanke wondered: ‘How much of this reduction has been driven by weaker demand for loans from small businesses, how much by a deterioration in the financial condition of small businesses during the economic downturn, and how much by restricted credit availability? No doubt all three factors have played a role.’

What does this mean?

The reported credit contraction is real, at historic levels and on-going. Although the Federal Reserve does not yet know whether the most recent consumer credit contraction is the result of consumer pay-downs or credit company write-offs, the fact remains that consumer spending and the money supply are both being impacted negatively as consumers (one way or another) clean up their personal balance sheets.

Small businesses, which account for over 60% of gross job creation, are not – for whatever reason – tapping into the credit necessary to create those jobs.

On July 6th we reported that the nearly relentless decline in our ‘Daily Growth Index’ had leveled off, but cautioned that the index should be viewed from a longer perspective. Since then the decline has resumed:

(Click on chart for fuller resolution)

When the most recent period of contraction in our ‘Daily Growth Index’ (January 15, 2010 to date) is charted along with the similar ‘Daily Growth Index’ contraction events from 2006 and 2008 (with the first day of each contraction aligned on the left-hand axis) the relative severity of each contraction can be visualized.

(Click on chart for fuller resolution)

One measure of the true severity of an economic slowdown is the ‘area under the curve’ (or ‘above’ the curve in this case) swept out by the ‘Daily Growth Index’ over time. This area is just the average magnitude of the decline times the duration of the contraction event. During the 2006 slowdown this area was about 136 percentage-days of contraction, while the 2008 event was much more severe at 793 percentage-days. The 2010 event has now reached 288 percentage-days, over twice the severity of 2006 and well over a third of 2008 ‘Great Recession’ — and it is still growing.

The key point to notice in the above chart is that if the current 2010 curve continues its current course, in about 20 days the 2010 slowdown will be more severe on a day-to-day basis than the 2008 ‘Great Recession’ was at the same point in its respective evolution. Unless the economy begins to pick up quickly, a double dip is likely — with the second round milder but lingering longer than the first.

Note: A more complete list of historical Commentary can be found on our History Page

Consumer Metrics Institute

Want to know the REAL reason that government statistics appear to be pointing to ‘economic recovery’?

$10 Billion a Month Freed up Each Month from People not paying their Mortgage. $1.9 Billion of That is in California so People can continue Leasing their SUV Mercedes and Getting Tans. Thanks Bailouts!

Posted by mybudget360

Living in California, the central hub of housing bubble mania, I have come to realize that many people that overpaid for homes are now quickly shifting their mindset to one of non-payment revolt.  With the 24 hours news cycle and instant viral financial information, many are now realizing that strategically defaulting isn’t such a bad option anymore.  In fact, this is now a significant strategy for many.  The corrupt bankers and Wall Street have set the example so people figure why shouldn’t they follow the same path?  But the problem with that is someone still ends up paying.  And that is the prudent middle class.  Look at it this way.  We have 51 million homes with a mortgage.  Over 44 million Americans are paying their mortgage diligently.  Yet our economy is screwed because we are bailing out the bankers and Wall Street but also giving incentives to many others to walk away from their home or game the current bailout structure.

Let us look at the current U.S. mortgage market first:

Source:  Census, MBA

The latest data tells us that over 14 percent of all U.S. mortgages are either 30+ days late or in some stage of foreclosure.  In other words, 7.2 million people are not paying their mortgages.  Yet banks are turning out record profits even though they are bleeding in their real estate cash-flow.  Now let us run a hypothetical here.  The median mortgage payment of those 51 million mortgages is $1,514.  This is actual stimulus for people if you don’t pay that each month.  If you aren’t paying your mortgage you just relieved yourself of your biggest monthly commitment.  So let us run a rough number:

$1,514 x 7.2 million         =             $ 10,931,916,697

So this frees up some $10 billion each month (this is a rough number).  This seems close to what Mark Zandi has calculated:

“(Zero Hedge) No, not crazy. With some 6 million homeowners not making mortgage payments (some loans are in trial mod programs and paying something but still in delinquency or default status), this is probably freeing up roughly $8 billion in cash each month. Assuming this cash is spent (not too bad an assumption), it amounts to nearly one percent of consumer spending. The saving rate is also much lower as a result. The impact on spending growth is less significant as that is a function of the change in the number of homeowners not making payments.

I’m not sure I would say this is juicing up spending, but resulting in more spending than would be the case otherwise.”

Part of the jump in recent spending has come from people flat out not paying on their mortgage.  I can tell you of a case of someone that bought a home here in California.  They paid $700,000 for a home that is now worth $500,000 (if they are lucky).  That is typical.  What is also typical is that they took on an exotic mortgage for the full $700,000 amount.  Last year, they realized that they wouldn’t be able to sell the home and wouldn’t be able to make their new modified home payment.  So once it modified late last year, they stopped paying.  Yet they had the money to pay.  They explained that the bank wouldn’t deal with them until they missed a few payments.  Now, the bank is throwing itself like an obsessed lover to help them “modify” their loan.  The terms now seem nice but they want to negotiate for more.  You have the banking criminals using taxpayer money to negotiate with people that drive around in a leased Mercedes SUV and BMW.  Does this sound like the poor grandma being kicked out of her humble home?  Apparently I’m not the only one hearing and seeing this:

“(WSJ) Some borrowers are being helped by the Obama administration’s foreclosure-prevention program and other modification efforts. Irma Bravo, the owner of a cleaning service in San Diego, recently received a loan workout that lowers the monthly payment on her $522,000 mortgage to $1,736 from nearly $5,000.

“It’s a big, big relief,” Ms. Bravo says.”

Did you get that?  A $5,000 mortgage payment was pushed down to $1,736.  Now wouldn’t you, one of the 44 million prudent Americans want to have this kind of sweetheart deal?  If you want this deal you have to imitate your local crony banker and give them the middle finger and stop paying.  Suddenly, they’ll do handstands and back flips to lower your payment.  The Wall Street system has perverted the foundation of our economy.  Do I begrudge the people doing this?  Not really.  But what I do resent is the fact that banks are using the trillions of dollars in taxpayer money to make these deals work.  If they wanted to use their own money, so be it.  But that is not the case.  And we have many people that fall in this category:

Source:  Calculated Risk

I also wanted to get this data specifically for California:

So today you have roughly 798,000 California mortgage holders not paying their mortgage for a variety of reasons.  Clearly the main reason is the economy is horrible.  But a large number are taking advantage of the situation.  The median home payment in the state is $2,384.  Let us do the math:

$2,384 x 798,832               =             $1,904,414,716

So of the $10 billion in non-payer stimulus, California receives roughly 20 percent of the cut.  And what are people doing with this money?

“(CNBC) The person had an $1,880.00 monthly mortgage payment on which they’d defaulted, but said person’s monthly bank statement showed payments to a tanning salon, nail spa, liquor stores, DirecTV bill with premium charges, and $1,700.00 in retail purchases from The Gap, Old Navy, Home Depot, Sears, etc.”

Well I’m glad some people have their priorities straight.  The fact of the matter is the bulk of Americans, the middle class, are being screwed by the banks, Wall Street, and also the current bailout structure.  The median home price in the U.S. hovers around $170,000.  Why not cap any bailout help to mortgages at that level or less?  Do you feel good that the folks I talked about (who make over $100,000 a year by the way) in California who have a Mercedes and BMW and continue to live in a nice home rent free are able to do so because of your taxpayer money?  This is exactly what is happening.  No wonder why many Americans must feel like fools.

The name of the game is simple.  Get into massive debt, so much so that when you fail, you will then be able to negotiate lower terms because the government enjoys rewarding horrible behavior.  Things like this won’t last long because eventually, the public that is being ramrod into bailouts wakes up and revolts.  Yet this could be a few years or much longer before any of it happens.  Things have gotten so absurd that people are now calling up credit card companies and blackmailing corrupt banks saying they won’t pay on $50,000 on debt unless something changes.  In many cases, credit card companies are changing terms if you sound convincing enough.  Otherwise, if you are one of the majority who honor their debt be prepared to pay higher fees for the smaller group that are milking the system.  This is an absolute war on the middle class.  And why save when banks offer close to zero percent because of the Federal Reserve cartel?

$10 billion a month freed up from not paying mortgages.  No wonder why retail spending has jumped up recently.

It would be nice if the media covered the actual scam in these stories….. but they don’t:

Dec. 9 (Bloomberg) — Andrea Allan used a convenience check she received in the mail from JPMorgan Chase & Co. for Home Depot purchases. The check cost her almost $700 in interest and fees when the bank cut her credit limit and wouldn’t honor it.

“Why during this economy would Chase put out checks to people to entice them?” said Allan, a 50-year-old aesthetician in North Hollywood, California, whose credit limit was cut to $1,100 from $3,500 after she received the checks in September. “It feels predatory, not convenient.”

Well yes, that’s inconvenient.  What’s worse is that there is no requirement for card issuers to notify you (other than on your statement) when they cut your line back, which can (and sometimes does) lead to this sort of problem.

But that’s not the real scam in these “convenience” checks. 

Oh no.

The real scam is found in the typical pitch enclosed with them, like the one I got from Discover a couple weeks ago.

“0% if paid off by March 31st 2010.”

Sounds good, right?

Well, no, it’s not, and it’s not 0% either.

From the date I received the checks there was roughly four months of “zero interest.”  So far so good.

But in the fine print was disclosed that there was an immediate 5% “convenience fee” added to the balance when I wrote the check!

Let’s see – there are 12 months in a year, and I got four months for 5% right up front, and if I don’t pay it off, I start getting charged interest.

So what was the actual interest rate on that loan again?

If I wrote the check and then paid it off in one month, I’d pay 5% for holding the money for one month.  If I did this 12 times I’d pay 5% 12 times, or an annualized 60% interest rate!

The longer I hold the money, of course, the lower the effective rate – which is why they cut that off after March.  If I hold it for the full four months then I pay “only” an effective 15% interest rate.  That’s not awful (unless you consider that Discover can borrow from The Fed at zero!) but it is not “zero interest.”

But of course when I get the check I might not cash it instantly.  Let’s say I spent it a month later on Christmas presents.

Well then my “effective interest rate”, since the zero period expires in March, would be 20%.

See how these clowns get you?

What’s missing is a clear, one-page description along with some simple examples, such as the person who holds the money for only one month, for two, for three, and for the maximum possible four before their ordinary interest rate kicks in.

That’s a very nice scam boys and girls, but I won’t be biting on it, you shouldn’t bite on it, and if we had anything approaching an honest regulator in this country this sort of “trick ‘em and screw ‘em with fancy games” practice would be absolutely banned.