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Wednesday, April 01, 2009


"a secular shift in attitudes toward credit"

zero hedge cites david rosenberg's demand-focused note.

... the savings rate could head back to the 10-12% range that prevailed before we became a consumer society that was relying on parabolic asset inflation to fund retirement needs.

... The latest NAHB index for March suggested very little traffic at showrooms (this subindex fell to 9 in March from 11 in February, in fact, the third lowest print on record). As the nearby charts show, consumer plans to buy a home in the next six months have actually fallen to a 27-yeaar low after declining in March for the third consecutive month. Demand is so weak, that it is now taking a record of nearly 10 months for the builders to find a buyer of a newly-completed home.

Attitudes toward housing have changed, and it looks increasingly as though this is more of a secular shift than something that is merely cyclical, and perhaps it is because people are much more fearful of taking on any new debt – at any cost – after the misery that the past decade of excessive leverage has left in its wake. Housing, like autos, is extremely credit sensitive, and every survey we see (NACM, Fed Loan Officer Survey) shows that household demand for credit is at or near record lows.

The widening slack in the labor market is taking a serious toll on the household income statement. Total personal income, excluding government benefits, has contracted by $234 billion since peaking six months ago (a 4.5% decline at an annual rate) – a plunge of unprecedented proportions. So not only have the boomers lost $20 trillion of net worth during this bear market (including our estimate for first quarter), but the flow of income from the workforce is declining at a near-record rate as well. Be assured that the Baby Boomers’ investment behavior is going to change based on this dual squeeze on the balance sheet and income statement, and, to repeat, these shifts are permanent (as much as anything can be), not transitory.

UPDATE: of additional interest, via zero hedge, trimtabs is reporting accelerating job losses, no visible economic basing, and an interesting observation on savings rate.

TrimTabs reported that the personal savings rate in February was much lower than the 4.2% reported by the Bureau of Economic Analysis. "Real-time income tax data indicates that personal income is plummeting and that the savings rate was no more than 0.9% in February," said Biderman. "The only reason the savings rate was positive was that income tax refunds were up sharply relative to last year."

BEA's early savings rate number is a guess marked by heavy revisions, so trimtabs is to be listened to here. i personally know a handful of salaried and hourly folks who are seeing wages cut, and so have little trouble believing this -- yes, that is an anecdotally-driven bias.

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