Consumer Fuelled Recession Will Likely Test New Lows

Note: Please see Important Disclaimer below

Welcome to this blog and the inaugural post. We intend to entertain, and hopefully provide some food for thought. We shall be providing you some long/short ideas, and comments on relevant statistics, and other news worthy items.

Much has been said about the spiraling U.S. debt (Government and Non−Government) with total debt currently estimated at about 350% of U.S. GDP.

We decided to take a look at how much U.S. Households were in hock. We looked at total mortgage debt, consumer credit, and total household debt as % of GDP from 1975 to 2008. Needless to say the numbers are not pretty. For 2008 we estimate household mortgage debt to be at 73% of GDP, consumer credit to be at 18% of GDP and total household debt to be at 97% of GDP. To put it mildly this gives us some cause for concern. (We note that the U.K. amongst other markets have similarly high debt levels).

Tread Carefully - More Landmines than Rocket Ships.

The astounding level of household debt, a likely double digit unemployment rate, de-leveraging, and likely further paring back on discretionary spending prompt us to disagree with commentators who suggest that stocks are cheap. Yes, some stocks are cheap. But there are more land mines than rocket ships out there. Just because various market indices fell 35% to 60%, does not imply that we are near a bottom or that stocks are cheap.  We await other shoes to drop and wait to see valuation metrics recalibrate to lower levels.

 

IMPORTANT DISCLAIMER: 

IF YOU USE THIS POSTING FOR ANY PURPOSE YOU DO SO AT YOUR OWN RISK.  

the content on this site should NOT be taken as investment advice.  

The ideas expressed on this site are solely the opinions of the author(s) and do not represent the opinions of sponsors or firms affiliated with the author(s).  

The author(s), their FAMILY MEMBERS, and/or related parties may or may not have a position in any company mentioned.  Any action that you take BASED UPON any information, analysis, or advertisement on this site is your responsibility.  

THE AUTHOR(S) MAKE(S) NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, ABOUT THE ACCURACY OR SUITABILITY FOR ANY USE OF ANY CONTENT POSTED ON THIS BLOG/WEBSITE AND ON ANY EXTERNAL LINKS PROVIDED; AND EXPRESSLY DISCLAIM RESPONSIBILITY FOR ANY LOSS OR DAMAGE, DIRECT OR INDIRECT, CAUSED BY USE OF OR RELIANCE ON THESE COMMENTS, IDEAS, ANALYSES, NOTES, REPORTS, OR CHARTS.