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Oh! American Consumer is Doing Great! (What?)

Oh! American Consumer is Doing Great! (What?)
September 7, 2023

Bankruptcies, credit card delinquency‘s, rising commodity prices, no, really everything‘s OK.

I have always enjoyed South Park the show. They consistently point out the ridiculousness that media and people create. Wall Street, in particular financial media creates drama because it’s sells add space.

Let’s take a look at what financial media is not talking much about. First up the sizable spike in the US bankruptcy filings. As you can see from the chart below provided by Games of Traders, the four week moving average of US bankruptcy filings is spiking. Yet financial media really isn’t talking much about. What they continuously focus on is artificial intelligence, Nvidia, Apple, Microsoft, and interest rates.

Another looked over item by the financial media is the delinquency rates on credit cards. As you can see from the chart below small banks, who offer credit cards are experiencing a sizable spike in credit card delinquency‘s. Gee, I wonder what this is caused by? Possibly the rising cost of money? The rising cost of goods and services? The Federal Reserve continues to be on the warpath to raising interest rates. They want 2% inflation. It’s like anybody with a wrecking ball going through a a porcelain doll shop. Eventually you’re going to start knocking things over and the sound of crashing porcelain meeting the concrete floor is going to become harder and harder to ignore. The Federal Reserve consistently overdoes it. And this time is no different.

If you have been invested in any of the bond ETFs, such as TLT or IEF, you have been getting wrecked as Treasury rates continuously rise. So is now the time to buy bond ETFs?

What are the most ignored trades in financial media recently is the energy trade. Energy continues to rise since mid July. If you’ve been one of those who have not filled up your gas tank since June, you probably haven’t noticed the rise in gasoline prices. But I suspect if you’re reading this, you filled up sometime earlier this week and grimaced at how much it cost to put gasoline in your car or truck.

Conclusion

Inflation continues to be a menace. Rising interest rates by the Fed continues to be a wrecking ball. And most in the financial media think there is less and less of a chance of some level of a recession. In my opinion, the worst is yet to come. Rarely do markets gradually fall. Most often they are triggered by a catalyst, such as a failure of Bear Stearns, Lehman Brothers collapse, or a sizable corporate bankruptcy which is what I believe will be the push of the large rock over the cliff.

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