Koyaanisqatsi-Life Out of Balance

Following on the heals September’s Koyaanisqatsi retail report, comes this week’s Fed’s H8 data. This gives us direct evidence on how the consumer did it. As mentioned in yesterday’s blog, there was a $20.8 billion yoy increase in retail sales, or 0.6% excluding gasoline. At first glance I was prepared to dismiss this as just another bogus report. This is especially true given the clear and hard to dispute slippage since late spring in state sales tax collections. But the new H8 data to me suggests that September consumer activity was a very real Hail Mary, and perhaps a last Hurrah.

Bottom line: there has been an absolute orgy of new consumer borrowing over the last three weeks.  Almost unfathomable behavior, given the actual declines routinely seen in housing prices of late. Guess the Ministry of Truth convinced folks that because they had saved $2.3 billion on gasoline, that they should go on a major binge? Interestingly, the consumer reaction has been so strangely lopsided, that even a complete stooge and sycophant like George “One Trick Pony”  Bush felt compelled to exercise some rare cautionary comments on this Koyaanisqatsi environment.

Even the higher interest expense and sure to leave a hangover home equity lines of credit (HELOCs) are being revived. In three weeks Joe Soccer Mom added $17.3 billion new debt to the whopping $2.3 billion saved on gasoline. Do the math, and you pretty much have your $20.8 billion retail increase figure for Sept.

But that wasn’t all. Although real estate borrowing in the Fed data also picks up commercial borrowing, we also got confirmation from the MBAA refi index that a borrowing boomlet took place in the house as ATM realm. Conclusion, even with declining house equity, consumers mustered at minimum, equity extraction along the lines seen in the last several years. At least some will have more Ponzi finance to make house payments at least for awhile. Will they also have enough to go wild for XMAS? With rates back up some, watching the refi index going forward should give us clues. 

HELOC:
Sept. 13: 447.0
Oct. 4: 464.3

That’s 67% annualized!

Real Estate:

Sept. 13: 3,104.7
Oct. 4: 3,158.8

29.5% annualized!

Bank credit:

Sept. 13: 8.003.4
Oct. 4: 8.065.4

13.35% annualized, Houston we have a problem! So much for the rate cut theory, and explains why five Fed governors brought out the hose in their comments of late.