Monday, August 11, 2008
It's Thundering Again
PS: Big financial news of the week is not Euro moves, or energy moves, or even bombs in S. Ossetia. It's growing consumer financing problems in BRIC. Higher defaults, higher costs, or lower defaults with lower costs = lower demand. India's consumer goods industries have been hit hard, and Brazil is seeing the same thing. If you lower your default rate and double your credit grants, yet see losses, what does that mean? It means you're buying current sales at the cost of future losses.
This is happening all over the world. The structure of consumer financing is changing from India right through the US, with car leasing deals and various credit securitizations no longer "working".
You are buying current sales with future sales and credit risk.
What happens is that you get a bump in current sales but it is from folks buying now instead of later and when later comes not only have the items been sold, but potential customers cannot buy due to credit crunch or economic difficulties.
My main computer goes through 2 surge protectors and a battery back up unit.
Vader - they get blown out after a while, so I don't trust them. And you are dead right on the consumer sales. It's bringing future sales forward, which then boosts consumer debt and produces a deeper future slump in sales.
Links to this post: