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Is the Credit spigot is being turned off? By Carl Pellegrini Print E-mail
by Special to DallasBlog.com    Mon, Nov 28, 2005, 02:01 AM

Background :

The 3 month growth of Real Disposable Personal Income was -1.4% in September, after reaching -3.8% in August. In October, Real Average Weekly earnings rose at a 4.8% SAAR (seasonally adjusted annual rate), bringing the 12 month change up to -1.6% from -2.3% in September. Total Manhours worked in the economy were unchanged in October from September’s level.

Facts:

Commercial banks hold 37% of all Consumer Installment Debt. Bank Consumer loans peaked at $721.9 on September 14 and stood at $709.3 on November 9; some of these loans may well have been sold in the asset backed securities market, but the fact remains that the largest holder is no longer adding to its portfolio.

Total Securitized Pools outstanding peaked in June at $605.7B and stood at $596.5B in September. Bank holdings of Home Equity Loans hit $438.8B on 9-7-05 and were at $436.9B on 11-9-05. The index of applications to refinance homes hit 2715 on a 4 week moving average basis on July 1; on November 18th, the index was 1737, -23% lower than year ago levels.

Is the financial condition of the auto companies negatively affecting sales? Yes, because inventory levels are too low to support higher sales. For the last 3 months, non seasonally adjusted inventories stood near 745,000 units. In October, unadjusted sales fell to 1,143,000 units. October production was at a 12.33 million SAAR versus 12.45 in September. Production in November through the 26th was slightly lower than November 04 when the I/S ratio was 2.77X versus 2.06X in September. Looks to me like the credit spigot is being turned off.

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