The Pomp Letter - US Consumers Are Economic Punching Bags
Today’s letter is brought to you by Trust & Will!Trust & Will is the most trusted name in online estate planning and settlement. The company has helped hundreds of thousands of families create their estate plans, and they’re just getting started. Trust & Will enables every American to create a plan that’s customized to fit their needs, their life, and their legacy. Their mission is to make estate planning simple, affordable, and inclusive. All of Trust & Will’s documents have been designed and approved by estate planning attorneys to meet the highest legal standards. Their process is simple, secure, complete, and customized for your specific needs and state requirements. To investors, The Federal Reserve pledged to “destroy demand” in early 2022 when they revealed their plan to begin hiking interest rates. For once, the Fed did what they said they would do and their actions had the intended consequences on the American consumer. These rate hikes did not simply destroy demand, but rather they turned the American consumer into an economic punching bag. For example, we can look at car loans. Financing for new cars can range from just over 5% for a great borrower (based on credit score) to 14% for the worst credit scores. Used car loan interest rates are slightly over 7% for the best borrowers and more than 21% for those on the other end of the quality spectrum. Imagine paying 21% interest on a loan for a used car — insane. These rising interest rates are forcing borrowers to miss their payments at a record rate. Claire Ballentine at Bloomberg writes “the percent of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September, the highest in data going back to 1994, according to Fitch Ratings.” It makes sense that more consumers will fall behind on their payments as the payments become more expensive. But remember, majority of Americans need their car to get to work, school, the grocery store, etc. These are usually not exotic purchases, especially at the subprime level, rather they are for a car that is essential to the livelihood and survival of the owner. The Fed’s interest rate hikes has beaten up car owners. This is not the only place we can see this issue. Credit card delinquencies have been an interesting development. The second quarter credit card delinquency rate sat at 2.8%, which is not particularly concerning given that the delinquency rate was 6.8% during the Global Financial Crisis. The concerning aspect is how quickly the rate has almost doubled from 1.6% in 2021 to 2.8% in 2023. You can see the historical context and the rate of rapid acceleration in these charts from the St Louis Fed. Speaking of Fed data, one of the wildest charts is how depleted the personal savings of the American consumer has become. As interest rates have risen, coupled with the persistent appreciation of consumer good prices, citizens have to spend the money that is available to them, including from their hard-earned savings. The last time that the personal savings rate was this low? Leading up to the Global Financial Crisis. That doesn’t exactly instill confidence in market participants who are watching the American consumer get punched over and over again from every angle as interest rates rise. Related to consumer prices, food continues to be an area of concern for the American consumer as well. We have seen inflation ravage this area of citizen’s budget. There were times in the last 12 months where food prices has increased by more than 10% over the preceding year. According to the most recent data, food prices are up almost 4% in the last 12 months, which is slower growth than we have had previously, but the dirty secret is that none of the past price increases to food are going to be rolled back. Once food prices increase, they create a new normal at the elevated level. As Bloomberg showed, food price growth can fluctuate from year-to-year but the aggregate prices of food only continues to grow at a ridiculous rate. Food prices grow faster than wages, so people have a more difficult time affording food each year. This is just another example of the American consumer becoming a punching bag for the US economy. There is no end in sight for the economic pain that citizens are feeling right now. To make matters worse, there is an elevated chance of a recession on the horizon, which would punish consumers who are already in a precarious financial position. The Fed’s mandate to get inflation under control has worked to a degree, but there are concerns that much of the “wins” that have been attributed to the Fed can be explained by high base effects in the CPI numbers. Regardless of whether you think the Fed has done a good job or a bad one, it is objectively true that the American consumer is on the losing end of the current economic situation. We didn’t even get into the fact that according to the US government’s data, $1 in 2020 is worth only $0.83 today. These economic data points showcase why Americans constantly feel like they are falling behind, while simultaneously our national debt continues to explode higher signaling persistent pain in our future. I wish I had better news for you all to start your Monday. We have to call the situation like we see it though. Strengthen your balance sheets. Prepare for more pain. And, of course, hope that I am wildly wrong and things turn out to be much more positive than they seem. I’ll talk to everyone tomorrow. -Anthony Pompliano If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and the business world. Elbridge Colby is the co-founder and principal of the Marathon Initiative, a policy initiative focused on developing strategies to prepare the United States for an era of sustained great power competition. He is the author of “The Strategy of Denial: American Defense in an Age of Great Power Conflict.” In this conversation, we talk about the threat from China, Ukraine & Russia, what is happening between Hamas & Israel, how this all feeds into the economic strength of America, how private sector can make an impact, and what America can do right now to put us in a better position. Listen on iTunes: Click here Listen on Spotify: Click here Earn Bitcoin by listening on Fountain: Click here How America Can Prepare For Conflict With ChinaPodcast Sponsors
You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research. Invite your friends and earn rewardsIf you enjoy The Pomp Letter, share it with your friends and earn rewards when they subscribe. |
Older messages
Podcast app setup
Friday, October 20, 2023
Open this on your phone and click the button below: Add to podcast app
The National Debt Should Fear A Recession
Thursday, October 19, 2023
Listen now (5 mins) | Today's letter is brought to you by Sidebar! Ready to accelerate your career? As we all know, navigating a big career transition is hard to do. It's one thing to set a
Will We See Interest Rates Cut Aggressively Soon?
Thursday, October 19, 2023
Listen now (4 mins) | Today's letter is brought to you by Trust & Will! Trust & Will is the most trusted name in online estate planning and settlement. The company has helped hundreds of
Global Conflict Will Create More Inflation
Monday, October 9, 2023
Listen now (4 mins) | Today's letter is brought to you by Trust & Will! Trust & Will is the most trusted name in online estate planning and settlement. The company has helped hundreds of
The National Debt Is EXPLODING Higher
Wednesday, October 4, 2023
Listen now (3 mins) | Today's letter is brought to you by Sidebar! Ready to take your career to the next level? Make your transition successful by leveraging a Personal Board of Directors. A
You Might Also Like
Simplest trick to gain prospects from Twitter
Friday, September 20, 2024
Every business - big or small - needs an e-sign tool in their stack. But they cost so much. Get this lifetime deal on the best Docusign / PandaDoc Alternative (https://www.rockethub.com/deal/flexisign/
🔍 How To Build An Organic Content Flywheel
Friday, September 20, 2024
September 19, 2024 | Read Online All Case Studies 🔍 Learn About Sponsorships Nearly every brand makes this mistake: their organic content team operates in a silo. Huge mistake. Organic is the testing
Your Invite To BUILD Summit 2024
Thursday, September 19, 2024
Hey everyone, ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
GPT o1 vs. 4o 🥊, Accelerator List 🚀, AI Coming To Your Ads 🤖, and Game-Changing AI Guides 🧭
Thursday, September 19, 2024
Plus: CRO Hacks 📋, B2B Gems 💎, UX Mockup Tutorial Using AI 🎨, Elevator Pitch Tips 🎤, and more!
FREE AI training for marketers…
Thursday, September 19, 2024
Hi Reader, Do you know you need to do more with AI? If so, I've got some high-quality video training for you. It's designed by me. And for a limited time, it's free. GET ACCESS TODAY I can
Exciting announcement
Thursday, September 19, 2024
I've got an announcement just for you: Our master class series last year had a 99% satisfaction rate. Several people have emailed me asking for a repeat of the experience this year... So, we're
📣 Now open: free registration for Litmus Live, SEO for email, and more
Thursday, September 19, 2024
The latest email resources from the Litmus blog and a few of our favorite things from around the web last week. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
Discover the new Digiday Streaming and Video Awards categories
Thursday, September 19, 2024
Showcase how your company is modernizing streaming and video
Fed Begins Easing Cycle with Jumbo 50bps Rate Cut
Thursday, September 19, 2024
Plus House Committee Questions SEC's Crypto Strategy in Divisive Hearing
[Webinar] 👀 Unlock lululemon’s winning social media formula
Thursday, September 19, 2024
Join us for an exclusive peek on October 1! ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏