All Bubbles Eventually Find Their Pin: US Consumers Tap Out, Cryptobubble Has Just Burst, Stock Funds See Biggest Weekly Outflows…

by Chris

US Consumers Tap Out: Personal Savings Rate Plunges To 10 Year Low While Americans Splurge

The latest confirmation that the US consumer is now effectively tapped out came moments ago when the Dept of Commerce reported that in November, Personal Income rose by a lower than expected 0.3% (exp. 0.4%), while US consumers continued to splurge at an accelerated rate, with personal spending rising 0.6%, above the 0.5% expected, as Americans decided to splurge on holiday products and services.

speaking of savings, therein lay the rub, because as Americans splurged in November – and much of 2017 – the personal savings rate continued to decline, and in the latest month it tumbled from 3.2% to 2.9%, the lowest since November 2007, which as a reminder is one month before the recession started.

This incidentally explains the surge in credit card usages we noted last night. As a reminder, the 13-week annualized credit card balances in the U.S. have gone completely vertical in the last few months of 2017, a troubling sign and yet another confirmation that US household savings are almost gone, forcing Americans to resort to savings.


Stock funds see biggest weekly outflows in more than two years

Investors don’t seem convinced that Santa Claus is coming to Wall Street this Christmas.
U.S. stock-market traders pulled an estimated $17.47 billion from U.S.-based stock funds over this past week, the highest weekly outflow since September 2015. That’s according to BofA Merrill Lynch Global Research, which looked at both mutual funds and exchange-traded funds.
The outflows came despite a continuing rise in stock prices; the S&P 500SPX, -0.05%  is on track for a 0.2% gain for the week, and it is within 1 percentage point of record levels. The S&P 500 has gained nearly 20% thus far this year.
Outflows at a time of market gains are “unusual, as flows typically follow returns,” analysts wrote. “In contrast, stock returns have been very strong over the last three months.”
Investors pulling money from stock funds isn’t necessarily a sign that they are turning bearish, despite valuations that are stretched by many metrics. BofA suggested the outflows likely represented profit-taking after a market run that has seen the Dow hit a record number of records while stocks overall experience little in the way of pullbacks or volatility.


We Give Up! Consumers And Corporations Join The Debt Orgy

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Late cycle behavior is everywhere these days. Governments have stopped worrying about deficits, and now the rest of us are apparently joining the orgy.
Corporations, for instance, are buying each other out – mostly with borrowed money – at a record pace:

December’s $361 Billion Deal Haul Is the Busiest in a Decade

(Bloomberg) – Just as most people are packing up for Christmas, dealmakers across the world are rushing to finish up a slew of transactions in industries ranging from consumer to telecom and health care to gambling.Companies have announced about $361 billion of mergers and acquisitions this month, making it the busiest December in at least 12 years, according to data compiled by Bloomberg. On Friday, the last work day before bankers and executives break for the holiday, GVC Holdings Plc of the U.K. agreed to buy bookmaker Ladbrokes Coral Group Plc for as much as 4 billion pounds ($5.4 billion), Deutsche Telekom AG said it will buy Liberty Global Plc’s Austrian unit and Roche Holding AG announced the $1.7 billion acquisition of U.S. biotech Ignyta Inc.
“We have announced three new takeover deals in the last month, and we have worked on a range of M&A continuing through the holiday,” said Gavin Davies, global head of M&A at law firm Herbert Smith Freehills in London. “Clients want to get deals done, for growth, for rationalization, and to get ahead of tech disruption, and they are working hard to make those deals happen?, despite a more challenging political and economic M&A environment.”
Europe has been a hot spot for M&A this year on the back of a more stable economic outlook and growing confidence. Still, the U.S. has seen the biggest transactions in December, led by CVS Health Corp.’s $67.5 billion purchase of Aetna Inc., creating a health-care giant that will have a hand in everything from insurance to the corner drugstore. Also in December, Walt Disney Co. agreed to acquire a large portion of media mogul Rupert Murdoch’s 21st Century Fox Inc. in a $52.4 billion deal.

The busy end of the year may spill over to January and beyond, especially in Europe, according to Cathal Deasy, head of M&A for Europe, the Middle East and Africa at Credit Suisse Group AG.
“Against a backdrop of strong macro fundamentals in Europe, boardroom confidence and supportive capital markets, we are positive on the outlook for European M&A in 2018,” said Deasy. “The strong finish to 2017 gives us further conviction.”

Consumers have lately caught the same fever, and are enthusiastically buying stuff they don’t need with money they don’t have:

U.S. Consumer Spending Rises in November, Savings Rate at 10-Year Low


Well, all bubbles eventually find their pin.
It’s hard to predict exactly how this will play out because for most people the “losses” were in the form of unrealized gains, not actual losses.
But for all the new entrants over the past two months who sold into this carnage, these are straight up losses.
At any rate, I’m placing this here in the HAA gold/silver thread because I want to remind people that an important diversification for getting your wealth out of the crosshairs of the central bankers and their goobermint enablers who wish to thieve your purchasing power has to be in the form of having some primary or secondary wealth.
But the time for making that some into *all* is approaching because there are only two outcomes for a credit bubble – voluntary abandonment (*snort*) or the collapse of the currency system involved.
The Great Crash of 2018?

Crises always take longer to arrive than you think, and then happen much quicker than they ought to.

– Rudiger Dornbusch
An eerie calm has taken over the world markets. Volatility is crashing, and economic and political shocks come and go without any noticeable effect on the asset markets. Inflation and interest rates are also low. So ‘Goldilocks’ is here, right?
Well, no. I have written a collection of dark pieces about the world economy this year. They have followed the tone set in our business cycle forecasts. In March, we took a deep dive behind the façade of the economic expansion to discover the sources of growth. We found them to be unstable, depending on political decisions and thus prone to crash.

In our latest forecast, we envisaged how the world economy would respond if the foundations of global growth would break. It was not pretty. Here I present the main takeaways.


1 thought on “All Bubbles Eventually Find Their Pin: US Consumers Tap Out, Cryptobubble Has Just Burst, Stock Funds See Biggest Weekly Outflows…”

  1. Many consumers are taking the opportunity to spend dollars they know, or at least suspect, are rapidly decreasing in value. Many are aware the dollar is about to lose its status as petro-currency and either slowly or with a sudden crash it will no longer buy what it once did.


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