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The death of the U.S. Consumer has been greatly exaggerated...



I'm usually pretty optimistic but some of the replies to this tweet have me questioning the survival of the species...

Anyway, the tweet is in reference to this story πŸ‘‡πŸ‘‡


Wells Fargo tells customers it’s shuttering all personal lines of credit
Wells Fargo CEO Charles Scharf has been forced to make hard decisions during the pandemic, offloading assets and deposits and stepping back from some products.

Even away from the ZH replies, I've seen some terrible takes on this being an indicator of continuing low demand for credit.

A bit of context goes a long way...

See, Wells Fargo are aren't like other banks. πŸ‘‡


Wells Fargo scandals: The complete list
Here’s an overview of Wells Fargo’s most notable scandals and missteps as CEO Tim Sloan testifies before the House Financial Services Committee.

In 2018, the Fed sanctioned Wells Fargo and effectively capped their growth.


Until the firm makes sufficient improvements, it will be restricted from growing any larger than its total asset size as of the end of 2017

They are making progress, but it's still a long road ahead...

All of which hopefully explains why a Wells Fargo announcement is a terrible indicator of lending intentions...

You know what isn't a terrible idea? Signing up to this debate and the chance to win $5K in EQO... πŸ‘‡πŸ‘‡ πŸ‘‡



Back to Zerohedge.

After declaring the consumer dead, strange noises were heard in the morgue just a few hours later...



Boom! Back from the dead and spending like crazy, must have good WiFi in that fridge...

Now, this isn't going to be a ZeroHedge pile-on.

But it does really draw attention to something very important going forwards.

Is there going to be demand for credit?

One thing to really take note of on your Internet travels...

This is nothing like 2008 when every asset had to be re/de-valued and there was no confidence in the solvency of banks or individuals.

That lack of confidence led to a credit crunch.

This time, the economy has not slowed as much as originally feared.

Banks are full to the brim and ready to lend.

Borrowers have actually paid down debt during lockdown while assets have generally appreciated in value.

If ever there was a time that lenders and borrowers should be in sync, this is it.

  • Banks want to lend
  • Households are less indebted
  • Collateral (assets) to secure lending against has increased in value

Even business lending should pick up... If you're a business that needs to invest in machinery, factories, and any tangible assets, why not do it now, at record low rates?

Banks are doing their bit by not easing lending standards...



The WSJ compiled data from various sources to show that the consumer is willing to borrow, and they're already underway. πŸ‘‡πŸ‘‡πŸ‘‡


Borrowing Is Back as Sign-Ups for Auto Loans, Credit Cards Hit Records
Lenders extended a record number of auto loans and leases in March and issued more general-purpose credit cards than any other March on record.

But with vaccinations readily available in the U.S. and the economy reopening, many Americans are splurging on cars, vacations and eating out. Higher prices, especially for cars and trucks, have also stoked loan demand.
β€œThere’s a significant increase in consumer-credit demand and a growing appetite to use credit on things like those vacations that were postponed for 18 months,” said Tom Aliff, senior vice president of analytics consulting at Equifax.
At JPMorgan Chase & Co., customer spending on credit cards increased about 17% in May from the same month in 2019. Gordon Smith, the bank’s co-president, said at a June conference that he expected the trend to continue throughout the year.
Brendan Coughlin, head of consumer banking at Citizens Financial Group Inc., said he expects consumer lending to grow for the next 12 to 24 months, first as people use up their last stimulus payments and then as they increase spending on credit cards.
β€œThe U.S. consumer is poised to lead the economic recovery across the country,” Mr. Coughlin said.
Some lenders are also extending more credit to people with low credit scores. Some 1.4 million general-purpose credit cards were given to subprime borrowers in March, up 28% from last year and 25% from 2019.
Roughly 602,000 subprime auto loans and leases were originated in March, up 31% from a year before. Balances on those auto loans and leases totalled $11.7 billion, the highest on record.

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The U.S. consumer is a long way from being dead, and there's every reason to think they'll increasingly splash the cash as the economy continues to recover...

As the largest consumer market on the planet (and responsible for 70% of U.S. GDP) that can only be a good thing...