Credit Card Defaults – Worst Yet To Come, Food Prices Too

Weather Report: The Economy–Food Prices to Skyrocket, Credit Card Defaults Soar, Consumers and Banks Face a Bleak Future

‘Food Prices’: “Jim Rogers: Food Prices Will Skyrocket” is May 15 headline on the Dan Weil post at Street Talk (moneynews.newsmax.com/streettalk/).

• Jim Rogers, a renowned investor (world class) and business savant, has serious concerns about future investment venues with special emphasis on commodities in general and food In particular: “ … where does Rogers see investment opportunities? Commodities…”
• “The only place I know where fundamentals are getting better is raw materials …”
• KEY “We’re going to have serious food shortages, … Pieces are going to go through the roof.”
  “Commodities are still the best place to be because supply is declining, and governments are printing huge amounts of money.”

Nassim Nicholas Taleb, famous for his prescient financial forecasts, agrees with Rogers.

‘Credit Card Defaults’: “Credit Card Defaults At Record Highs But Worst Is Yet To Come” says Mike “Mish” Shedlock over at Mish’s Global Economic Trend Analysis (globaleconomicanalysis.blogspot.com) today. Here are some highlights:

• “U.S. credit card defaults rose in April to record highs with Citigroup and Wells Fargo posting double digit loss rates as the recession slashed more than 2 million jobs since the beginning of the year.”
• “American Express Card Defaults Exceed 10%”
• “Last month Credit Card Defaults Hit (a) 20 Year High and … this month is worse. Next month will be worse and so to will the month after that. As long as we are shedding 500,000 a month … .”
• “Remember that credit cards are unsecured loans. Card chargeoffs are a direct hit to the bottom line. That bottom line is looking bleak regardless of what nonsense Geithner and Bernanke are spewing about banks being well capitalized.“

‘Consumers and Banks’: First an apology to Michael Panzner: we spelled his last name incorrectly in our May 6, 2009 post. “Panzner” is the correct spelling. It’s to Mr. Panzner we turn to again today, and his excellent blog site Financial Armageddon (financialarmegeddon.com), for insight on the consumers and banks.

Mr. Panzner’s antidote in his article, “The Perfect Antidote”, is Howard Davidowitz, chairman of Davidowitz & Associates and a retail industry consultant. In a Yahoo Finance Tech Ticker piece entitled “ ‘The Worst Is Yet To Come’: If You’re Not Petrified, You’re Not Paying Attention” Mr. Davidowitz explains his outlook and here’s some of that explanation:

• “ith the unemployment rate rising into double digits – and that’s not counting the millions of “underemployed” Americans – consumers are hitting the brakes, which will have a huge impact, given consumer spending accounts for 70% of economic activity.”
• “Rising unemployment and the $8 trillion negative wealth effect of housing mean more Americans will default on ;;;mortgages,…student loans and credit card debt.”
• “More consumer loan defaults will hit banks …along with a “depression” in commercial real estate, …”
• Regarding bank “stress tests”: they were a sham and with the bailout money “…going to the most inefficient parts of the economy, “The bailout money is in the sewer and gone.”

Until next week then; keep your eyes on the horizon as the weathers changing fast.