I'm certain there will be plenty of happy talking heads telling us spending hit a record and "cyber sales" were through the roof and I'm also sure that some of those numbers are true. When stuff costs twice as much as last year of course the sales number look good by comparison, duh! It's also glaringly obvious that retail foot traffic is nowhere near enough to justify their happy-talk:
“Crowds? I see nothing. I’m surprised,” retail worker Jeremy Pritchett told FOX 2. “Normally, it’s wrapped all the way around the building. Today: no one.”
(Bloomberg) – Activity Light at One San Francisco Mall (4:40 p.m.) – "At the Stonestown mall in San Francisco, shoppers were few and far between. The Target and Zara stores were mostly empty, and there was no line for the mall’s Santa Claus. Uniqlo and Apple were the busiest locations, but they still weren’t crowded"
Now that the Fed has hiked it's main intervention rates, everything cost more to finance which is causing pain to companies that hold inventory or who have invested in capacity infrastructure. Rates on everything (except my working capital - more on that in a minute) have exploded higher. Some loans have increased carry costs as much as 100% from below 4% to almost 8% and the Fed isn't done hiking, not by a long shot:
"St. Louis Fed President James Bullard noted that “the policy rate is not yet in a zone that may be considered sufficiently restrictive.”
So more hikes are coming even though actual inflation numbers might decrease slightly here short term. But make no mistake; inflation will be coming back much stronger very soon driving rates even higher. The last time inflation caused this much pain in the early 1980's interest rates were ALREADY 12%!! We need to see double digit interest rates on home mortgages before inflation is tamed again.
“Beware because once inflation raises its head, it is very difficult to get it back into the box. We could go down to 6% or 6.5% inflation, but also the inflation cycle just started, and we are going to see much higher inflation.”
Meanwhile, small business owners are experiencing a monumental perfect storm. Owners are being squeezed as costs increase, revenue stagnates and supplies are erratic. The metrics that show overall health of the small business community are butt-ugly:
"Due to high inflation, reduced consumer spending, higher rents and other economic pressures, U.S.-based small business owners' rent problems just escalated to new heights nationally this month, based on Alignable’s November Rent Poll of 6,326 small business owners taken from 11/19/22 to 11/22/22.
Unfortunately, 41% of U.S.-based small business owners report that they could not pay their rent in full and on time in November, a new record for 2022. Making matters worse, this occurred during a quarter when more money should be coming in and rent delinquency rates should be decreasing. But so far this quarter, the opposite has been true."
I'm also seeing used car loan interest rates much higher than before which has softened the demand resulting in "lower" prices - (I'm still not a buyer here though lol) Fico scores above 750 are still paying almost 11% while 450 scores are at 22%.
Some are saying that the used car market is collapsing with Carvana one of the first casualties:
"Carvana – which was making lots of profit re-selling (re-financing) used cars – is a kind of canary in the coal mine and it just fell off its perch, onto the newspaper below. The value of shares in this once-hot-commodity is down 97 percent – and bankruptcy appears imminent."
Our Private capital rates have stayed the same and even trended lower all through the Fed Hikes and massive increases across the board from mortgages to car loans. The reason is our rates are true rates, not subsidized or manipulated. When I quote unsecured capital the risk has been fully evaluated and underwritten. The reason you're seeing rates in the conventional banking world explode higher is because the manipulated, manufactured funny-money scheme which has artificially held interest rates down the last 10 years is unraveling. Now the banking world will experience the shock of swimming around in an unheated pool, we've been in the deep end all along though and the water is just fine!