Credit Bubble Brewing

• 3 min read
Credit Bubble Brewing

MARKET MOVERS

  • Big Tech companies are pulling back on hiring. After years of adding jobs at a rapid pace, some of America’s fastest-growing companies like Twitter, Amazon, Meta, and Uber have signaled in recent weeks that they plan to take a more cautious approach to bring on new workers. The shift by these technology giants raises questions about the direction of the overall U.S. job market. Read more here.

  • The economic outlook may not be as bad as the market fears. The labor market is alive and well. Companies are filling on average more than half a million open positions a month in 2022, wages are rising — albeit not as fast as the cost of living — and companies are still making money at a healthy clip, registering a 9.1% profit gain in the first quarter, according to FactSet estimates. Read more here.

  • G-7 to continue economic pressure on Russia. Group of Seven foreign ministers vowed to reinforce Russia’s economic and political isolation, continue supplying weapons to Ukraine and combat a “wheat war” being waged by Moscow. They would work on finding logistical solutions to get vital commodities out of Ukraine’s storage before the next harvests.

  • US consumer sentiment falls to lowest in more than a decade. The University of Michigan’s sentiment index fell to 59.1 from 65.2 in April. Consumers expect prices to rise 5.4 percent over the next year, holding at a four-decade high for the third month in a row. They expect prices will rise at an annual rate of 3 percent over the next five to 10 years, also unchanged from April.

  • 52% of homes sold above list price in April. Up from 45% in March and from 42% a year earlier. Homes in April sold for an average of $13,655 above the list price across metro areas. In San Francisco, 82% of homes sold above the list price. Denver had the second-most-competitive metro, with 70% of homes selling above the list price. San Diego, Boston, and Los Angeles saw 65% of their homes sell above the list price in April. Read more here.

  • Homebuyers have doubled their down payments. Buyers, on average, offered a $28,000 down payment in the first quarter. In 2020, down payments averaged $14,000. The percentage of down payments has grown, too. In the first quarter of 2020, buyers averaged a 10.9% down payment on the purchase price, compared to 13.1% in the first quarter of this year.

  • Buyers now snapping up homes in 15 days despite the latest wave of rate hikes. In the wake of rising mortgage rates, homebuyers are racing to seal the deal on a scant number of listings before another economic shift knocks them out of the market. As a result, the typical home listed between April 8 and May 8 sold within a record-smashing 15 days. Read more here.

WHAT TO WATCH

  • A consumer credit bubble is coming, says David Friedberg. Consumers are not slowing down with their purchases or changing their lifestyle as quickly as investors are changing their investing style. Prices are going up 10% year-over-year. So the concern is if we do hit a recession, and we don't see real wage growth while the consumer credit bubble continues to grow, we're going to face a crisis where consumers cannot afford all these credits. Source(1:33:50)

  • Terraform’s Kwon floats blockchain restart plan. The proposal includes the redistribution of ownership of the blockchain network to investors who saw the value of their TerraUSD stablecoin and Luna tokens get wiped out this week. The proposition, titled “Terra Ecosystem Revival Plan,” would distribute 1 billion new Luna tokens to UST and Luna holders. Read more here.

  • GM’s Cruise and BrightDrop explore self-driving electric vans. Cruise and BrightDrop have started early-stage work that could eventually put a self-driving system into the electric vans, potentially creating a driverless package-delivery service. The nascent project could be a logical next step for GM, whose Cruise unit has mostly been focused on getting its robotaxi business running and generating revenue.
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