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Five Things You Need to Know: Too Much Stuff


This is not the culmination, but the beginning of a long-term cultural shift in attitudes toward consumption.


Kevin Depew's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Mortgage Rates Reach Nine-Month High

Thirty-year mortgage rates edged higher this week to 6.45% from 6.42% last week, according to data released yesterday by Freddie Mac (FRE). One-year adjustable rate mortgages (ARMs) rose a bit more, to 5.27% from 5.19%.

What's interesting about this is that it marks the highest level for 30-year mortgages since September. In fact, rates for 30-year mortgages are actually higher than when the Fed began its rate-cutting spree.

Of course, rates on new mortgages are only one part of the story, which leads us to today's Number Two...

2. Homes Becoming Less Affordable Even As Prices Fall

Monthly payments on 30-year fixed mortgages are 6% to 10% higher in 41 of the top U.S. housing markets than they were two months ago, even as home prices have declined year-over-year in 88% of those areas, according to, a provider of home valuations.

"While it's a buyers market in terms of home prices, that is definitely being mitigated by the cost of financing,'' Stan Humphries, Zillow's vice president for data and analytics, told Bloomberg.

3. Process vs. Event

Days in the market like yesterday often feel "event-like." In other words, they seem to take on the feel of an occurrence when in reality it is just one datapoint in a longer-term process. The credit unwind that is ongoing is a long-term process.

Yesterday we noted the action in Oshkosh (OSK), which declined 30% after disappointing earnings and guiding lower. The company said orders were being canceled due to the impact of housing on municipality taxr receipts.

We can't stress how important it is to understand this process. It's the multiplier effect in reverse. Just as the housing boom had a positive multiplier effect on the way up (the wealth effect, tangential employment related to housing, contractors, real estate sales people, etc.), so too will it have a multiplier effect on the way down.

This is what we have referred to as the echo effect; what began on Wall Street among a handful of hedge funds last year at this time with too much exposure to subprime mortgages, has now expanded to include Alt-A and prime mortgages, other types of credit products, credit cards, auto loans and the ability of corporations across a broad range of industries to access credit markets. The most dangerous point in this process will occur when it appears that banks and financials have moved beyond the crisis. At that point, as the process continues to work through the economy, it will echo back to Wall Street from Main Street.

4. Too Much Stuff

Minyan Chase forwarded us an interesting piece by MSN Money's MP Dunleavy that fits neatly with some themes we've been discussing in Five Things over the past few years. Her piece, "The High Price of Too Much Stuff," looks at what she calls "a nationwide consumption disorder that needs to get better before things get a whole lot worse." Dunleavy adds, "The relentless focus on having and buying and wanting and owning -- and using your credit card or your home equity to cover it -- has landed us here: with crates of things we don't need, stuffed into compartments where we never see it, throwing yet more money down the drain for the meaningless thrill of knowing we have it."

In a society exhausted (physically and financially) and pushed to the brink by excessive pursuit of credit and consumption, articles like this one are an important step in the "cleansing" process; they make it OK to stop and reassess priorities. It becomes OK to not consume.

Articles such as this, appearing with increasing frequency over the past few years, are not a culmination, but point toward the beginning of a long-term cultural shift in attitudes toward consumption, a shift precipitated psychologically by the, perhaps subconscious, recognition that many of us are overextended in almost all aspects of life; physically, occupationally, financially, socially.

Reacting to this overextension while bombarded incessantly with overt and covert images, overt and subtextual messages urging us toward ever deeper overextension and consumption requires something more than a simple decision not to consume and add to the pile of stuff we are accumulating without purpose and without need.

It requires the vilification of excessive consumption; the assertion of simplification and downsizing as, first, something "cool", then later as worthy, higher pursuits; as traits where the measure of worth is the opposite of accumulation and is instead absence. The credit-fueled view of absence as deprivation shifts under this weight of material possessions, so that absence becomes its opposite, the presence of some thing conspicuous by its invisibility, and attractive by the difficulty of measurement at a glance, void of design, label, price tag, categorization.

This is not anti-capitalist. It is capitalism evolved, pushed toward the commodification of the intangible, the priceless, involving the exchange of that which defies external measurement.

5. The Seven Signs of Credit Addiction

Are we really addicted to credit? Let's take this simple quiz and find out.

Have we ever substituted one form of credit for another, thinking that one particular type of credit was the problem? You mean, like, buying corporate junk while avoiding mortgage-backed-securities? Cause corporate junk is "ok."

Have we ever manipulated or lied to a lender to obtain credit? Hmm, like overstating our income on a loan application, or if loaning money, overlooking reasonable lending standards?

Have we ever used one form of credit to overcome the negative effects of another type of credit? Three words: Term Auction Facility.

Do we avoid people or places that do not approve of our use of credit? Are there such places?

Have we ever used credit without knowing what it was or what it would do to us? Haha, isn't that what credit default swaps are? Haha. Hahaha. Uh. Ha. Ahem. Yes.

Do we put the purchase of loans ahead of our financial responsibilities? No, we need the loans to meet our financial responsibilities.

Does the thought of running out of credit terrify us? It terrifies the Federal Reserve.

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