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Two Ways To Play: Biggest Consumer Credit Drop Ever


Strengthen your portfolio in good times and bad.

The Federal Reserve said today that consumer credit dropped by $7.9 billion to $2.58 trillion. According to Bloomberg, it was the first drop in more than a decade and also the biggest since 1943, when statistics began.

Total borrowing by consumers dropped at a 4.3% annual rate in August. That was the most since January 1998, during the Asian Financial crisis. Revolving debt like credit cards fell by $612 million during the period and non revolving debt, including auto loans, plunged by $7.3 billion.

Economists were looking for an increase of $5 billion in consumer credit in August. In July, credit rose by $5.2 billion, revised upwards from a previous report of a $4.6 billion gain.

For more context on the economy, see today's Five Things You Need To Know by Professor Kevin Depew.

From the Bull Pen: The data certainly isn't very uplifting. But bulls can still look to MasterCard (MA) for an upside trade. There are signs that the selling in this stock may be overdone. Sell stops can be considered around $150.

From the Bear Cave: Bears need to constantly be on the lookout for a sharp countertrend rally. Thus, Target (TGT) in the $45-50 range could be an interesting downside candidate.
No positions in stocks mentioned.

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