For Immediate Release
Chicago, IL – December 1, 2011 – Zacks.com announces the list of
stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include American Express
Company (AXP), Discover Financial
Services (DFS), Capital One Financial
Corp. (COF) and Macy's Inc. (M).
Get the most recent insight from Zacks Equity Research with the
free Profit from the Pros newsletter:
http://at.zacks.com/?id=5513
Here are highlights from Wednesday’s Analyst
Blog:
Can You Live Without Debt?
Remember the fictional immigrant Balki from the TV show "Perfect
Strangers"? He seemed to speak a universal truth when he said,
“Am I in debt? I'm a true American.”
Well, not anymore. After being battered by the latest recession,
Americans are gradually learning to live without debt, priming
protection over growth.
According to a report released by the New York Federal Reserve,
U.S. consumers continued to free themselves of debt in the third
quarter, showing a 0.6% sequential decline. The decline was
primarily led by reduced mortgage balances.
Consumer debt increased substantially during 2002–2008. In 2007,
consumer debt had swollen to about 135% of disposable income. Since
then, the level has been seeing a steady decline.
It is a common perception that living without debt is just
impossible, as our society has structured certain high-value
consumptions like higher education, cars and homes that translate
to our future financial growth. And these consumptions need big
dollars, for which you often need a loan.
So, before looking at the detailed consumer debt data for the
reported quarter, let’s take a look at the feasibility and
boon/bane of a debt-free situation.
Discard Debt Mania
There could be a better way to keep ones life cycle intact even
without the regular credit. The demerits of a debt burden are not
unknown to any of us. Naturally, nobody wants to get involved in
one.
But our society and lifestyle force us to think mechanically.
Have you ever taken a loan with the intention of fueling economic
growth? Of course not. We indulge in loans to make ourselves
wealthy, forgetting the wonders that savings and wiser spending can
do. Perhaps tighter purse strings and a saving habit are all we
need to better serve ourselves our own needs and those of our
economy.
Though moving toward a debt-free economy will make it difficult
for policymakers to frame growth models in the near term, this
could be a positive for the long-term health of the economy, making
lives easier for generations to come.
What is Consumer Debt?
In economics, consumer debt implies a fund for individual
consumption and not investment. Theoretically, this fund should be
used for the purchase of consumable goods that do not appreciate in
value directly or indirectly.
However, in reality, consumer indebtedness for anything -- from
consumption to investment -- is counted as consumer debt.
Any Good for Economy?
In post-Keynesian economics, consumer debt is viewed as an
instrument to increase domestic production. If consumers get easy
credit to step beyond their real purchasing power for valuable
consumption, consumer goods will be in hot demand. Consequently,
the demand surge should translate into higher overall domestic
production.
According to economist Milton Friedman’s permanent income
hypothesis, consumers take major loans to finance their big
expenditures like housing and schooling earlier in their careers to
make life circles smooth and constructive. These expenditures help
motivate them to earn more and repay debts. So, a complete consumer
debt cycle helps the economy move forward with higher domestic
production.
The permanent income hypothesis has proven its worth in South
Korea. The increase in South Korean consumer debt has significantly
fueled its economic growth.
But the consumer debt model is neither the mandate, nor the
mantra for GDP improvement in every country. Credit card debt is
almost unfamiliar in Japan and China. But these countries are
progressing well, with China being an undisputed economic
forerunner. These two countries made this possible with their
long-standing social mindset against consumer debt. So why can’t
America?
Are Americans Attempting?
According to the report issued by the New York Federal Reserve,
total consumer indebtedness stood at $11.66 trillion at the end of
the third quarter, down approximately $60 billion or 0.6% from the
revised second quarter total of $11.72 trillion.
A major debt reduction was witnessed in real estate during the
quarter. Mortgage indebtedness fell 9.6 % from its peak. Also, the
number of people applying for new mortgage loans decreased 17%.
This reflects that Americans no longer prefer to buy a home with a
huge loan as the value appreciation of landed property is
uncertain.
Credit card debt fell marginally to $693 billion. Also, the
number of open credit accounts declined 23% from its peak in 2008.
Aggregate credit card limits were down.
Though student loans increased marginally to $865 billion from
$845 billion in the prior quarter, this was below market
expectations. According to Lauren Asher, president of the Institute
for College Access and Success, student loans typically increase
during recessions, particularly for higher education, as people
tend to seek more education with the expectation of a better job
and better pay.
On the flip side, the number of people defaulted on their
payments increased during the quarter. At the end of September, the
delinquency rate increased to 10% from 9.8% at the end of June.
Also, the number of credit inquiries increased during the
quarter.
However, in October, credit card companies reported mixed
results, with American Express Company (AXP) and
Discover Financial Services (DFS) witnessing lower
delinquency rates and Capital One Financial Corp.
(COF) experiencing the opposite.
We think the overall declining trend of consumer debt reflects
the willingness of Americans to offload their debt burden. We are
also appreciative of the recent government regulations that have
gone a long way to change customer habits to a great extent. In
this context, the Dodd-Frank Wall Street Reform Act is worthy of
mention. It has forced credit card issuers to tighten credit
standards, making credit card debt less accessible to
consumers.
Languishing Consumer Confidence?
One school of thought argues that the decline in consumer debt
is just a reflection of lower consumer confidence. With shoppers
seeing fewer promises from the economy as it continues to lack
luster, they are changing their buying habits and cutting down
their consumption borrowings.
However, the data released by the Conference Board on Tuesday
reveals that the Consumer Confidence Index increased to 56.0 in
November from 40.9 in October. This is the highest since July, when
the index hit 59.2.
Also, according to the data from the Commerce Department last
week, consumer spending, which accounts for two-thirds of the
economy, grew the fastest in third quarter so far this year. In
fact, the quarter saw an annualized growth rate of 2.3% for
consumer spending.
In fact, earlier this week, the National Retail Federation said
that retail sales during the Thanksgiving weekend climbed 16.4%. On
average, consumer spent $398.62, up 9.1% year over year. Cash
counters kept ringing, and retailers such as Macy's
Inc. (M) enjoyed a weekend of significant gains.
So, it’s obvious that the consumer sentiment for buying
consumables is still strong. The only difference is that they are
actually reducing their borrowings for consumption.
No Pain, No Gain!
You don’t have to worry about getting consumer spending back on
track. The policymakers will do that for you. There’s a far simpler
job for you – just cut your coat according to your cloth!
Obviously, no one wants you to change your lifestyle overnight.
That’s impractical. But the effort to live a debt-free life should
continue. Each small step taken could be a giant leap for the
economy.
Most importantly, we need to focus more on savings, so that
gradually we can finance our own mega-spending for home, education
or a car.
Debt avoidance will call for sacrifices initially. But if you
can make yourself debt-free, you are an assured winner of life-long
financial security and peace of mind.
Want more from Zacks Equity Research? Subscribe to the free
Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and
qualitative analysis to help investors know what stocks to buy and
which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly
traded stocks. Our analysts are organized by industry which gives
them keen insights to developments that affect company profits and
stock performance. Recommendations and target prices are six-month
time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides
highlights of the latest analysis from Zacks Equity Research.
Subscribe to this free newsletter today:
http://at.zacks.com/?id=5517
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc.,
which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew
he could find patterns in stock market data that would lead to
superior investment results. Amongst his many accomplishments was
the formation of his proprietary stock picking system; the Zacks
Rank, which continues to outperform the market by nearly a 3 to 1
margin. The best way to unlock the profitable stock recommendations
and market insights of Zacks Investment Research is through our
free daily email newsletter; Profit from the Pros. In short, it's
your steady flow of Profitable ideas GUARANTEED to be worth your
time! Register for your free subscription to Profit from the Pros
at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the
performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook:
http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results.
Investors should always research companies and securities before
making any investments. Nothing herein should be construed as an
offer or solicitation to buy or sell any security.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
http://www.zacks.com
AMER EXPRESS CO (AXP): Free Stock Analysis Report
CAPITAL ONE FIN (COF): Free Stock Analysis Report
DISCOVER FIN SV (DFS): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
Zacks Investment Research
Grafico Azioni Discover Financial Servi... (NYSE:DFS)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Discover Financial Servi... (NYSE:DFS)
Storico
Da Lug 2023 a Lug 2024