Consumer Spendables Indicator

I’ll give TrimTab’s Charles Biderman credit: He is not the one trick pony I previously pegged him as.

To review: Back in August, I read this horrifically ugly quote from Biderman in Marketwatch:

and ignorance seem to be gripping retail investors these days," said
Charles Biderman, chief executive of Santa Rosa, Calif.-based TrimTabs
on Thursday.  "There’s no credit risk; no bank is going to lose money
on this subprime fear," he added. "Income-tax collections are strong,
and you don’t have a housing collapse when wage income and job growth
are surging.  This is a complete panic by individual investors," he
commented. "They just don’t know what’s going on." 

That was a stunningly ignorant comment, and I was set to write off both Biderman and TrimTabs.

Bidderman proved skeptics like me wrong. Instead of merely remaining in consumer weakness denial, he went back to the drawing board to create a "by-the-numbers" quantitative method of tracking consumer spending. The NYT’s Gretchen Morgenson discusses the details:

"TrimTabs calls its new measure the Consumer Spendables Indicator, and it sensibly includes these crucial sources of consumption cash: after-tax wages; after-tax income from nonwage sources, like capital gains, dividends, pensions, partnerships and self-employment; and net equity extraction from consumers’ homes, either through property sales or mortgage refinancing.

For the first time since the fourth quarter of 2003, TrimTabs estimates, consumers will have less money to spend this quarter on a year-over-year basis. The firm expects this figure to fall 0.6 percent from the same period in 2007.

While that may not seem like a meaningful decline, it becomes more significant when compared with the increases the index showed during the real estate boom.

Back when homes were everybody’s favorite A.T.M., mortgage equity extraction propelled the TrimTabs consumer indicator. Beginning in late 2004, quarterly comparisons with year-earlier periods shot up; they peaked at a growth rate of 17 percent in the first quarter of 2006. During that period, consumers had $1.69 trillion to spend; equity extraction accounted for $191 billion then, TrimTabs said, its peak amount."

That sort of intellectual flexibility is worth noting.

Biderman believes the recession has already started, and will not last much longer than the end of 2008.  Quote: “I see this thing lasting longer than the bulls think but not as deep as the bears expect.”

I may not necessarily agree with that, but it is an intellectually defendable position. If Biderman;s forecast turns out to be true, then the window for your ideal equity buying opportunity will open up sometime between May and July . . .


Blaming the Retail Investor   
Wednesday, August 01, 2007 | 11:45 AM

The Buck Has Stopped 
Gretchen Morgenson
NYT, March 2, 2008

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What's been said:

Discussions found on the web:
  1. Steve Barry commented on Mar 3


    Great point…as a bear since early last year, Biderman always coming on CNBC with pretty convincing bullish money flow data scared me all the time. The one thing that intrigues me is I missed his “awakening”…when did he start turning bearish? Was it all at once? Maybe that is why I haven’t seen him on CNBC for awhile.

    On a different note, you must, must do a blog piece on the muni collapse. Since I dumped all my muni fund 2 months ago, these stable investments are down 7%.

  2. Steve TN commented on Mar 3

    I agree with Steve Barry, the muni collapse is astonishing…their action completely severed from treasuries. I too sold out a couple of months ago but only because I thought munis would be the debt instrument that would fall next from the contagion.

    This is one of those rare times when muni yields are similar to treasury yields for the same duration. Munis are approaching one of their all-time greatest buying opportunities.

  3. bluestatedon commented on Mar 3

    “…wage income and job growth are surging.”

    Surging?? For who? For what income groups? Show me the data supporting this notion and I’ll believe it.

  4. Will Rahal commented on Mar 3

    Consumption patterns have changed.
    During the recovery from this last recession,
    wages increased dramatically while the consumption of DG as % of (DG+NG) decreased.
    At the same time an index of ND Consumption/Wages increased to a 4 decade high

  5. MarkM commented on Mar 3


    I have been thinking Biderman was just another sell-side tout as well and have called him worse at times. If he has come over to The Dark Side, well, that is indeed notable.

    Always some interesting analysis over at Will’s place, just like this fine blog.

    Cheers Barry. Come visit at BDG’s from time to time.

  6. larry commented on Mar 3

    News from northwestern Washinton state-

    2 plywood mills shut down until further notice.

    Gas $3.50 per gallon.

    Luxury yacht builder adds third shift due to backlog of $34 million dollar production yachts.

    Gotta keep those tax cuts permanent!

  7. Mises commented on Mar 3

    5 yr TIPs trading at -3 basis points. Yowza!

  8. MooPoint commented on Mar 3

    Off topic, but with all the increases in oil and gold, what does it mean that when priced in gold, the cost of oil hasn’t changed at all? Is that 30% run up since the end of august rate cuts pure inflation?

  9. PureGuesswork commented on Mar 3

    Between May and July? Ok, I got that marked on my calendar.
    Speaking of upcoming stock buying, am I the only one who noticed the FT article about money market funds today? How last week figures from the Investment Company Institute showed that the these funds have increased by over a trillion dollars in the last year? Or looking at it another way, a 42% increase? 1.029 trillion extra dollars sitting in money market accounts. Hmmm.

  10. PrahaPartizan commented on Mar 3

    Did anyone else hear Paulson’s interview with Bloomberg radio which just occurred? How did this man ever get selected as Treasury Secretary? He’s either the world’s most accomplished dissembler or the world’s biggest fool. Either way, his interview indicated that the Bush administration has no clue about how to actually beneficially respond to the economy’s problems. His money quote was the way he described home-owners who were underwater on their mortgages and who were inclined to just walk away as speculators. I guess they aren’t moral enough for somebody who’s willing to work in the Bush administration. Oh, and he believes in a “strong dollar” policy. He also appears to believe in the tooth fairy, the Easter Bunny and maybe Santa Claus too.

    Any ideas?

  11. Eric Davis commented on Mar 3

    RE: “I see this thing lasting longer than the bulls think but not as deep as the bears expect.”

    I kind of buy that… I’d expect at one point there could be enough money built up in cash… “They”(whoever they are) will have to start buying… even slightly.

    I kind of expect a sort of Range bound ‘Commodities stocks driving the market up’.. then ‘Inflation driving it down’ AKA ‘high input costs’. trade for quite some time.

    that may fall into the “not as bullish as the bulls and not as bearish as the Bears…

    and we are starting to see that..

    Of course… the realization that the fed is firing blanks could spell some near term “market doom”…. near term defined as this year.

    Not that I want to agree with them..or disagree.. it will be interesting to see.

  12. Toro commented on Mar 3

    Props to Biderman. Its one thing to be wrong. Its another to stay wrong.

  13. scorpio commented on Mar 3

    as to 1) munis: today it’s just another example of the Wall St machine breaking down w yields rising from say 4% to 6%, but tomorrow it’s going to be serious credit issue as local taxpayers strapped and local infrastructure crumbling, 2) buying this summer: that’s probly right as Fed now losing control of the market’s expectations, they will step aside and restart the rally in the last months before the election, but from much lower level.

  14. Camille commented on Mar 3

    PrahaPartizan (regarding the interview)

    Paulson’s response is what you expect from people who don’t believe that a government can function to serve the people. So their response is to let entropy ‘do the work’ and pray the forces of desperation turn a turd into a diamond. I guess in their world, meals don’t get prepared until the family is starving to death, gas tanks don’t get filled until you’ve stalled on the highway, and leisure hours are spent sitting and watching for things to spontaneously repair themselves.

  15. Crim Jamer commented on Mar 3

    Re: Biderman…

    To build the new indicator, he collected data from as far back as the first quarter of 2002.

    Wow! All the way back to 2002. Impressive…not.

    He got Gretchen’s ear some way, but he’s still a self-promotional clown in my book.

  16. Michael Schumacher commented on Mar 3

    Paulson telling people to not walk away and honor contracts…


    What a douchebag…..

    Sucks to be on the other side of a walk out doesn’t it Hank???

    No bonus for you….


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