The consumer has a revolver, but who is it pointed at?

There was much cause for celebration Friday as the Bureau of Labor said 271K jobs were created. But little was made, except here about the 165K phantom jobs — jobs Labor can’t count but believe were created — being added to the 271K.

Another statistic this one from the Federal Reserve said household borrowing jumped $28.9 billion jump in total credit. Again celebration that the consumer is back.

Taking on debt seems to be a perverted way of saying all is clear.  Non-revolving debt for college tuition and auto purchases, rose $22.2 billion, the most since July 2011.

Now let’s see. Hedge funds struggling to make returns have jumped into the auto/truck loan sector, since that is the one area in finance not regulated by Dodd-Frank.

Not surprising since it’s the one industry that has union control and is a favorite of the Obama Administration.

So American’s extended their $1 trillion appetite in student loans and doubled down on a no-interest, 72-month auto loan with no income check.

Revolving debt, which is credit cards, was up $6.7 billion, the biggest gain in three months, after a $4 billion advance, the Fed report said.

Hmm, what could go wrong.

I can’t take the spin coming out of the business media that the consumer is back. While some say the consumer is more comfortable and therefore has the means to afford the loan, I believe that the consumer is taking advantage of ultra cheap rates to upgrade a 10-year-old vehicle — on average according to latest data — by putting little skin in the game as far as down payment goes.

We already went through the “using your house equity as an ATM” phase, now the consumer is using cheap auto loans as a Uber with no surge pricing.

If we learned anything from the Great Recession, the consumer can get away with non-performing loans with little downside, because when hedge funds and Wall St. do the financing they are not in the business of servicing loans, they are writing them and selling them. Who cares if they are non-performing, let the investor worry about that.

And from the consumer side, foreclosure and repossession no longer hold the stigma it once did.

So what could go wrong? The consumer has a revolver, but who is it pointed at?

 

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