Housing and auto sales appear to have hit a wall over the last 8-12 weeks. To be sure, online holiday sales jumped significantly year over year, but brick-n-mortar sales were flat. The problem there: e-commerce is only about 10% of total retail sales. We wont know until January how retail sales fared this holiday season. I know that, away from Wall Street carnival barkers, the retail industry is braced for disappointing holiday sales this year.

A subscriber asked my opinion on how and when a stock market collapse might play out. Heres my response: With the degree to which Central Banks now intervene in the markets, its very difficult if not impossible to make timing predictions. I would argue that, on a real inflation-adjusted GDP basis, the economy never recovered from 2008. Im not alone in that assessment. A global economic decline likely started in 2008 but has been covered up by the extreme amount of money printed and credit created.

Its really more of a question of when will the markets reflect or catch up to the underlying real fundamentals? Were seeing the reality reflected in the extreme divergence in wealth and income between the upper 1% and the rest. In fact, the median middle class household has gone backwards economically since 2008. That fact is reflected in the decline of real average wages and the record level of household debt taken on in order for these households to pretend like they are at least been running place.

The steep drop in housing and auto sales are signaling that the average household is up to its eyeballs in debt. Auto and credit card delinquency rates are starting to climb rapidly. Subprime auto debt delinquencies rates now exceed the delinquency rates in 2008/2009.

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