Quick note: I included a photo from the Center for Consumer Freedom in yesterday's newsletter that I labeled a "PSA." My longtime readers know that many of my headlines are not to be taken literally, but I think some folks were confused.
(Today's Smart Brevity count: 1,280 words, 5 minutes.)
Lower- and middle-income households in the U.S. are just starting to feel the benefits of the economic recovery as wage growth has picked up over the last year, but many are still struggling because the pace of wage gains has not kept up with expenses.
Why it matters: As a result, more Americans are taking on debt in the form of personal loans, which are now outpacing credit cards and auto loans as the fastest-growing debt category in the U.S., according to data from credit reporting firm Experian.
What's happening: Many consumers are taking on the debt through online installment loans, which hold longer payoff times than notorious payday loans, "but often the same sort of crippling, triple-digit interest rates," Bloomberg notes.
The intrigue: The increase in lending is also the result of fintech products, which have more than doubled their market share of unsecured personal loans from 22.4% in 2015 to 49.4% in 2019, Experian says.
The big picture: "In the past, personal loans were often considered a last resort for people trying to escape debt," Experian's Matt Tatham wrote earlier this month. "But since financial technology firms, or fintechs, began flooding the market in recent years with unsecured personal loan offers, personal loan balances have surged."
Fed Chair Jerome Powell has not been one to disappoint markets and is unlikely to do so today when the Fed announces its October policy decision today.
The intrigue: Asset prices will likely be little moved after the release of the Fed's rates decision, because all eyes will be on the statement and press conference.
Of note: The U.S. Treasury yield curve has steepened significantly this month, with yields on the 3-month and 1-month T-bills falling back below the 10-year note. Both curves had been inverted for the better part of the last five months.
What to watch: Before the Fed decision, ADP’s private jobs data is out at 8:15am ET, and third quarter U.S. GDP arrives at 8:30am.
The Conference Board’s consumer confidence index dipped slightly in October, but showed a notable decline in the survey's future expectations component and a growing divergence between respondents' views of their current situation and their expectations for the future.
By the numbers: Expectations fell 0.9 points during the month and have dropped by 17.5 points from their 2019 peak in July, Pantheon Macroeconomics chief economist Ian Shepherdson says in a note.
Why it matters: "The trend now probably is declining — not surprising given the ongoing trade war and specifically the August 1 announcement of tariffs on consumer goods."
But, but, but: Another consumer sentiment survey from online survey research company Morning Consult shows just the opposite.
Tesla’s third-quarter revenue fell by $2 billion, or almost 40%, in the U.S., a regulatory filing released Tuesday showed, the company's first drop in more than two years.
The big picture: Tesla is sacrificing sales of its higher priced vehicles and in higher value markets like the U.S. to focus on growing its low-cost Model 3 and increasing market penetration in China.
What they're saying: “Musk & Co. are laser-focused on Europe and China for growth, while domestically, core demand is fading relative to other regions,” Wedbush analyst Dan Ives told CNBC, adding that U.S. growth will remain more challenging going forward.
Yes, but: Analysts at Roth Capital on Tuesday downgraded Tesla shares to sell, calling the company's margins "unsustainable." They note that the Q3 filings shows warranty adjustments and other one-time items were "a large driver of perceived strength" in Tesla's Q3 earnings report that resulted in the stock's big gains.
Ratings agency Moody’s warned Tuesday that bond and credit investors are taking on more risk and making more sacrifices in safety and compensation than they have in the past.
Two of the most prominent findings were that "credit quality continues to deteriorate" and that "investors have lost more control over debt terms and credit protections."
"[S]everal of our industry outlooks have turned negative, including global manufacturing, chemicals, autos, auto parts, steel and coal. Given the already existing proliferation in low ratings, downgrades and defaults could pick up without a recession."
"Moreover, it is likely the next downturn will last longer. One of the primary reasons is because the Federal Reserve’s ability to administer quantitative easing has shrunk meaningfully in this ongoing low rate environment. We continue to track trends across the credit markets, with our proprietary metrics largely pointing to a slow shift toward rising risk. Stay tuned."
There was more bad news Tuesday for two U.S. industries President Trump pledged to bring back — coal and manufacturing.
Details: Murray Energy, the third largest U.S. coal producer, announced it had filed for bankruptcy.
Why it matters: Murray is the latest in a string of coal sector bankruptcies — the fifth this year, with dozens more expected to reach at least selective defaults by year-end, according to S&P Global — that underscores how power markets are moving away from coal in favor of natural gas and renewable energy.
Context, per Axios' Ben Geman: Coal, which once provided well over half of U.S. electricity, is at around 25% of the power mix today and it's slated to be 22% next year, according to Energy Department data.
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