WSJ: Consumers in China and Brazil Discover Debt

Number of the Week: Consumers in China, Brazil Discover Debt.Number of the Week
17.1%17.1%: The rise in Chinese credit-card balances in 2009.

While consumers throughout the developed world struggle to shed debt, their counterparts in China and Brazil are piling it on.

In 2009, the year the global recession hit bottom, the aggregate credit-card balances of Chinese consumers rose 17.1% even as those of U.S. consumers fell 8.7%, according to a study by financial consultancy Lafferty Group. Brazilians increased their balances by 28.9%, part of a 9.2% rise throughout Latin America.

More people going into debt might not sound like a desirable development, but in some ways this could be. One of the global economy’s biggest problems has been its dependence on an overstretched U.S. consumer. If folks in places such as China and Brazil are now stepping up and taking on some of the burden, that could provide some much-needed rebalancing.

To be sure, the picture is still unclear. The U.S. is running a large current-account deficit, which means Americans are still spending more than they earn, while the rest of the world — including China — saves to make up the difference.

The data from Lafferty, though, suggest at least the potential for that picture to change. As of 2009, China, Brazil, India and Russia had a total combined credit-card balance of $143 billion, still a far cry from the U.S.’s $849 billion but getting into the same league. Two Chinese banks were among the global top ten by number of cards issued.

The danger, of course, is that consumers in the developing world get themselves into the kind of credit bubble that triggered the most recent global crisis. By international debt standards, it looks like they have a way to go. China’s total credit-card balances amounted to only 2.4% of the country’s annual economic output, compared to 6.0% in the U.S. Brazil’s stood at less than 1%, and India’s was even smaller.

In other words, a little well-placed profligacy might yet do the world some good.

Stock meeting 8/5/2010

Stock meeting 8/5/2010

Telnor on the watch list (if we can get data from Baseline)

ITRI:
-DS looking into it, very expensive presently. Concerns that competition is catching up and the premium could be uncalled for. ENOC is a competitor, as is Silver Spring.

Inflation/deflation: how to position portfolios.
-Sean sent a GE bond, inflation linked. Priced at par. In a year, resets to 3 month libor plus 75 bp. 1% floor, resets each quarter.

China:
-Tough ahead. More internal competition with Chinese manufacturers.
-Next year some pundits see it as slowing
-Hard to know what will happen since the gov't can control so much
-Chinese more likely to buy RE than equities