CUSHION IS ERODING FAST - CLAIMS GO THE WRONG WAY AGAIN

Initial unemployment Claims came in at 480k last week, up from 472k the week prior (revised up 2k). This brings the 4-week rolling average up 12k to 469k from 457k last week. The improvement in this metric since March of last year has been the key metric for our bull case on consumer finance companies. As this rate backs up, we get, on the margin, less bullish, but this metric has shown some drift in the past, both up and down, relative to its predominant trajectory, so we give it some latitude. That's why we use a +/- 3 standard deviation range to keep track of whether the trend in rolling claims is veering off course or is simply moving within the channel. As the following chart shows, claims remain within the channel for now, so we're not changing our bullish view yet. That said, claims are as high within the channel as they've been at any time since the turnaround began, so we think we're at a very important moment in time, and intend to keep an extremely close eye on claims in the next few weeks to see whether we break out of the channel.

Joshua Steiner, CFA

Financials

CUSHION IS ERODING FAST - CLAIMS GO THE WRONG WAY AGAIN - claims