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Trading Retail While Consumers Charge Less

Revolving credit continues to drop, even though the likes of JPMorgan said loan losses are falling, reports CNBC's Melissa Lee. So how is the consumers' reluctance to charge affecting retailers?

Burned by charge-offs and other bad loans, banks have scaled back consumer credit lines and consumers are paying off or defaulting on high-rate credit cards in hopes of getting back into the black. In July, revolving credit dropped at an annual rate of 6.25 percent, according to data from the Federal Reserve. It is a stark contrast to July 2007 when revolving credit rose 6.5 percent.

Now less likely to charge, consumers are spending less. From July to August, consumer spending rose less than .25 percent. The credit crunch, however, is boosting sales in discount stores like Family Dollar. Stores targeting the middle class and those that sell big ticket items, like cars, continue to suffer.

Even though middle class customers may still be somewhat squeezed, Metropolitan Capital Advisors president Karen Finerman still likes TJX Companies, the operator of T.J. Maxx, Marshalls and other stores.

Brian Kelly, founder of Kanundrum Capital, said he hasn't played the retail space because of credit tightening.

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Trader disclosure: On Oct.13, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman owns (GOOG); Finerman’s Firm owns (IBM); Finerman and Finerman’s Firm own (JPM); Finerman and Finerman’s Firm own (BAC); Finerman’s Firm own (MSFT); Finerman’s Firm owns (RIG); Finerman’s Firm owns (WMT); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts; Terranova Owns (APA), (AAPL), (IBM), (OXY), (RSH), (UPL), (XBI), (JOYG), (C), (AXP), (SWN), (AGU), (EOG), (HES), (OIH), (ORCL), (SU), (VRTS), (FTO), (RIG), (PEP), (POT), (CRM), (CF), (VMW); Terranova Owns (AAPL) puts; Pete Najarian owns (DD), (TSO), (YHOO), (AKAM), (BMC), (F), (LVS); Simon Baker Owns (SLW), (IGTE); Simon Baker's Firm Owns (SLW)

For Anthony Scaramucci
Scaramucci and SkyBridge Capital own (RL)

For Brian Kelly
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (ADM)
Accounts managed by Kanundrum Capital own (GS)
Accounts managed by Kanundrum Capital own (JEF)
Accounts managed by Kanundrum Capital own (MSFT)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
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Accounts managed by Kanundrum Capital are short U.K. Pound
Accounts managed by Kanundrum Capital are short Mexican Peso

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Citigroup has a significant financial interest in relation (NKE), (VFC), (BBY), (ODP), (SPLS)
Citigroup received investment-banking compensation within the past 12 months from (LIZ), (VFC), (ODP), (AZO), (SPLS)
Citigroup received compensation for non-investment banking services from (FL), (LIZ), (NKE), (PVH), (RL), (VFC), (BBY), (ODP), (OMX), (WSM), (AZO) (COLM), (SPLS) (BBBY) in the past 12 months
Citigroup had within the past 12 months, (LIZ), (VFC), (ODP), (AZO), (SPLS) were investment banking clients

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