The $22 trillion national debt was our beat yesterday. To summarize: If you think there's a party of fiscal responsibility, you're fooling yourself.
Nobody will care in Washington, D.C. until it's too late. They're all too busy spending your tax dollars to worry about paying anything back.
And today, our third Bear Market Signal that we're watching closely is a more personal problem: household debt. This is the dollars and cents that Americans owe directly on mortgages, student loans, auto loans, and credit cards.
Despite a growing economy... near record-low unemployment... and low levels of inflation... most Americans can't scrape together $500 to handle a life-and-death emergency.
And now, we're starting to see this debt catch up to folks.
Recent headline numbers from the New York Fed on household debt and credit seemed to continue the "more, more, more" debt binge trend we've seen for years...
Total household debt recently rose for the 18th straight quarter. It's now at a new record of $13.54 trillion. As you can see below, that's well over the previous credit-cycle peak of $12.68 trillion in the third quarter of 2008...
However, beneath the surface, not all the data were so "rosy"...
The report also noted that the number of credit inquiries within the past six months — which is an indicator of future consumer credit demand — didn't just fall last quarter... It fell to the lowest level ever seen in the 20-year history of this data.
This is concerning... It suggests consumers are becoming unwilling (or unable) to take on even more debt.
And it confirms similar data from the Federal Reserve's quarterly survey of bank loan officers in January, showing a significant slowdown in demand for loans — as well as tightening lending standards — to both households and businesses.
Of course, so far in this credit cycle, nothing has snapped... yet.
But the financial strain continues to grow.
One of the first things people stop paying is unsecured credit cards. There's no immediate consequence, because there's usually nothing of value for a creditor to take.
Credit-card delinquencies over 30 days are up 10 straight quarters, rising from 5.1% in the second quarter of 2016 to 6.7% in the fourth quarter of 2018. Altogether, $58 billion of credit-card debt is now delinquent over 30 days. And 8% of all credit-card debt is more seriously delinquent — with no payment in more than 90 days.
But that's not all...
One of the other first signs of trouble in the next credit-default cycle is likely to appear in subprime consumer loans... particularly subprime auto loans. And that's exactly what appears to be happening now...
According to the Fed, more than 7 million Americans were "seriously delinquent" — defined as 90 or more days past due — on these loans in December. This is the highest level ever reported... And it's roughly 1 million people more than at the end of 2010, the peak of the last default cycle.
This trend is being led by the least-creditworthy borrowers...
The number of loans that were current or less than 90 days late in the previous report that have now become seriously delinquent is now growing at a rate of 8%. Again, that's the fastest rate since 2010.
It's still early, of course...
But this is exactly how the credit cycle turns... quietly and slowly at first, while most data show everything is fine. The "fireworks" come later.
Stansberry Research founder Porter Stansberry and legendary investor Jim Rogers will detail how this credit cycle ends... as well as what to do to prepare your portfolio... on May 15 at 8 p.m. Eastern time.
If you haven't yet done so, you can register as a VIP for the big event by entering your phone number below. Not only will it guarantee your spot at the event, it will also ensure that you receive a complimentary text message reminder on the day of the event, plus any other important updates we need to send you. Don't worry, we won't use your phone number for anything else and we won't spam you.
Our 4th Bear Market Signal focuses on the third leg of the "credit market." You see, since the last financial crisis, credit has been cheap and easy to access. And during the current credit cycle, the biggest excesses have occurred in this corner of the credit market. Click the "Bear Market Signal #4" button below to learn more.
Jim Rogers is an American businessman, investor, traveler, financial commentator and author based in Singapore. Rogers is the Chairman of Rogers Holdings and Beeland Interests, Inc. He was the co-founder of the Quantum Fund and creator of the Rogers International Commodities Index.
Porter Stansberry founded Stansberry Research in 1999 with the firm's flagship publication, Stansberry's Investment Advisory. He is also the host of Stansberry Investor Hour, a weekly broadcast that has quickly become one of the most popular online financial radio shows. At Stansberry Research, Porter oversees more than twenty of the best editors and analysts in the business, who do an exhaustive amount of real-world, independent research.
Austin Root is editor and portfolio manager for the Stansberry Portfolio Solutions products and American Moonshots. He is also director of corporate development at Stansberry Research and a senior analyst for Stansberry's Investment Advisory.