Fund Manager: Sparks Fly Toward The Debt Powder Keg
Silverdoctors.com
May 16, 2018
Dave Kranzler says, “the narrative that the economy continues to improve is a myth, if not intentional mendacious propaganda”. Here’s why…
by Dave Kranzler of Investment Research Dynamics
The stock market has gone 74 days without making a new high but that hasn’t stopped the bulls from boasting about how it is up or flat six days in a row. I still say to sell into strength – David Rosenberg, Gluskin-Sheff
The narrative that the economy continues to improve is a myth, if not intentional mendacious propaganda. The economy can’t possibly improve with the average household living from paycheck to paycheck while trying to service hopeless levels of debt. In fact, the economy will continue to deteriorate from the perspective of every household below the top 1% in terms of income and wealth.
Theoretically, the Trump tax cuts will add about $90 per month of extra after-tax income for the average household. However, the average price of gasoline has risen close to 40% over the last year (it cost me $45 to fill my tank last week vs about $32 a year ago) For most households, the tax cut “windfall” will be largely absorbed by the increasing cost to fill the gas tank, which is going to continue rising. The highly promoted economic boost from the tax cuts will, instead, end up as a transfer payment to oil companies.
The Fed reported consumer credit for March last week. Consumer credit is primarily credit card, auto and student loan debt. The 3.6% SAAR (Seasonally Adjusted Annualized Rate) rate of increase over February was the slowest growth rate in consumer debt since September. Credit card debt outstanding actually dropped 3% (SAAR). But the 6% growth in non-revolving debt – auto/student loans – rose 6% (SAAR). Given the double-digit increase in truck sales in March, which offset the double digit decline in sedan sales, it’s safe to speculate that the increase in consumer credit during March was primarily loans to “buy” trucks/SUVs.
Remember, the average light truck/SUV sales ticket is about $13k more than for a sedan, which means that the average size of auto loans in March increased significantly during March. This is a horrifying thought in my opinion. Here’s why (original chart source was Wolfstreet.com):
The Rest…HERE
