Consumer Debt: Don’t Say We Didn’t Warn You

2023 could be the roughest year for borrowers in more than a decade [View in browser]( Proprietary Data Insights Top Big Bank Stock Searches This Month Rank Name Searches #1 Bank of America 107,906 #2 JPMorgan Chase 62,982 #3 Citigroup 49,154 #4 Wells Fargo 30,022 #5 Bank of Nova Scotia 13,559 #ad [3 Top Investment Trends]( A couple months ago, The Juice asked, [Can You Trust Big Banks?]( Specifically when these banks speak about the strength of the American consumer. Because for months, what they say they see doesn’t jibe with reality, or at least the data on [spending, savings, and debt](. In a nutshell, pretty much every datapoint we see trends in the wrong direction. A bad direction for a large swath of financially struggling consumers. And a new 2023 outlook from TransUnion predicts more doom and gloom. Details in a second, but first… TransUnion released related data that shows banks aren’t the only ones fooling themselves, and us. The American consumer might be denying their personal financial realities too. In TransUnion’s words, “Consumer optimism held despite worsening household finances.” As one of the nation’s big three credit reporting agencies, Transunion probably knows a thing or three about what’s happening. As for what the consumers they survey are telling them: - 52% of Americans are optimistic about their money situation over the next year. - 26% say they’re pessimistic. - 21% are neutral. A mixed bag. Could it be as simple as the optimists are doing well, so they’ll keep spending and managing debt effectively, while the pessimists will run into trouble? Maybe, though we’re not sold. When people self-report this type of data, let’s face it: They often lie. Nobody likes to admit they’re having money problems. To themselves and definitely not to others. Then there’s this, directly from TransUnion’s report that broadly states that “Consumers continue to turn to credit cards”: - 26% will apply for new credit or refinance in 2023. - Of those, 53% plan to try to open a new credit card account, 23% will seek a car loan or lease, and 22% will try to get a personal loan. The more optimistic of those surveyed were likelier to say they’ll take on more debt in 2023. This anticipated rush of new credit in the new year, combined with the concerning data we’re about to tell you about, puts even more writing on the wall. The story we’ve been telling on debt throughout 2022 could get a lot worse in 2023. Scroll with us... Brought to you by [The Alt]( [You need to know about alternative investments]( Cryptos… commodities… real estate… startups… They can help you make a fortune. But it’s hard to figure out which to invest in. That’s why we launched [The Alt]( – a free newsletter focused on these and other alternative assets. Each issue shows you the latest trends, ideas, and discoveries happening outside of the mainstream. Ready to learn how to take your investments to the next level? [Click here to sign up for The Alt**]( **By clicking the link, you are automatically subscribing to The Alt newsletter. Unsubscribing is easy. Full disclosures [here](. The Consumer Economy Consumer Debt: Don’t Say We Didn’t Warn You Key Takeaways: - With delinquency rates at their highest in more than a decade, a debt bubble is about to burst. - The bubble could get even bigger as this year’s most financially optimistic households take on even more debt. - We wouldn’t want to be in the business of lending money next year. At least if we want to get paid back. The Juice has three primary goals: To make sense of the economy, so together, we can be better with money and become better investors. To achieve these goals, we love weaving a narrative around the data trail we follow over time. It’s long- and well-established that [credit card debt is soaring while personal savings are rapidly dwindling](: - In Q3, credit card debt hit $930 billion, up 15% annually. The biggest year-over-year spike in roughly 20 years. - The personal savings rate dropped again in October to 2.3%. - That October reading is the lowest since 2005. - In raw numbers, personal savings were $426.5 billion in October, compared to $447.8 billion in September (a 4.8% decrease) and $695.8 billion in March (a 38.7% crash). We just established, via TransUnion, that quite a few Americans plan to take on even more debt in the new year, especially credit card debt. Alongside this data, TransUnion reports something interesting about existing debt headed into 2023: - The agency expects serious credit card delinquencies to increase to 2.6% by the end of 2023, compared to 2.1% at the end of 2022. - It also anticipates lenders will issue 14 million more credit cards in 2023 than they did in 2019. TransUnion’s take on the situation: Credit card balances are forecast to rise over the course of the year as many consumers continue to turn to cards to help them manage cash flows. We expect card delinquency to increase in 2023 as consumers face liquidity shortages from the prolonged high inflation environment, slowing wage growth, and expected increases in unemployment. [Emphasis added] We’ll go ahead and call that pessimistic writing on the wall. [Your one-stop shop for FREE stock picks.]( Searching for the right stocks to buy is exhausting. At The Spill, we have you covered with daily ratings and expert analysis – direct to your inbox. [Sign up today.]( The Bottom Line: Across the board, search interest among investors is down over the last week for the top five big bank stocks in Trackstar, our proprietary sentiment indicator: - Bank of America (BAC): Down 38.6% - JPMorgan Chase (JPM): Down 41.5% - Citigroup (C): Down 39.2% - Wells Fargo (WFC): Down 41.4% - Bank of Nova Scotia (BNS): Down 49.1% We think investors are losing interest in bank stocks, in part, because they might be in for a rough 2023. TransUnion laid out the reasons: persistent inflation, slowing wage growth, and potential increases in unemployment. These things, combined with the bleak savings-vs.-debt equation, paint a tricky picture if you’re in the business of lending people money. 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