The 'Scare Media' Gets It Wrong on Consumer Debt

September 16, 2019 A publication from [Stansberry Research] [DailyWealth] The 'Scare Media' Gets It Wrong on Consumer Debt By Vic Lederman, analyst, True Wealth --------------------------------------------------------------- First, there's the outrage cycle... You can't turn on the TV without seeing something you're supposed to be mad about. Everybody's angry about something. And they want you to be angry about it, too. Then, there are the end-of-the-world predictions. In five, 10, 20 years, we'll live in a world with no trees, no water, no fish, no air. And don't forget, things have never been worse for you. Yes, you, personally. The American consumer, we're told, is facing the worst beatdown we've seen in living memory. And any hope and optimism we might be feeling is fueled by debt. Jeez... Can everything really be that bad? Of course not. And the debt narrative in particular is one the "scare media" has dead wrong. Let me explain... --------------------------------------------------------------- Recommended Links: [September 25: "Guess which stock is lying to you"]( One of the most popular companies in America has been releasing misleading earnings to the U.S. public. On September 25, a forensic accountant who has lectured at Harvard University plans to air an exposé that could make you a fortune if you take action immediately. [See his full exposé here](. --------------------------------------------------------------- [GOLD ALERT: Extraordinary Upside in One Stock (Not a Miner)]( Value analyst behind 19 triple-digit winners (as high as 628%) believes this dirt cheap gold stock could be your next 20-bagger. It's NOT a miner, explorer, gold ETF... or anything you've likely heard of before. He sees 20 times long-term upside with far less risk. This might be the ONLY gold stock you need. [Full story here](. --------------------------------------------------------------- Is right now really the worst time in history for the American consumer? My guess is you know the answer intuitively. It's not. I remember, not so long ago, when only fancy people had big-screen TVs in their homes. You know – those massive tube TVs, with the speakers built in. They cost a ton. They were a luxury. Today, you can pick up a Smart LED Ultra HD 4K 50-inch TV from Walmart for $260... It's truly amazing. Now, don't get me wrong. I know there are a lot of problems in the world. And there are people out there who haven't gotten a fair shake. But the reality is that as a whole, we're doing better than ever. I know the big objection to this idea. It goes something like this... "Sure, all this amazing tech is cheap today. But most folks aren't paying in cash. It's all paid for with a mountain of debt." That's the narrative as the scare media sees it... "Consumers are drowning in debt." Student debt. Auto loans. Credit-card debt. Home loans. The media has some pretty good numbers to back this up, too. You've probably heard debt levels are at all-time highs. And that's true. Take a look... U.S. consumers have more debt today than at any other time in history... So the logic goes, we must be drowning in it. It's true that debt has blown past $4 trillion, an enormous figure. And it's OK if that produces a knee-jerk reaction in you. Being overloaded with debt is scary. It pushes families over the edge. It can be the precursor to homelessness. For a household, too much debt is bad news. But we need to stop and ask ourselves, what does "too much" mean? I think you know this one intuitively, too. A consumer has too much debt when he's at risk of not being able to make payments on it. That's pretty basic. The first rule of taking on a loan is that you have to make payments on it. If you don't, you're in default. And that's never a position you want to be in. So, to measure how overextended the general public is when it comes to payments... we need to know how much "wiggle room" folks have. Fortunately, the U.S. Federal Reserve actually tracks that wiggle room. Take a look... This is how much households spend on debt payments as a percent of disposable income. And it's the exact number we want to look at. That's because disposable income is the amount of wiggle room a consumer has after his other bills have been paid. And when disposable income drops to zero, you know that consumers are teetering on the edge of disaster. So the chart above might surprise you... As you can see, consumer spending on debt payments is near all-time lows. Right now, consumers spend less than 10% of their disposable income on debt. Simply put, Americans have more debt than ever. But they're also spending less on it than ever. It all makes sense when you step back from the scare-media machine... Interest rates have been very, very low for more than a decade now. And American consumers are smarter than the media will admit. They're using the low rates, which are synonymous with cheap debt, to achieve a higher standard of living. And compared to times past, they're spending less of their disposable income to do it. This is just another example of how the scare media gets it wrong. They want you to believe that the world is falling apart... Fear sells. The reality is, despite all our problems, things are going pretty well. And when it comes to consumers drowning in debt, well, the water level isn't as high as you'd think. Good investing, Vic Lederman Further Reading "This is not what we'd expect to see at the end of a major bull market," Steve writes. "Investors are downright scared." Everyone wants to know whether these fears matter, or if they are just a passing phase. Get Steve's take [right here](. Last month, one of Steve's major "red flags" for a recession flashed. The financial media has been eating this story up... but Steve says they've got it all wrong. [Get the full story here](. INSIDE TODAY'S DailyWealth Premium It's a proven tech company that takes care of its shareholders... The American consumer is better off than anyone realizes. That could be a major tailwind for U.S. stocks... And this tech company could soar as the market moves higher... [Click here to get immediate access](. Market Notes HIGHS AND LOWS NEW HIGHS OF NOTE LAST WEEK NXP Semiconductors (NXPI)... semiconductors Micron Technology (MU)... semiconductors Lam Research (LRCX)... semiconductor equipment AT&T (T)... telecom Comcast (CMCSA)... cable TV Home Depot (HD)... [home improvement]( PulteGroup (PHM)... homebuilder KB Home (KBH)... homebuilder Carlisle (CSL)... [roofing and wiring]( Johnson Controls (JCI)... industrial equipment Kansas City Southern (KSU)... [rail shipping]( General Mills (GIS)... 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