Warning: Economy Fragile – Do Not Break

The U.S. consumer is at a breaking point... Using credit cards for daily expenses... Americans are flocking to their 'last resort'... We're in financial-crisis territory... Warning: Economy fragile – do not break... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The U.S. consumer is at a breaking point... Using credit cards for daily expenses... Americans are flocking to their 'last resort'... We're in financial-crisis territory... Warning: Economy fragile – do not break... --------------------------------------------------------------- Editor's note: We all know 40-year-high inflation has already stained the U.S. economy and that the Federal Reserve has been bent on fighting record price increases over the past year-plus. But the long-term consequences of persistently higher prices are only starting to become apparent... Today, I (Corey McLaughlin) want to share a special guest essay by our colleague Kevin Sanford of our Stansberry NewsWire team, who recently published a terrific analysis in our free news service about the signals that suggest a major slowdown for the U.S. economy ahead. --------------------------------------------------------------- And the American credit bubble is back... Coming out of the COVID-19 pandemic, Americans were swimming in excess cash. After all, on top of loan forbearance and tax credits, the government flooded the economy with trillions of dollars in stimulus. The personal savings rate skyrocketed to more than 33%. And if there's anything more American than hot dogs, apple pie, and freedom, it's buying things we don't really need... Coming into 2022, Americans were ready to make up for the lost time and spending of the previous two years. They bought new homes, new cars, and everything in between. They spent money on sporting events, concerts, and dinners out. And "revenge travel" took hold as vacation-starved Americans booked trips with family and friends. In other words, they were splurging on things they didn't really need. Now, when times are good and consumer confidence is high, nobody really notices these unhealthy spending habits. But when times aren't so good and the things you actually need become more expensive, perspectives start to change... I (Kevin Sanford) will explain how we can see that is happening today... The Federal Reserve began raising interest rates in March 2022 to combat rising prices... And with every rate hike, the cost to borrow has grown more and more expensive. That means it costs more to take out loans and service credit-card debt. At first, folks didn't notice all that much... They still had plenty of leftover savings accumulated from the two years of pandemic lockdowns and government handouts. But eventually, that well dried up. And Americans turned toward their old friend – credit. Consumers are increasingly relying on credit cards to pay for necessities like food and rent. And that pushed credit-card debt to a record $931 billion by the end of 2022. That's up nearly 19% from the year prior. With household finances now at a breaking point, the Fed's in a tough spot... It has been hellbent on killing inflation for over a year now. But as I'll show you today, it has sacrificed consumers' financial well-being to do so... You see, the Fed is trying its best to save the economy from high inflation and the everyday American from financial ruin. But saving both is not easy... And focusing too long on bringing down inflation has crushed consumers' finances. So while the Fed may be winning the battle over inflation, it's losing the war to save Americans from financial ruin... According to Bankrate's 2023 emergency savings report, which polls more than 1,000 U.S. adults, "the less-than-optimal economy has taken a double-edged toll on Americans." Here are some key statistics from the report, published in late January... - Growing debt is hurting savings. Thirty-six percent have more credit-card debt than emergency savings, the highest on record since 2011. Fifty-one percent, barely more than half, have more emergency savings than credit-card debt. - This working generation is the worst off. More than 4 in 10 Americans in their prime working years (aged 27 to 58) say they now have more credit-card debt than short-term savings. - Credit-card dependency is at a record high. Twenty-five percent of people say they would accrue credit-card debt to pay for a $1,000 emergency expense and pay it off over time – a record percentage since polling started in 2014. - Inflation and unemployment are to blame. Seventy-four percent say economic factors are causing them to save less right now, including 68% who say inflation is to blame (up from 49% last year) and 44% who say changes in income and employment are holding them back. - Consumer concern is high. Sixty-eight percent of people are worried they wouldn't be able to cover their living expenses for just one month if they lost their primary source of income, including 85% of Gen Zers – the most concerned of any generation. These figures certainly paint an eerie picture of how consumers are managing. But just how badly have credit conditions deteriorated? To figure this out, I took the data from the Federal Reserve Bank of New York's February Quarterly Report on Household Debt and Credit to compare the state of credit in America from 2003 to 2022. And the results were jaw-dropping... It looks like the lead-up to the global financial crisis... In the Fed report, I looked at the three main categories of credit – automobile, mortgage, and credit cards – as well as the total credit outlook. For each category, I compared the annual debt growth against the average interest rate (for auto loans, mortgages, and credit cards) for each year. By comparing these two data points for each year, we can get an excellent view of the current state of the economy and are able to see how 2022 is similar and different to the years of the global financial crisis. In each of the charts below, you'll see four quadrants... Recessionary – Low or negative annual debt growth and higher-than-average interest rates. Recovery – Low or negative annual debt growth and average and/or falling interest rates. Growth – Average to high annual debt growth and low to average interest rates. Unhealthy Expansion – Above-average to high annual debt growth and above-average to high interest rates. Remember, debt is like inflation... A healthy growth rate typically resides in the low to middle single digits. Excessive growth can mean that Americans are either super optimistic about future income... or that they're struggling to pay bills. That's why it's important to chart debt growth with average interest rates. If debt is growing too much at a time when interest rates are surging, that's a clear sign credit conditions are worsening and Americans have turned to their last resort. First, let's look at auto credit... As we can see above, 2022 broke away from the healthy growth of 2021 largely due to rising interest rates. It entered "unhealthy expansion" territory. And as automobile prices started to fall, many were left owing more on their cars than they actually paid for them. And according to a Cox Automotive [report]( this past January saw further deterioration in auto-loan performance. The delinquency rate for loans 60 or more days past due was up 2% from December and more than 20% year over year. Next, let's look at mortgage credit... It may be surprising to see that 2022 is right up there with the infamous four-year period that led to the housing collapse in 2008. And while 2022 was a historically bad year for the housing market, it doesn't mean we're going to see another housing collapse. Remember, there were four years of unhealthy expansion leading up to the collapse in 2008. Right now, we've only seen one year of unhealthy expansion. You'll also notice that 2021 is firmly in the "growth" quadrant. That year saw arguably the healthiest housing expansion in history. Still, that housing boom had severe rollover effects... Housing demand was just as strong in 2022, but interest rates for mortgages more than doubled. Lastly, we have credit-card debt... As inflation shot higher and the Fed began its rate-hike campaign, consumers' savings dried up, and they started relying on credit cards to pay for everyday items. As a result, credit-card debt soared last year. But so did interest rates for credit cards... It ended up being one of the worst years on record for credit-card-debt accumulation in America. Consumers racked up $180 billion in new credit-card debt – the largest amount ever added in a single year. According to Wilbert van der Klaauw, an economic research adviser at the New York Fed, historically low unemployment has kept consumers' finances generally strong. But now, stubbornly high prices and climbing interest rates are starting to test borrowers' ability to repay their debts. The chart below shows the credit picture as a whole... As you can see, 2022 still finds itself in "unhealthy expansion" territory... Arguably, it was among the worst years for credit... significantly behind only 2005 and 2006. To put it frankly, it's not in good company. This is the first major sign that a significant economic slowdown is likely... In short, demand is going to fall. And less spending means less economic activity. At some point, prices will come down to match demand. We've reached the point where a "soft landing" just seems out of the picture. Four-decade-high inflation was never going to return to the neutral level of 2% annual growth without consumers paying the price. The bottom line is that the U.S. economy is highly fragile right now. Most households have barely been hanging on over the past few months. And they've likely only been able to do so thanks to built-up savings from the pandemic and good credit from the past decade. While further rate hikes may bring down inflation, they'll only continue to crush everyday Americans. And if the central bank doesn't realize this soon, it runs the risk of plunging this economy into a severe recession. The Mother of All Bubbles "The way that bulls are behaving right now epitomizes the 'mother of all bubble' behavior," says Keith McCullough, founder and CEO of Hedgeye Risk Management. "I think this ends in tears in the next three to six months... Not enough people learned their lesson from the bear market in 2022." [Click here]( to watch this episode of The Daniela Cambone Show right now. And to catch all of the videos and podcasts from the Stansberry Research team, be sure to [visit our Stansberry Investor platform]( anytime. --------------------------------------------------------------- Recommended Links: [The Most Valuable Secret in Stansberry History?]( Only a few will remember it, but starting around 10 years ago, we detailed what might be the No. 1 investing secret of all time. Those on Wall Street even lobbied – successfully – for a BAN on talking about it because it didn't benefit them. Now, there's a big update. It's easier and potentially a lot more lucrative to do than ever before. Dr. David Eifrig has been waiting for this precise moment for more than 10 years. This Thursday, April 13, he'll detail it in full, on camera, for free. [Click here for full details](. --------------------------------------------------------------- [Gold Is SOARING... Here's the No. 1 Move to Make]( As overall market volatility continues, the world's financial elite have started piling into the safety and security of gold. But if you're not taking advantage of a little-known way to invest for around $5 today, you're missing out. [Click here for full details](. --------------------------------------------------------------- New 52-week highs (as of 4/10/23): Alamos Gold (AGI), Lockheed Martin (LMT), McDonald's (MCD), and Stryker (SYK). In today's mailbag, feedback on [Monday's Digest]( from Stansberry Research partner Dr. David "Doc" Eifrig... As we mentioned yesterday, Doc has a brand-new video event coming up on Thursday, and you'll want to tune in... He will share his latest market outlook, detail his "No. 1 investing strategy," and explain how to use today's high inflation and interest rates to your advantage... He'll also give away a free stock recommendation for all viewers. So [sign up for his totally free event now](... And, as always, if you have a comment or question, e-mail us at feedback@stansberryresearch.com. "Good advice but index funds only produce the mean and low interest rates are gone for a longer period of time than the mavens project. Businesses that have survived the test of time provide greater opportunities." – Paid-up subscriber Richard K. "Your message is very good and one I have practiced all my life. I am way past my use-by date with no debt and a 21-year-old Hyundai Santa Fe – the best car I have ever owned. "Not too sure about the safety of the stock market investments today; perhaps some diversification into commodities might help. Keep up the good work." – Paid-up subscriber Jan B. Good investing, Kevin Sanford Baltimore, Maryland April 11, 2023 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,046.1% Retirement Millionaire Doc MSFT Microsoft 02/10/12 900.7% Stansberry's Investment Advisory Porter ADP Automatic Data 10/09/08 771.3% Extreme Value Ferris ETH/USD Ethereum 02/21/20 659.7% Stansberry Innovations Report Wade HSY Hershey 12/07/07 624.1% Stansberry's Investment Advisory Porter WRB W.R. Berkley 03/16/12 555.7% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 454.3% Retirement Millionaire Doc AFG American Financial 10/12/12 412.2% Stansberry's Investment Advisory Porter ALS-T Altius Minerals 02/16/09 327.7% Extreme Value Ferris FSMEX Fidelity Sel Med 09/03/08 316.8% Retirement Millionaire Doc Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 4 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 2 Extreme Value Ferris 1 Stansberry Innovations Report Wade --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ETH/USD Ethereum 12/07/18 1,475.8% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,187.5% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,053.5% Crypto Capital Wade MATIC/USD Polygon 02/25/21 924.9% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 689.0% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You're receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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