Skyrocketing Consumer Debt & Falling Rates
With home mortgages, the primary collateral for the loan balance is the home itself. In the event of a future default, the lender can file a foreclosure notice and take the property back several months later. With automobile loans, the car dealership or current lender servicing the loan can repossess the car.

Homeowners often refinance their non-deductible consumer debt that generally have shorter terms, much higher interest rates, and no tax benefits most often into newer cash-out refinance mortgage loans that reduce their monthly debt obligations. While this can be wise for many property owners, it may be a bit risky for other property owners if they leverage their homes too much.

With credit cards, lenders don’t have any real collateral to protect their financial interests, which is why the interest rates can easily be double-digits about 10%, 20%, or 30% in annual rates and fees, regardless of any national usury laws that were meant to protect borrowers from being charged “unnecessarily and unfairly high rates and fees” as usury laws were originally designed to do when first drafted.

Zero Hedge has reported that 50% of Americans don’t have access to even $400 cash for an emergency situation. Some tenants pay upwards of 50% to 60% of their income on rent. A past 2017 study by Northwestern Mutual noted the following details in regard to the lack of cash and high credit card balances for upwards of 50% of young and older Americans today:

* 50% of Baby Boomers have basically no retirement savings.

* 50% of Americans (excluding mortgage balances) have outstanding debt balances (credit cards, etc.) of more than $25,000. 

* The average American with debt has credit card balances of $37,000, and an annual income of just $30,000. 

* Over 45% of consumers spend up to 50% of their monthly income on debt repayments that are typically near minimum monthly payments.


Rising Global Debt 


According to a report released by IIF (Institute of International Finance) Global Debt Monitor, debt rose to a whopping $246 trillion in the 1st quarter of 2019. In just the first three months of 2019, global debt increased by a staggering $3 trillion dollar amount. The rate of global debt far outpaced the rate of economic growth in the same first quarter of 2019 as the total debt/GDP (Gross Domestic Product) ratio rose to 320%.

The same IIF Global Debt Monitor report for Q1 2019 noted that the debt by sector as a percentage of GDP as follows:

Households: 59.8%

* Non-financial corporates: 91.4%

* Government: 87.2%

* Financial corporates: 80.8%


Rate Cuts and Negative Yields

As of 2019, there’s reportedly an estimated $13.64 trillion dollars worldwide that generates negative yields or returns for the investors who hold government or corporate bonds. This same $13.64 trillion dollar number represents approximately 25% of all sovereign or corporate bond debt worldwide. 


On July 31, 2019, the Federal Reserve announced that they cut short-term rates 0.25% (a quarter point). Their new target range for its overnight lending rate is now somewhere within the 2% to 2.25% rate range. This is 25 basis points lower than their last Fed meeting decision reached on June 19th. This was the first rate cut since the start of the financial recession (or depression) in almost 11 years ago dating back to December 2008.

It’s fairly likely that the Fed will cut rates one or more times in future 2020 meeting dates. If so, short and long-term borrowing costs may move downward and become more affordable for consumers and homeowners. If this happens, then it may be a boost to the housing and financial markets for so long as the economy stabilizes in other sectors as well such as international trade, consumer spending and the retail sector, government deficit spending levels, and other economic factors or trends.

We shall see what happens in the near future in 2020 and beyond.

* The blog article above is a partial excerpt from my previous article entitled Interest Rate and Home Price Swings in the Realty 411 Magazine linked below (pages 87 - 91):
September 3, 2009

Is The Stock Market Set To Fall Very Soon?

What has been the total return to investors in the S & P 500 Index (the broadest measure of the U.S. stock market) over the past 12 years? The answer is ZERO.

Amazingly, the same S & P 500 index is up almost 70% over the past six (6) months in spite of the on-going global depression happening worldwide. How can the stock market be up so dramatically in such a short period of time especially since unemployment numbers keep worsening, retail sales keep collapsing, and the overall real estate market numbers don't seem very inspiring either here in California or nationwide?

The answer, my friends, is that the stock market is rigged. It is not a true capitalistic exchange entity as many of us were lead to believe. The government and a select few of private entities are actually the bulk buyers and sellers of stocks these days.

For example, five (5) stocks (according to Kitco) currently account for 40% of all trading activity these days on the NYSE (New York Stock Exchange). These stocks include Citigroup, CIT Group, Fannie Mae, Freddie Mac, and AIG. Essentially, each one of these companies is bankrupted as their debts far exceed their current overall assets.

Also, computerized trading via the controversial High Frequency Trading Programs (HFTP) control almost 70% of all current stock transactions as well. Once these manipulated computer trading programs stop buying and selling stocks on Wall Street, then I expect the Dow Jones to plummet in the very near term (i.e. September through the end of October).

A wise investor may consider liquidating their current stock investments in these primarily worthless companies NOW before the traditional September and October stock meltdown begins. My long-time readers may remember that I predicted the worldwide stock meltdown EXACTLY during the week of September 29, 2009 several months before it actually happened thanks to a lot of research.

The best investments these days are foreclosured properties for cents on the dollar. A savvy investor may consider selling their overvalued stocks now before the Dow plunges to 5,000 or 6,000 in the very near term as the numbers make no sense whatsoever to remain heavily invested in stocks.

Would you rather own a stock for $50,000 (which may plunge to ZERO), or a foreclosed home for $50,000 which was once valued at $300,000? You can always live in the home, or rent it out as opposed to owning potentially valueless stock certificates.


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