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 14, 2009

Causes of The Credit Crisis

Excess liquidity over the past decade is probably the main reason for the on-going and worsening derivatives meltdown worldwide. There was too much money chasing too many quality deals worldwide as well.

In addition, bank and Wall Street regulations were almost non-existent partly due to the repealing of The Glass-Steagall Act which had been in place since after end of The Great Depression (1929 - 1939). Glass-Steagall kept banks, insurance companies, and Wall Street investment firms separate in order the keep the financial markets healthy.

Once Glass-Steagall was repealed, the same firms (i.e. JP Morgan Chase, Citibank, Wells Fargo, etc.) were allowed to offer banking, insurance, and investment banking services. The once protective "divider" of potential financial implosions occuring simulataneously in insurance, banking, and Wall Street were sadly removed once Glass-Steagall was voided. This, in turn, increased the likelihood of a "daisy-chain" financial "house of cards" potentially hurting the banking, insurance, and Wall Street industries at the same time.

Also, the bond ratings agencies (i.e. S & P, Moody's, etc.) provided absurd AAA ratings for sub-prime and prime mortgage bonds leveraged up to 100%. These high credit ratings (AAA is the equivalent of a U.S. Treasury Bond - considered the safest investment in the world) were improperly given to these risky prime and sub-prime mortgage pools.

These AAA ratings attracted investors from around the world to buy this mortgage paper which later ended up being almost worthless. Many European, Asian, and American investors believed that the risks were "minimal" in the mortgage pools since they were rated as AAA. Also, the high rates and yields offered (8%+) were very attractive to individuals, hedge and private equity funds, mutual funds, and even governments around the world.

As few independent firms now remain on Wall Street since the financial implosion last September (2008) as well as far back as August 2007 (the "official" start of The Credit Crisis), we now are in the midst of the traditionally "scary" Wall Street months of September and October (traditionally the 2 worst months on Wall Street).

As the S & P 500 index is up an insane 70% over the past 7 months during this on-going worldwide depression, I suggest that investors consider taking their phantom gains now before the Wall Street meltdown begins literally any day.

We can offer foreclosure investments for literally cents on the dollar as an alternative investment option. For more information, please contact me through this same website.


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