Registered Investment Adviser Caleb Lawrence
The most recent data on revolving or credit card debt outstanding shows that it broke a trillion Dollars last year for the first time since 2007 with a 3.6% gain. It joins student loans 1.4 trillion outstanding and auto loans 1.1 trillion outstanding in the 1 trillion plus club that makes up consumer debt.
Despite the impressive advance of consumer debt retailers can’t seem to hold their own as over 2,500 retail store closures have been announced so far this year, a figure far higher than the 1674 store closures recorded in all of 2016. With 20 major retailers from Payless Shoe Source through Gander Mountain announcing either bankruptcy of substantial store closings year to date as the combination of online competition and far too much retail space as measured by square footage per consumer is proving an unworkable combination with traditional brick and mortar retail on track for its worst year since the 2007-2009 financial crisis.
Record debt and weak earned income are a toxic combination as seen during the 2007-2009 crisis as today. With record debt levels leading to sharply rising default rates 2016 ABS or Asset Backed Securities cumulative net losses are ahead of that recorded with the 2006-2008 series. Other worrying signs include rapidly rising student loan default rates and expectations amongst consumers that they will default in increasing numbers this year based on credit stress. Once again you can’t borrow your way to success, but I believe I have said that before.