over 30 days are up 10 straight quarters, rising from 5.1% in the second quarter of 2016 to 6.7% in the fourth quarter of 2018. Altogether, $58 billion of credit-card debt is now delinquent over 30 days. And 8% of all credit-card debt is more seriously delinquent – with no payment in more than 90 days. But the trouble isn’t limited to just credit cards... More than 7 million auto loans outstanding have gone unpaid for 90 days or more – a new record. Trouble is brewing when folks stop making car payments. That’s typically one of the last things people stop paying, since they need a car to go to work. Delinquency on student loans is also at all-time highs. Officially, $166 billion in student loans was delinquent as of the end of 2018. But the actual number is far higher. Borrowers can avoid repaying their loans – using forbearance and deferment, for example. Even the New York Fed acknowledges the effective delinquency rate is far higher than what’s reported. It estimates the real delinquency on student debt is at least double, at $333 billion – or 23% of the total student-loan debt. And it’s likely far higher than that, as more than 40% of people who borrowed from government student-loan
programs are behind on their payments or have stopped making payments altogether.
A recent study from the U.S. Federal Reserve found that 40% of adults couldn’t come up with $400 for an unexpected expense without selling something or borrowing the money. And just one-third of adults like Tom
and Kate either can’t pay their bills or are just a minor setback away from being unable to pay. This combination of rising debt and rising delinquencies can’t go on forever... And this situation is paralleled by even greater extremes in the corporate debt market. Trouble is brewing... It’s only a matter of time before this recklessness blows up. And when it does, it could trigger dramatic consequences for both the markets and the economy. Not only are we likely to see a severe bear market and one of the biggest credit-default cycles on record... but it could ultimately lead to a complete “reset” of our entire financial system. The vast majority of Americans – even responsible folks who diligently avoided going into debt themselves – could see their standard of living cut in half, virtually overnight. Bill has been a lawyer for the past 16 years, with experience in corporate litigation research, including securities, contracts, anti-trust, options backdating, foreign-exchange fixing, and trademark and patent infringement.
Bill McGilton is the editor for Stansberry’s Big Trade – a speculative options trading service aimed at profiting from the worst corporate credit and companies with broken business models in America.
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