The household debt statistics show a consumer that is buried in debt and will likely begin to default on this debt – credit card, auto, personal, student loan and mortgage – at an accelerated rate this year.  The delinquency and charge-off statistics from credit card and auto finance companies are already confirming this supposition:
From PM Fund Manager Dave Kranzler:


You’ve probably heard/read a lot lately about the VIX index. The VIX index is a measure of the implied volatility of S&P 500 index options. The VIX is popularly known as a market “fear” index. The concept underlying the VIX is that it measures the theoretical expected annualized change in the S&P 500 over the next year. It’s measured in percentage terms. A VIX reading of 10 would imply an expectation that the S&P 500 could move up or down 10% or less over the next year with a 68% degree of probability. The calculation for the VIX is complicated but it basically “extracts” the implied volatility from all out of the money current-month and next month put and call options on the SPX.

The graph above plots the S&P 500 (candles) vs. the VIX (blue line) on a monthly basis going back to 2001. As you can see, the last time the VIX trended sideways around the 11 level was from 2005 to early 2007. On Monday (May 8) the VIX traded below 10. The last time it closed below 10 was February 2007. The VIX often functions as a contrarian indicator. As for the predictive value of a low VIX reading, there is a high correlation between an extremely low VIX level and large market declines. However, the VIX does not give us any information about the timing of a big sell-off other than indicate that one will likely (not definitely) occur.

In my opinion, an extremely low VIX level, like the current one, is signaling an eventual sell-off that I believe will be quite extreme.

The true fundamentals underlying the U.S. economy – as opposed the “fake news” propaganda that emanates from uncovered manholes at the Fed, Wall Street and Capitol Hill – are beginning to slide rapidly.   The primary reason for this is that the illusion of wealth creation was facilitated by the inflation of a massive systemic debt and derivatives bubble.  Government and corporate debt is at all-time highs.  The rate of debt issuance by these two entities accelerated in 2010.  Household debt not including mortgages is at an all-time high.  Total household debt including mortgages was near an all-time high as of the latest quarter (Q4 2016) for which the all-inclusive data is available.  I would be shocked if total household was not at an all-time high as I write this.

The fall-out from this record level of U.S. systemic debt is beginning to hit and it will accelerate in 2017.  In 2016 corporate bankruptcies were up 25% from from 2015.   So far in 2017, 10 big retailers have filed for bankruptcy, with a couple of them completely shutting down and liquidating.    Currently there’s at least 9 more large retailers expected to file this year.   In addition to big corporate bankruptcies, the State of Connecticut is said to be preparing a bankruptcy filing.

The household debt statistics show a consumer that is buried in debt and will likely begin to default on this debt – credit card, auto, personal, student loan and mortgage – at an accelerated rate this year.  The delinquency and charge-off statistics from credit card and auto finance companies are already confirming this supposition.

  1. Preserve wealth???  Well my “wealth preservation” is in the toilet losing over two-thirds of its value. I don’t give a shit what all of these so-called “experts” state buying silver is absolutely the worst financial mistake I have ever made in my entire life. Wealth preservation… what a ridiculous statement to make after all that has been done and still being done to silver.

    • INat…You’re timing may be poor, but you’re move is correct. Sit tight and you’ll be glad you did. What if you had bought 10yrs ago when gold was at $641 and silver was at $8.92? You’d be feeling great. Point is major turnings take time.

    • @INat38

      Sadly, you are quite correct about results to date.

      You don’t provide details, but you are probably talking about the result in $US.

      In terms of actual purchasing power, the results are even worse than in monetary terms.

      For example, here in Thailand, the price of gold is about the same as it was 5 years ago, but the price of food has doubled.

      A couple of years ago, I read an article about how the prices of homes in the USA had recovered to 2001 levels.

      However, the main point of the article was that groceries that had cost $85 in 2001 cost $200 at the time the article was written.

      So older people who planned to downsize their home in order to eat after they retired had lost 60% of their planned groceries, despite the return of higher home prices.

       

       

  2. MFL, the Zionists are our friends. They are putting silver  on sale again. By fall, the metals will be looking much better.  How many will freak when the state of Conn. files for bankruptcy?  That should wake up a few buyers.

    • They are not your friends.  They are criminals and Gold and Silver manipulation for 6 years straight is not good unless you are 35 years old which I am not!

  3. There may be a lot of consumer debt but the interest rates may be very low, and people may be using their cash to buy stocks or real estate which makes sense since stocks and RE are over priced. Most of my credit card debt is at 0% interest and my car is at 2.5% so I’m buying or shorting stocks and buying metals rather than paying off the debt.

    • Unbubble that strategy may or may not work for you Just hope we don’t get a nasty deflationary Depression where say 50percent lose their employment because the bankers will NOT give you or me a pass and metals could tank badly in such an environment Short term anyway You could do as I did and just “pull” and collect on your policy

  4. Current consumer debt levels are the same as 2007, but as a percentage of GDP, they are 20% lower.

    I’m NOT saying that being a lower %age of GDP makes them any less significant, as I believe that the economy is much worse now than it was then.

    The largest differences I see between now and then, however, are three:

    1. $1 TRILLION of that debt is student debt, much of it incurred to study things that do not enhance employment skills, and much of it that does enhance employment skills is for jobs that don’t exist.

    2. On average, there has been $1 TRILLION per year since then added to “GDP” in the form of transfer payments from the government that are funded by perpetual deficit spending and consequently increasing government debt.

    3. Nearly all the “job growth” since the has been bar tenders, healthcare providers (mostly bedpan changers, to be a little cynical), and government employees.

    I have seen so signs of any recovery, which would require gains in WEALTH CREATION, not wealth liquidation and increasing debt.

     

     

     

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