Apr 2 2017

Baby boom or bust: Retirement withdrawals now exceed contributions. Since 2008 US public debt up by $10 trillion, nearly the same as the Russell 3000 Index.

You knew it was only a matter of time before baby boomers started taking out their money from retirement accounts in mass.  If you think boomers were rebalancing every year carefully, think again.  We have now crossed an interesting threshold where retirement withdrawals exceed contributions.  Part of this has to do with a younger and more broke generation of Americans.  You also have older Americans being stretched financially thin so they need to get additional funds from retirement accounts.  This also means that there is likely going to be more forced selling from this massive market.  After all, that is the point of a retirement account in that it should throw off income when you retire.  But for every sell you need someone willing and ready to buy.  The market hasn’t been necessarily tested in this regard with tens of millions now utilizing the sell side of a retirement account.

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Mar 26 2017

Subprime auto loans face mounting problems: With $1.1 trillion in loans outstanding we all know bad deals are made in good times.

Exuberance breeds bad decisions as inhibitions and due diligence get tossed out the window like dirty water.  This is exactly what is unfolding in the rampaging auto market.  The latest data from Fitch Auto ABS Indices shows that 60+ day delinquencies for subprime loans are now at 5 percent of all outstanding balances.  This is the highest it has been since 2008 when the financial crisis was wrecking havoc on global markets.  The issue we have today is that auto loan standards are deep in the toilet.  Essentially what happened in the housing market with no-doc and no-income loans is happening with the auto sector.  Part of this has to do with the pressure being seen in the industry since new cars are simply built much better and can last a long time. So dealers hustle out late model used cars which eat into new car sales.  So incentives are the name of the game and when incentives end you simply start giving out loans to anyone with a pulse.

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Mar 20 2017

Graduating with a Degree in Debt: The Average Student Debt Balance for Seniors is now $40,000.

The runaway cost to attend college just continues to sprint ahead.  The average student loan balance for graduating seniors is now $40,000.  This is astronomical considering the per capita wage of Americans is in the high $20,000 range.  The math behind this astronomical debt is rather clear and simple to follow.  Student debt is one of those categories where your ability to pay said debt back is completely devoid from reality.  For example, you can go into one hundred thousand dollars of debt for a degree in art that has little earnings potential in the market.  Is that wise?  Depends on who you ask but you can’t walk into a car dealership and purchase a $50,000 car without some financial backing and ability to pay it back.  This applies to most things but the way we fund college is somewhat dysfunctional.

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Mar 13 2017

Roughly one third of college students spend their loans on spring break and partying.

There is a massive student loan epidemic in the United States.  Over $1.4 trillion in student debt is floating around in our economy lingering like an albatross on the necks of many young students.  While the idea of getting a college degree is more popular today than ever, it would seem like going to spring break is also very popular.  It is hard to track how students spend their student loans.  Obviously most (if not all) goes to pay for college for the vast majority of students.  But some use student loans to finance unnecessary items like partying it up on spring break and getting inebriated to celebrate a semester well done.  A new LendEDU poll found that roughly one-third of college students used a part of their student loans to finance their spring break.  While this is not the bulk of young college going Americans, the number is somewhat startling.  Priorities folks!

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