Sjug's Latest Housing Call Is Already Playing Out

Americans are more indebted than ever before... New all-time highs for auto- and student-loan debt... Delinquencies continue to rise... Sjug's latest housing call is already playing out... 'Inventory is reaching historic lows'... The No. 1 question our readers are asking...

It took nearly 10 years, but it finally happened...

According to a new report from the Federal Reserve Bank of New York, Americans have now borrowed more money than any time in history.

The report showed total household debt rose $149 billion in the first quarter of 2017 to $12.73 trillion. As you can see below, this has officially surpassed the previous all-time record of $12.68 trillion, set just before the financial crisis...

Regular Digest readers won't be surprised to see auto- and student-loan debt leading the way to new highs.

Auto loans rose to a record $1.17 trillion, while student-loan debt now sits at a mind-boggling $1.34 trillion. Meanwhile, credit-card debt is quietly closing in on a new record, too.

While the new record doesn't mean another crisis is imminent, it's a troubling sign...

As Heather Boushey, executive director and chief economist at the Washington Center for Equitable Growth, told the New York Times...

This is not a marker we should be super excited to get back to. In the abstract, more debt signals optimism. But in reality, families are using debt as a mechanism to pay for things their incomes don't support.

To be fair, total household debt sits at just 67% of gross domestic product ("GDP") today, compared with nearly 85% of GDP in the third quarter of 2008.

But this is only because mortgage debt remains well below the previous bubble peak. Set aside mortgages, and consumer debt represents an all-time record of more than 20% of GDP.

Of course, the next crisis won't be driven by mortgage defaults...

Rather, it's likely to be skyrocketing defaults in these other types of consumer debt where subprime lending has soared this time around (to say nothing about trillions of dollars in potential losses in corporate debt).

In the meantime, the New York Fed noted delinquency rates for most consumer debt continued to tick higher, led by credit cards. The report showed 7.5% of credit-card debt is now "seriously delinquent" – or at least 90 days late – up from 7.1% at the end of last year.

We believe this trend is just getting started.

Elsewhere in the market, another of Steve Sjuggerud's predictions appears to be playing out...

Longtime readers know Steve was one of the first analysts anywhere to turn bullish on housing nearly eight years ago. He has remained bullish as prices have rebounded to new highs.

Early last month, Steve updated his thoughts on the housing market. As we noted at the time, Steve told his subscribers we were in the "sixth inning" of the housing boom. The final – and potentially most explosive – innings were still ahead.

In particular, Steve noted that despite the big increase in recent years, prices still had room to go much higher. This is because housing inventories – the supply of homes available to buy – have plunged to almost the lowest levels on record. And as he told readers, as long as more people were searching for homes than there were homes to buy, prices would keep rising.

"It's freaking us out... "

According to Glenn Kelman, CEO of real estate data firm Redfin, that's exactly what's happening. As financial-news site CNBC reported this morning...

"The inventory is reaching historic lows. It's never declined faster than it did last month. It's freaking us out — it's affecting our business; it's limiting our sales," said [Kelman]. "We're going to be fine in terms of market share, but I think the overall industry for the first time is seeing sales volume really limited by the inventory crunch."

Homes in April sold the fastest since Redfin began tracking the market in 2010. The typical home went under contract in just 40 days, 10 days faster than April 2016. As a result, one in four homes sold above their list price, which is the highest percentage Redfin has recorded.

Inventory of homes for sale fell about 7% nationally in March, compared with a year ago, according to the National Association of Realtors. Like most, Kelman blames the problem on a lack of new construction. On the single-family side, homebuilders are still putting up 18% fewer homes than the 25-year average.

Finally, an answer to a question you've probably been asking...

We know many readers are confused and upset by the apparent contradiction: How can we warn about the growing risks in the consumer- and corporate-debt markets... and still continue to recommend stocks?

If you're among them, we invite you to join us for a special presentation next Wednesday, May 24, where Porter will clear everything up. Folks who attend this free event will hear our latest thoughts on preparing their portfolios for what comes next, including...

When this historic bull market will finally end... how to get back in the market today if you've been afraid to do so... how to know exactly when to sell some of our best-performing recommendations... the one thing you must do whether you agree with Porter, Steve, or Dr. David "Doc" Eifrig... and much more. Click here for all the details.

New 52-week highs (as of 5/17/17): short position in AutoNation (AN), short position in Avis Budget (CAR), and short position in Hertz Global (HTZ).

Another busy day in the mailbag... three long-time subscribers come to our defense... another is confused and upset... and several more weigh in on the latest "must read" from P.J. O'Rourke. Send your notes to feedback@stansberryresearch.com.

"Tom W. says that he 'absolutely, positively hate[s] your marketing techniques.' Like the California gold rush, you make more money selling pics and shovels to greedy investors than they ever realize in gains.'

"Tom, I'm an Alliance member and I have made far more than the cost of my lifetime membership by following the recommendations I've received.

"As for 'pics and shovels,' perhaps you really are thinking about photographs and digging tools. Or could you mean 'Picts and shovels' – an early Scottish construction crew with blue faces!

"Whichever it is, Stansberry's 'picks and shovels' have helped me grow our net worth to more than double what it was when I first subscribed. After the crash in 2008, when our retirement nest egg was cut in half, I began desperately looking for some good guidance to rebuilding it. I was fortunate to come upon Stansberry. Doc, Steve, and Porter have all helped me rebuild that nest egg and I continue to increase it almost daily. Without their tools and the education I have received, we would be in very sad shape for retirement.

"As Porter answered, 'you don't have to buy.' And it's fairly easy to not even read the marketing materials if you don't want." – Paid-up Stansberry Alliance member Ed M.

"I have been a subscriber to your publications for over 9 years. I have been a member of your Private Wealth Alliance since 2010. In those 9-plus years I have learned more about investing, how the market functions, how our economy functions, and how to properly evaluate businesses than I ever learned during the previous 20-plus years of college classes, investing, and subscribing to other investment-advisory publications. It has been an incredible education and fascinating learning experience.

"To me, the making of more money on my investments is just the frosting on the cake. The real gain is in knowledge and understanding of how the economic systems of our world work and how we can profit from them. The profit we make from that knowledge is a bonus.

"Keep up the great work Porter, with all your colleagues and staff. You people do a fantastic job and your price of admission is more than justified. Your real product is knowledge and understanding, not just simple stock picks. If that is all a subscriber wants, then they can find other, cheaper publications, for that alone." – Paid-up subscriber Tony I.

"I enjoy reading those quick-witted thoughts you guys come up with, and P.J. [O'Rourke] is my favorite! I don't know how you guys come up with your thoughts and analogies, but you make reading fun and informative. I've learned a lot from reading all the various news letters from the different authors, some things go a bit over my head but some things are good old fashioned common sense that I need to hear.

"I have made many investing mistakes over the years, some I'm too embarrassed to talk about or even admit I did, but I have done well with the advice over the years and even better when I became my own financial planner and stopped relying on someone else to oversee my savings.

"Thanks for what you all do... When I figure what I spent every year on my professional planner verses the money I've spent at Stansberry, it's been a savings plus it's made investing an adventure!" – Paid-up Stansberry Alliance member Scott M.

"BLAME TRUMP?! If that is what you think, I can't listen to your investment ideas, you're listening to fake news (gossip and rumours) on the TV, I'm sick of this we're doomed with this President B.S. hope you get my note to unsub me." – Paid-up subscriber Glenn E.

Brill comment: Easy, Glenn... As we mentioned yesterday, we do our best to avoid politics in the Digest. The truth is, we have little fondness for politicians of any stripe. But if you've read even a fraction of what we've written in the past seven months, you should know we've been supportive of the president's proposals for tax and regulatory reform. We were simply pointing out that White House turmoil was blamed for yesterday's decline. Forgive us?

"[Wednesday's] essay by P.J. O'Rourke was absolutely priceless. Thanks!!!" – Paid-up subscriber V.P.

"I generally skip or delete P.J. stuff... just that I have so many emails of newsletters coming in from different places, I can't get to all of em. After working out in the field all day as a plumbing contractor, I'm wiped out when I get home. But tonight, I popped a beer open and read this one... He's spot on! My kids would say 'that sounds like my dad.' P.J. is a cool dude. Thanks!" – Paid-up subscriber Joe. B.

"PJ's latest rant on basic vehicles is spot on. I am one of those grumpies that are old enough to realize how good we had it when the basics did just fine. I drove a Ford 150 truck when all you got was the basics (manual roll up windows, 4 on the floor, rubber mats and a bench front seat). For a farm truck that is all you needed. If it didn't run, you knew what was wrong when you opened the hood. It withstood whatever you threw in the back, from tree stumps, to bales of hay to parts for fixing the combine etc. Keep up the great work PJ and in today's crazy society a good laugh is needed." – Paid-up Stansberry Alliance member Dave P.

"P.J. – I'm a GRUMPIE too. Last year I bought a bare bones Nissan Frontier pickup. My grandson said to his mom 'Hey Grandpa's new truck is so neat. You have to turn this handle to get the window go up and down.' That made this Grumpie smile!!" – Paid-up Stansberry Alliance member Jim H.

"Well PJ hit it right on the head... I'm a female grumpie! I hate carpet in my pick up. I have a farm – besides the hay, shavings, mud (which likely contains some manure), dog or other animal hair and who knows what, the carpet is never going to ever look good after the first year or two.

"Ditto ground clearance! My ride is a Ford F250. It still gets me over obstacles but not as well as several older versions of the same truck. It still has a modified bench seat—the center console folds back. The only other plus is the extended cab has those small opening rear doors. My first extended cab didn't and even small people had problems getting into the rear.

"Ages ago, Ford and I'm sure the other truck makers did NOT put carpet in the trucks. I have fond memories of an old 1960 truck with a leather seat and rubber floor matting. A good hose wash and it was clean as new. Some things REALLY were better in the 'good old days.'" – Paid-up subscriber Pat

"Great article about the latest cars/trucks having too much crap. My take on cars/trucks is very different then P.J.'s, I love the old sport cars, but try to get a basic fast great handling sports, manual tranny and very little else for less than 50k + it comes with all kinds of crap. I bought a new 2015 Subaru WRX with nothing added for less then 30k. .6 -speed manual basic turbo 4 door with good room in back and nice trunk space. Rides a little rough but that's what you expect from a sports car... fast as hell and for an old dude like me (I am 72) tremendous fun like what the old days were like. Not a lot of electronics to make you feel useless. Highly recommend this car." – Paid-up subscriber Stephen G.

Regards,

Justin Brill
Baltimore, Maryland
May 18, 2017