Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Mark Adams who wrote (108097)	6/11/2001 6:03:02 PM
From: KyrosL	Read Replies (3) \| Respond to of 436258

Mark, some quick comments. First the more relevant ratio of consumer debt burden is debt service to disposable income, rather than total debt to disposable income. I believe this ratio is currently at or very near a record. This is because, as your graphs show, revolving (mostly credit card) debt has been rising sharply and interest rates for revolving debt are over two times interest rates for non-revolving debt (mostly car loans.) Moreover, while interest rates for non-revolving debt are affected by Fed interest rate reductions, interest rates for revolving debt are largely not affected. Another thing your data is missing is the trend of leasing rather than buying cars in the last few years. I suspect that if you include leased car equivalent debt in your figures (I have no idea how you get this) you will find that non-revolving debt will also show a strong uptrend. Finally, your data does not include mortgages and home equity loans. You know that there is a very strong trend for people to "consolidate" their credit card and other debts by getting an equity loan on their house or a second mortgage. Also when people refinance, they typically take out chunks of their home equity. As a result of this average percent home equity is in a strong downtrend in the last few years. Of course, because of rapidly rising home prices, the absolute amount of home equity is still increasing smartly, however, the picture will change dramatically if home prices stop rising or, heaven forbid, start falling. Kyros