Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

US Auto Loans - Americans Missing Car Payments Is a Symptom of a Much Bigger Problem

Interest-Rates / US Debt Feb 22, 2019 - 04:54 PM GMT

By: John_Mauldin

Interest-Rates By Robert Ross

Transportation is a big issue in most of the US.

It’s so big that for the majority of Americans having a car is a matter of survival. Most people can’t even go to work without a car.

That makes auto payments a high priority. And yet, the number of people who can’t make them is rising fast.

Last week, the Fed warned that auto delinquencies—or missed payments on auto loans—are on a steep rise.


In fact, 7 million Americans are at least 90 days late on their auto payment:



That’s the highest level in history.

While most analysts view this as a threat to the auto industry, I see it as a symptom of a bigger problem that should set off alarm bells nationwide.

Rising Auto Delinquency Is a Canary in the Coal Mine

Notice what I said earlier: auto loans are a high priority payment. Everyone is well aware that their well-being depends on these payments.

People didn’t forget to pay on time. Nor did they put those payments off for any trivial reason. They didn’t pay because they don’t have enough money.

Let me put it another way…

The number of Americans who don’t have enough money for even high priority payments is rising fast.

That’s not a sign of a healthy economy. Instead, it’s a sign that we’re not too far from a recession.

All Signs Are Pointing to a Looming Recession

I’m not alone in this thinking.

The Fed doubled the odds of a recession in the past year alone. In fact, their recession probability reading has not been that high since 2008:



Source: Federal Reserve Bank of New York

When the Fed is worried, you take notice. The last time they were so pessimistic about our economy we faced the 2008 financial crisis.

Another key piece of data signaling the end of this economic cycle is consumer spending.

Consumer spending is the main driver of economic growth. And it’s starting to falter.

The chart below shows the difference between current and future expectations in consumer spending. The higher the reading, the lower spending is expected to be in the future.

Today the ratio is peaking at levels not seen since the dot-com crash in 2001:



Source: Gluskin Sheff

This means that the consumer is tapped out. Even the “bond king” Jeffrey Gundlach said this was, “one of the worst readings ever.”

Another key gauge of consumer spending is retail sales. No positive news here either.

Last month, retail sales fell at the fastest pace since 2009.

The bad news is mounting up. It’s a clear sign the economy is at the tail end of the cycle. Now it’s only a matter of time before a recession hits.

Dividend-Paying Stocks Come to the Rescue

Most economic recessions cause bear markets in equities. And in a bear market, you want to do one of three things:
  • Go to cash
  • Buy bonds
  • Buy dividend-paying stocks

If you go to cash, you’re not making any money. You’re actually losing money to inflation. With bonds, you’re earning a paltry 2–3% return on your investment.

That’s why I prefer dividend-paying stocks.

See, my forte is income investing. This means buying stable, reliable companies that will deliver solid results no matter what’s happening in the economy. And I’ve done it for most of my life.

Dividend-paying stocks have a long history of riding out financial storms.

Even a simple strategy like buying the 10 stocks with the highest dividend yields from the Dow Jones Industrial Average (DJIA) beats the market over the long run.

For instance, between 1996 and 2006, the DJIA returned 356%.

But had you held the 10 DJIA stocks with the highest dividend yields instead, you would have earned 407%! This period included the dot-com crash.

But this isn’t cherry-picked data. This same strategy worked in 2018.

While the DJIA lost 6% of its value, the 10 stocks with the highest dividend yields lost a mere 1.5%.

But the good long-term performance is not the only reason to own dividend stocks in a volatile market.

An All-Weather Investing Strategy

Dividend-paying stocks have proven to outperform in both bull and bear markets. There’s good reason for this.

First, dividend stock returns aren’t reliant only on the stock price.

See, dividend stocks—while also benefitting from rising stock prices—offer bond-like payments. These payments add to your total return.

Because dividends make up for some of the losses, dividend stock prices tend to fall less during bear markets.

Another reason these stocks are more stable is that they are often very solid businesses. They are much more immune to economic weakness than other stocks.

That’s why they have money to pay dividends in the first place.

Remember back in October 2018 when the stock market was a roller coaster?

Well, had you held dividend stocks in this period, the ride would have been much smoother:



As you can see, the S&P Dividend ETF (SDY)—which holds a basket of dividend-paying stocks—fell much less than the S&P 500. It also bounced back even faster.

Clearly, dividend stocks are what you want to hold in volatile times. But picking the right dividend-paying stocks is crucial.

That’s where I come in.

My Three Favorite Dividend Stocks

Americans missing their car payments is one of the red flags popping up. And it won’t go away without a major reset in the markets.

Bulletproof your portfolio with dividend stocks before it’s too late. If you want a good place to start, download  my free special report here.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules