In Hemingway’s, ‘The Sun Also Rises,’ one of the characters, Bill, asks his friend, ‘Mike,’ how he went bankrupt. Mike replied, ‘I had a lot of friends. False friends. Then I had creditors…’ This passage from the novel comes to mind when I hear ads during the local sports radio programming from mortgage brokers urging listeners to use a cash-out refi or home equity loan to take care of credit card debt that piled up during the holidays. Beneath the surface is the message, ‘c’mon in, the water is fine, go ahead and take on even more debt.’
If in fact the retail sales turn out to be as strong as projected, it’s because the average household has tapped into its savings and used an unusually large amount of credit card debt to fund holiday spending this year:
This post was published at Investment Research Dynamics on December 28, 2017.