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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
* Major World Market Indices * Futures Markets * U.S. Sectors and ETFs * Commodities * U.S. Bonds * Forex

DISCLAIMER: All the information contained within my posts are my opinions only and none of it may be construed as financial or trading advice...
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...If the dots don't connect, gather more dots until they do...




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Monday, May 07, 2012

Consumer Debt Bubble Looming?

Data released on May 7th shows that consumer debt levels rose again and are now at their highest levels since January 2000, as shown on the graph below.

As you can see, the "boom and bust" swings have been steadily widening since that time, which indicates "increasing volatility" in this type of psychological behaviour...some may call it "unstable and unsustainable."

The Monthly chart of the S&P 500 Index below shows a corresponding widening within this same time cycle...however, unlike consumer debt, the value of the SPX has not exceeded the last boom experienced in 2008. Personal debt has actually outpaced the value of the markets (that's the big difference this time) and, in my opinion, it is the next bubble which is about to burst...and I wouldn't be surprised if it's sooner rather than later, particularly since Average Hourly Earnings fell, as reported on May 4th, and they have been in decline since March 2003. This corresponds to the information contained in my post of March 7th.

Add to this, the growing national debt problem, and there is a recipe for disaster waiting to happen (unless the Fed also prints money for each individual who carries debt).