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QUOTE OF THE WEEK

“Aren’t we forgetting the true meaning of Christmas?  You know, the birth of Santa.”

 – Bart Simpson

TECH CORNER

This isn’t 2008. This is far more dangerous. Let’s start with four simple words, “Buy Now, Pay Later”.

I know that I have been saying that the consumer is tapped out. I hope that this will add fuel to my statements.

It’s not just a new payment method increasingly relied on by U.S. consumers. It’s also a worrisome trend with dire consequences.

Payment plans were once reserved for big ticket items like a car or college tuition. Now, people are increasingly deferring payments on everyday purchases and they’re deferring these payments because they have to.

In theory, the option to buy now and pay later (BNPL) is a convenience. The first half of the equation (“buy now”) is simple enough. In a world of the cash-strapped, inflation-challenged U.S. consumers, it’s been increasingly hard to fulfill the latter half, the obligation to “pay later.”

Over half of Gen Z and Millennials say they use BNPL, compared with 35% of Gen X and 24% of baby boomers. Here’s where things go wrong: 40% of all users miss a meaningful percentage of their payments.

The result is mounting debt and they tack on exorbitant interest rates if you miss a payment. On top of that money owed, the deficit can quickly become insurmountable. Plus, credit card defaults for more than 30 days are rising substantially and the recession hasn’t really started or maybe it already has started and we don’t know it yet.

Hedgeye CEO, Keith McCullough, says this is not a story about the Great Financial Crisis of 2008 which was about Wall Street leverage, bad behavior, and frauds. This is far more dangerous. 

This is about Main Street. It’s about 50%, going on 60% and 70% of Americans not having any money left and needing government handouts to offset that pressure. I’ve got news for the consumer getting any handouts from the Government. With the National Deficit growing out of sight, there won’t be any bailouts in the current political climate. Thus, the consumer is needing more credit cards and more leverage. Credit card applications are way up and 401k hardship loans are also at all-time highs

If you are paying 22% on a credit card, think about where you must be financially. Buy now, pay later is far more dangerous for far more people. This is a Main Street recession that we are just entering.

SOURCE:  HEDGEYE

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These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Laurence Lof Financial Advisors, LLC are not affiliated. Laurence Lof Financial Advisors 4757 E Camp Lowell Drive Tucson AZ 85712 info@lofadvisors.com

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