Friday , 30 September 2016


Debt: A Trillion Dollar Investment Opportunity

…Credit card watchdog CardHub estimates that American credit card balances10623945-the-word-debt-in-the-american-flag-colors-americans-in-debt will hit $1 trillion in 2016, a debt burden that has never been reached before, not even during the go-go days of the dot-com boom.

The following are excerpts from the original article by Tony Sagami (MauldinEconomics.com) which has been edited ([ ]) and abridged (…) to provide a fast and easy read.

Not only are Americans borrowing more, they are paying it back at a snail’s pace. Americans added an astounding $71 billion in credit card debt in 2015 and repaid just $26.8 billion during the first quarter of 2016—the smallest first-quarter paydown since 2008…

Disturbingly, and surprisingly, the group with the highest credit card debt are middle-aged Americans. The average 45- to 54-year-old American owes $9,000 on credit cards, 50% more than the average Millennial!…

[On the other side of the coin is the fact that] there is a lot of profit to be made on the lending side of those trillion dollars of debt…[as] the average interest rate on credit cards today is a whopping 15.19%. Given that the national average for 1-year CDs is a measly 1.09%, it is clear that credit card companies are making lots of money.

The purest ways to invest in the credit card business are Capital One Financial Corp. (COF), Synchrony Financial (SYF), and American Express Company (AXP). As a dividend lover, I would point out that Capital One Financial (2.2%) and American Express (1.7%) pay a decent dividend too…[Also,] in case you think that I’m nuts and that the credit card business is a house of cards ready to tumble, you should take a look at PRA Group (PRAA), which is in the business of purchasing and collecting defaulted consumer receivables in North America and Europe.

You see, even in these days of NIRP, ZIRP, and QE there are still ways to turn lemons into lemonade. That’s what I’m doing in my monthly newsletter, Yield Shark, which focuses on high-yield, dividend-paying stocks. Check it out risk-free for 3 months.

Tony Sagami
Tony Sagami
Mauldin Economics

Disclosure: The above article was edited ([ ]) and abridged (…) by the editorial team at munKNEE.com (Your Key to Making Money!) to provide a fast and easy read.
“Follow the munKNEE” on Facebook, on Twitter or via our FREE bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner)