The Most Misleading Chart
This data point is continually misunderstood
There has been one chart that is continually shared with me. It has happened for two years now. I’ve also seen it shared and debated numerous times on social media.
It has been called for as the reason the United States was going to experience a recession. It’s been called a reason to sell your stocks and why businesses are going to struggle.
It’s the chart of U.S. consumer credit card debt.
Or maybe you’ve seen it characterized more like this. With phrases like, “What happens next?” or “How does this end?”
What isn’t shown or talked about when they try to scare you with the total credit card debt number is this, courtesy of The Daily Shot.
The overall US consumer credit as a percentage of disposable personal income continues to decline.
Or this from Torsten Slok at Apollo.
Credit card debt as a share of disposable income for US households is at very low levels.
The overall credit card debt number is misleading and misunderstood.
First of all what is it that we’re comparing this to exactly? This growing number is supposed to be a reason to sell stocks? This is a reason to not want to grow your business?
It actually highlights that the U.S. consumer is spending. They’re confident enough to be spending. But that isn’t any reason to be bearish the stock market or the economy.
In fact, it’s the opposite.
I love this breakdown from Seth Golden along with an excellent chart to show why credit card debt rising is a good sign for economic and business outlooks. Hence a good thing for the stock market.
The next time you see a big U.S. credit card debt number reported or a chart about credit card debt trying to scare you, remember to take the much larger picture into context.
If the credit card debt number is growing that’s a positive outlook for stocks and the economy. Don’t let yourself be told any different.
The Coffee Table ☕
Seth Godin had a good post on his blog called “Thank You” is a complete sentence. I have talked about this a number of times and also wrote about it in my book. Thank you is one of the most overlooked and powerful words in business and life.
I’ve heard a lot recently about the growing issue businesses are facing with the growing cost of transaction fees for swiping credit cards. It’s why you’re starting to see two prices at many places now. One price for paying with cash and another if paying with a card. There was a good article in the New York Times that covered this important topic. As Cash Fades, Small Retailers Embrace Efforts To Rein In Swipe Fees
Did you know that $100 invested into the S&P 500 ETF means that $30.28 is going into the 6 largest companies. $69.72 goes into the other 494 companies.
Source: Markets & Mayhem
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