Even The Rich CAN’T PAY THEIR BILLS…

With how tough the economy is right now, it's not really a surprise when we hear that low-income folks and people who are already struggling to get by start missing payments, whether it's a house payment, a rent payment, a car payment, anything like that. That is kind of expected when somebody is already struggling, right? But one thing we're seeing now is prime borrowers, basically wealthy people, are now starting to go behind on their debts, which is a huge, huge warning of where the economy is headed next right now. Because even if people who are financially well off are starting to fall behind on debt, that's a warning signal, guys. Already in 2024, auto delinquencies were massively on the rise. But starting at the beginning of this year, we have seen it climb even further. And we're talking about auto loans for prime borrowers here. We are not talking about subprime auto loans. If we take a look at this chart on the screen here, this shows you how serious the auto delinquency problem is right now. We are now seeing auto delinquencies that are 120 days past due rising to the highest rate that we have seen since the pandemic. And to make matters even worse, these auto loans, since they were prime auto loans, were packaged into bond deals and are now 120 days overdue. And this second chart here shows you the delinquencies of at least 60 days past due auto loans that are now returning to pre-pandemic levels, even though we have an unemployment rate as of March as low as 4.2%. So why is that, guys? Well, it's because the unemployment rate is incorrect. We've talked about this on the channel before, but the unemployment rate is artificially low due to several different circumstances. One of the major ones is the fact that once you're on unemployment for over six months, you're not on it anymore. So you drop off. So even if you're still unemployed, even if you no longer have a job, you're no longer counted as unemployed. So that's a big one right there. But also local unemployment agencies are a thing of the past. Now, all the unemployment data, all the unemployment reporting is done by the federal government. And it is in every administration's best interest to finagle the data in a way to make it look like unemployment is not a huge problem. But when all the other circumstances surrounding the economy are flashing red, it's hard to deny that unemployment is a huge problem. And for people who have been watching my channel for a while, you might remember that I have done a couple of videos on this subject talking about how basically the rich, people who are doing well right now, are supporting this economy. If it wasn't for them, everything would be completely in the dumps. Well, now even those people are starting to go delinquent on their auto loans. What's next? What's going to be the next bill they can't pay for? Now, I understand a lot of this has to do with the fact that people have $750,000, $1,200 a month car payments. That's not a smart thing to do. And that might be the first thing you stop paying on if you're falling on hard financial times, especially if you have a backup car, you have a household with two cars, you can get by sharing one, whatever, right? The next thing we got to be on the lookout for is if prime borrowers are going to start defaulting on mortgages, because typically the delinquency rates are pretty low on prime borrowers, but this is going to be something to watch out for coming up. And I want to share this chart with you as well, which is an interesting illustration to show you just how wealthy the wealthy have gotten over the past several years due to just owning the vast majority of the stocks. When you take a look at this chart, when you see the bottom where it says bottom 50%, that's the bottom 50% of all people who own stocks and how much their wealth has increased in trillions since 2010. And as you can see, as you go up the chart and we talk about the 50 to 90% and the 90 to 99%, that's when the wealth really starts ramping up all the way up to the top 0.1% of folks that have realized more gains than basically everybody else combined. And so now that the stock market is finally taking a big downturn in 2025, all of these people are less rich than they were just at the beginning of the year. So it also doesn't come as a surprise that as the wealth effect is starting to turn into the negative wealth effect, more and more people who were well off just a few months ago are starting to feel uneasy about the economy. And some of them who are overextended are starting to miss some car payments. And speaking of payments, in a couple of weeks, there are millions of student loan borrowers who are going to owe a payment. And the question is, are they going to pay? On Monday this week, the education department announced that it will put defaulted borrowers back into repayment starting on March 5th. So, so much for the Cinco de Mayo party. Time to start paying the bills. And guess what? Borrowers who don't make their payments on time will see their credit scores go down. And in some cases, their wages are going to be garnished. So they're not messing around when it comes to this stuff anymore. You're either going to pay, and if you don't, you're going to have a huge decrease in your credit score, and you're going to see your wages garnished most likely. And think about this. The education department has not collected on defaulted student loans since March of 2020 as one of the relief measures that was put in during the pandemic. Just like we talked about in the FHA video, guys, all of these FHA borrowers that got loans for houses that they never should have gotten, and now the government has been paying their loan essentially for them to the mortgage servicer in order for them not to foreclose on these people. But everybody else who's been doing the right thing is responsible for paying for this nonsense. That's the problem. It's not that I'm against helping Americans. Obviously, I want to see people of our country succeed in every way possible. What I'm against is everybody who's doing the right thing subsidizing everybody who's not doing the right thing. And I know people are going to say, well, stop giving all the money to Ukraine and Israel and all that stuff. Yeah, I hear you. I agree on that too. But all that stuff's outside of our control. Also, another thing that's going to be happening starting in May of this year is the Federal Student Aid Office is going to restart the Treasury Offset Program, which withholds government benefits, including Social Security and tax refunds from people with past due payments. And after 30 days, the Treasury Department would start garnishing wages for defaulted borrowers. So there is going to be no escape from not paying anymore, guys. People say, well, I'm just not going to pay the student loan. Well, go ahead and try it and see what happens. Let us all know about your wages being garnished and not receiving that tax return. I'm curious to hear those stories. I agree that colleges are predatory and the tuition they charge is criminal. And when you're 18 years old, you're not really in the greatest mindset to be signing a big legal contract that promises you to pay back, you know, hundreds of thousands of dollars in debt potentially. But you still did it. And it's not fair to the people who didn't do it to have to pay for it. But they are working with folks. It's not like they're just saying, pay up or you're completely screwed. Right now, the Education Department is recommending that borrowers in default contact the default resolution group to make a monthly payment or enroll in an income driven repayment plan. So there are some things you can do to get on track. They're going to try to make it work for your budget, whatever that is, to start making payments again. But the fact of the matter is there are over 5 million student loan borrowers right now who are more than 270 days past due. Think about that. It's almost a year behind. In fact, the New York Fed, they estimate that there are 9 million borrowers who are behind on their bills, but not yet in default. Pay attention to this stuff, guys. Understand that if you have one of these loans, you are going to be on the hook and there are going to be pretty dire consequences for not paying. Here's another sign that the economy is weakening right now that I've never heard of, frozen pizza sales is apparently a sign of the recession as well. When things get tough economically, people will still treat themselves to small little things like women will still buy lipstick. And maybe people who like to drink alcohol instead of buying the liter are going to buy, you know, the smaller little bottle, things like that, but still be able to get that treat. But another thing that people are buying and spending more money on as like a little comfort and treat at home is frozen pizza, especially the expensive kind. And apparently this is something that happens in every single economic downturn. And the reason why people actually buy more expensive frozen pizzas than the cheap kind of frozen pizza in an economic downturn is because that expensive frozen pizza is supposed to be a replacement for getting takeout or delivery pizza from a real pizzeria. So that's like the next best thing, so to speak. In fact, in 2009, when we were in the middle of the great recession, frozen food sales in general grew by 3.1%. And when the pandemic hit, frozen pizza sales spiked by over $1 billion from the year before. So apparently frozen pizza and frozen food in general is a good category to track that tracks consumer behavior, and ultimately is an expression of how people feel about the current state of the economy. And also let's face it, making a pizza can feed basically a whole family or at least half a family, a couple of frozen pizzas versus making individual entrees for everybody. And that can end up saving people quite a bit of money, especially if you're on a budget. The owner of Tree Tavern Pizza, who is a frozen pizza company out of New Jersey, they said that their sales went through the roof during the pandemic. And there's a lot of advantages, right? You don't have to wait to get delivered. There's no tipping the delivery person, you know, not getting your order wrong, nothing like that. On top of that, it's cheaper than getting takeout. So lots of advantages to having that frozen pizza over calling up the pizza place. And the frozen pizza industry has been doing very good. So that's another point I like to make now and again on the channel that even when the economy is in the dumps, like right now, there is always a business that's good to be in guys. And apparently, frozen pizza is one of them looking for a job right now, what recently lost a job, look at working for one of these companies that makes frozen pizzas, I'm sure they're hiring, because frozen pizza industry generated 6.5 billion in revenue in 2024. And in general, a lot more people are eating at home than eating at restaurants right now. That's one of the reasons that the restaurant apocalypse is happening. And so many restaurants are going out of business and having to let people go closing down locations, you name it. I know sometimes these stories might sound trivial to some people like okay, Michael, frozen pizza sales are up. And that means we're in a recession. Are you kidding me? You know, that's far away from the traditional economic indicators that we look at. But I've talked about all the traditional stuff as well. I just like to mention every piece of the puzzle as it comes together. This is something I never even heard of until today. And even though it might sound trivial, it's yet a real world indicator that tracks human behavior, guys. And what people are doing speaks volumes about what's happening in the economy. So I think it's important. And you know what else I think is important is people having a financial education. I saw this story that USA Today put out about a financial quiz, pretty basic financial quiz that was given to over 25,000 adults in the United States. And here's the results. Only 27% of these 25,000 people got right answers on at least five of the seven questions that they asked. And only 4% of Americans got all seven questions right. I'm not going to go over all seven questions. I'm going to go over a few of them to show you just how basic these questions are. And the fact that, you know, educated people walking around living in the world and helping to operate today's society don't know this stuff is alarming. The first question was, imagine you have your savings account and the interest rate is 1% per year and inflation is 2% per year. After one year, how much would you be able to buy with the money in this account? And it's a multiple choice. It's not like you have to calculate it. The answers were more than today, exactly the same, less than today and don't know. So the correct answer is less than today, because if inflation is higher than the interest rate on your savings, then your purchasing power goes down. That's exactly what pretty much we are experiencing today. Now, 58% of people did get this question right, but that's still more than 40% who didn't. Here's the next question. Suppose you owe $1,000 on a loan and the interest rate you're charged is 20% per year compounded annually. If you didn't pay anything off at this interest rate, how many years would it take for the amount you owe to double? Now, I will say that one is definitely a harder one, but it's still not rocket science. The multiple choice answers are less than two years, two to four years, five to nine years, 10 or more years, or don't know. The answer is two to four years at 20% interest and $1,000 debt becomes $2,000 in debt in roughly that time span. And only 30% of people got that one right, which shows you that a lot of Americans do not understand how compound interest works, which is a problem going both ways. Number one means they don't understand it when it comes to building wealth. And also they don't understand it when it comes to the much more common scenario, which is getting themselves into debt. And this is why it's so hard to get out. This could also be another huge reason why a lot of Americans don't open high yield savings accounts. It is 100% free guys. I've talked about this a bunch of times on the channel. There are plenty of online banks that offer, you know, still 4.2, 4.5% on a high yield savings account. That's miles away from anything you're going to be getting at Bank of America or Wells Fargo or Citibank, any of the big ones. Here's another question, true or false, buying a single company stock usually provides a safer return than a stock or mutual fund. Only 40% of the people got this answer right. And the answer is it's safer to invest in a mutual fund rather than a single stock because it spreads the risk across many different stocks in that mutual fund. Here's another question. Suppose you have $100 in a savings account earning 2% interest in a year. After five years, how much would you have? It's multiple choice. You don't have to calculate it. More than $102, exactly $102, less than $102, or don't know. The correct answer is more than $102. And over 30% of people got this question wrong. Now the most difficult question they had on this quiz is this. If interest rates rise, what will typically happen to bond prices? Will they rise, fall, stay the same, or there is no relationship? Only 27% of Americans got the answer right, which is that when interest rates rise, bond prices usually fall. And this simple quiz just goes to show you how little people actually know about how our financial system works. And that's one of the goals I have here on the channel besides keeping people informed about what's going on in today's world, in the economy, in the housing market. I think it's also important to educate people along the way. People who have never heard certain terms or things explained before to bring it up and explain it to people. And I think there's a lot of really smart people who watch this channel. I see the comments from people here that watch. And a lot of you guys are a lot smarter than me, guys. I have not ashamed to admit that. And I'm actually proud of that because that means somebody of your caliber is willing to listen to what somebody like me has to say. So I take that as a compliment. I also am committed to learning. I'm a lifelong learner. I always want to learn things. In fact, having this YouTube channel has forced me to learn so many things that I never knew before. And I'm so much better off both financially and just in life in general because I know these things. So I didn't want to bring up the quiz to make fun of people. I wanted to bring it up to highlight how poorly educated Americans are when it comes to our own finances, guys. It's time to get it together. You have to learn this stuff. If you don't learn it, you're going to end up learning it the hard way and that's going to be a major setback for you in your life and could potentially make the difference of whether you're able to have a family or whether or not you're able to buy a house one day or maybe whether or not you're able to have a nice car. You know, it can make a huge difference in your quality of life by just knowing the basics. So if you've been getting value out of my videos and you ever learned something from me that you didn't know before, put it down in the comments below, guys. Share with the rest of the viewers something that you've learned from one of my videos that you didn't know before that made a positive change to your life. I would like to see that. So if you enjoyed this video, make sure you are subscribed to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here and I will see you in the next one.