B enjamin Franklin famously said that he would "rather go to bed without dinner than to rise in debt." For many hard-working Americans who have spent their lives prudently saving for retirement, this sentiment reigns supreme.

Upon first glance, this chart is rather frightening. Not only does the most recent data indicate that the U.S. is at an all-time high in total household debt accumulation, it's right back at the last peak which occurred just before the worst economic downturn since the Great Depression. Why believe in this debt-fueled recovery when history could so easily repeat itself again?

The problem with charts like these is that it breaks the first rule of debt analysis - the total amount of debt on its own is meaningless. Some of the most successful companies in the world carry billions in debt, and they continue to operate for decades with little risk of default.

This chart indicates that not only has the percentage of disposable income that goes to covering debt payments fallen since the financial crisis, it is currently at the lowest level since the early 1980s. Sure, there are pockets where debt is a concern for some Americans. Student loans and high credit card balances are obvious examples, but the current default rates on these are nowhere near levels that would indicate a looming crisis.

Simply put, debt accumulation is without question an important economic trend to monitor, but it must be done with a proper lens to prevent distortion to what is actually transpiring.

The problem is not the debt itself but rather how it gets used, and this is where it could come back and bite us down the road. Gaining insight here is tough to acquire, but it's safe to say that not all of it is being used responsibly. However, until the cost of the debt becomes too much to bear, it should be of little concern.

THE BOTTOM LINE is that investors should be far less worried about the consumer debt situation today than in any other time in recent history.

This material is for informational purposes only and sets forth the views and opinions of our investment managers as of this date. The comments, opinions and estimates are based on or derived from publicly available information from sources that we believe to be reliable. This commentary is not intended as investment advice or an investment recommendation nor should it be construed as a solicitation to buy or sell securities. All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. Past performance is no indication of future performance.

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