Subprime Chaos: The Auto Bubble's Bursting And The Data Is Worse Than 2008
Now you’re left with awful withdrawals – scrounging together all the extra money you can just to pay for a drink. But the only way you can really afford to feel better is if he starts giving out free drinks again or you painfully detox.
Just look at the collapse in auto-loan growth since 2015 – when the Fed began tightening with their end of QE and talk of rate hikes...
Clearly the higher rates had an impact on new auto loans.
But a bigger – and more pressing – problem is that the Fed’s short-term interest rate hikes are making these current subprime auto loans unserviceable. The borrowers are having a harder time paying more interest for an asset that depreciates 15% the moment they take it off the lot.
Clearly, affordability is becoming a problem. . .
As I learned from Ludwig Von Mises and the other brilliant Austrian economists – the Fed created a bubble in auto-loans by keeping rates low and printing trillions. And now they’re going to blow the whole thing up with their rate hikes.
Just like taking the free drinks away. . .
I expect delinquent subprime loans to keep hitting new highs. And I expect the ‘growth’ story the pundits keep pushing down our throats will fade.
Because even if the auto-loan industry and general economy hasn’t rolled over yet, each new Fed rate hike pushes us one step closer to the edge.
0.25% at a time. . .
So, with our Macro-Fragility Index (MFI) alarmingly high in the auto sector – I’m going to spend time looking for opportunities here.
History shows us that when things start their descent into collapse – the subprime market is the first to get hit.
Food for thought. . .