Car loans are slowing down while repos are increasing What is bubbling in the auto market reflects broader economic problems. The question: How might a bursting of an auto bubble affect the broader U.S. economy? Data published in May by the New York Fed shows Americans’ auto debt rose $87 billion for the year ended in March, to $1.47 trillion. That represents about a 10th of total consumer debt, which rose 8.2% over the same period. One place the trouble is starting to show up, Lopez says, is on banks’ balance sheets. He says banks that were giving auto loans with LTVs of around 140 are now getting around 70 at auction—meaning they are losing substantial money. Foohey says the increase in auto loans and the increase in delinquencies and defaults track an increase in defaults on personal loans and credit cards. There is a silver lining in that the weaker economy the auto trouble both reflects and portends should cool inflation. But it might not be that simple, at least not right away. “A lot of the banks—they’re smart. They control the market, like diamonds,” Lopez says. “As repos pour in, they only release them so often,” he says, meaning auto prices will probably remain stubborn even as economic growth wanes and more repos mean more used-car inventory. That will also remain the case for inflation broadly, with stagflation the only alternative to a deeper-than-expected recession. I really don't know what's coming up. Some people think we're still in the wake of 08, so it's all relative. It just means people plotted a curve, then noticed that "if we truly recovered from 08, each year post recovery would bring 1-2T dollars back into the American economy." Probably less populism from either side when you think about it like that. It's not clear with mass layoffs. There's been hiring freezes, but the Great Resignation is still a thing, so mgrs are deciding whether it's worth more to cut jerbs or keep them to avoid the lengthy time to backfill plus retraining. I don't know about retail and blue collar work. Gas going down just means demand might lower, which is disinflationary. No one knows for sure whether that's a good thing or bad thing, but it's generally bad with other signs. So yeah, no one really knows, do your own research, and wouldn't hurt to keep a 2-3 month nest egg even if you have a stable job.
Even if repos increase and auto demand cools off, the lost auto premium will be offset by higher interest rates. Same with housing. The longer rate hikes continue and stay flat, the longer the economy stays coiled up. It's hard to predict. If we do not see rate cuts in the next 12 months, we could see another massive spring in late 2023. Refis create false economic indicators and gives the illusion of growth.
Im pretty sure he was also complaining when Obama cut rates a decade ago. Voters dont understand....well anything but especially economics. They just gobble up from the trough. Hell half the people I took economics with in college were business students whose only take away was how a basic supply and demand curve works.
I don't agree with the Bitcoin Maxi narrative that Bitcoin fixes everything. The monetary system lacks a tool that allows a safe haven for money to flow into. Bonds are suppose to be this tool. The monetary system is a construct. It is not science. Understanding the construct is much more important (Lyn Alden types)than a a degree in economics (@adoo and CNBC types). Warren Buffet says it best; Do not invest in something you do not understand. Bitcoin is a new tool that does not fit in the current construct so thus the construct will need to be reshaped. Bitcoin is not going to fix it. Its going to reshape it. We will always need credit and countries will always need their local fiat. We will always still have recessions and expansions. We will have bankruptcies. The entire world will not be buying coffee with Bitcoin. But yes, sound money does fix many problems and Bitcoin can be a form of sound money. Bitcoins real value is in the network, not the asset
It depends on what each person means by "everything". It's not going to stop the natural world from occurring, but, at scale, it would lessen a lot of the self-inflicted harms we see occur through financial manipulation and currency debasement. A lot of folks prescribe failures/shortcomings to bitcoin for things which it was never intended to fix. Weird.
if only you'd practice what you preach. you know little about Bitcoin, yet u've been pumping it as the panacea/cure to all economic ills you need to heed Abe Lincoln's sage words better to be silent and be thought of as a fool than to speak to remove all doubts that Bitcoin is "rat poison squared" we will always have fads, such as tulips, pet rocks, Bitcoins, etc.
The troubling part in the article is how people ran up car loans, even used PPP funds, during the lockdown while lending standards was like housing during 08. It jacked up car prices and created a cycle for even more loan issuance. Cars are mostly a depreciating asset, so these banks aren't going to get back their full value through repossession from delinquency. Spoiler: full article The jobs report and minutes from the Federal Reserve’s June meeting were the economic highlights of the week, but they are, respectively, a lagging indicator and old news. This column instead digs into the auto market, where there is an underappreciated ticking time bomb. Lucky Lopez is a car dealer who has been in the business for about 20 years. In recent meetings with bankers, where he bids on repossessed vehicles before they go to auction, he has noticed some common characteristics of the defaulted loans. Most of the loans on recently repossessed cars originated during 2020 and 2021, whereas origination dates are normally scattered because people fall on hard times at different times; loan-to-value ratios, or the amount financed relative to the value of the vehicle, are around 140%, versus a more normal 80%; and many of the loans were extended to buyers who had temporary pops in income during the pandemic. Those monthly incomes fell—sometimes by half—as pandemic stimulus programs stopped, and now they look even worse on an inflation-adjusted basis and as the prices of basics in particular are climbing. Sticker ShockUsed-car prices are more than $10,000 above typically expected levels, or what oneobserver says is a bubble that 'is beginning to show signs of bursting soon.'Source: CoPilot Price Premium=$10,046 (June 2022)Forecast Market PriceListing PriceJun-20Dec-20Jun-21Dec-21Jun-2220,00022,50025,00027,50030,00032,500$35,000 Part of the problem is that some consumers’ incomes were temporarily high as the pandemic brought about debt forbearance, pandemic stimulus checks, enhanced unemployment benefits, and, in some cases, forgiven loans from the Paycheck Protection Program. Lopez says he recently bought a Bentley, McLaren and two Aston Martins—all purchased by buyers using PPP money as down payments, and all repossessed after few or no monthly payments.Another recent acquisition: a Silverado repossessed from a borrower with a solid 700 credit score who made two payments. Banks’ auto lending standards, meanwhile, went out the window, and then lenders jumped on the bandwagon of overpaying for cars, Lopez says. “Everybody thought the free gravy train would never end,” Lopez says. Now, he says he has never seen so many people making $2,500 a month owing $1,000 a month in car payments. That’s about double the maximum portion of income many financial advisors recommend allocating toward a car payment. “The idea that the economy is strong? Anyone who is actually doing business sees things are not strong,” says Lopez. “We had a housing bubble in 2008, and now we have an auto bubble.” Consider data from car-shopping app CoPilot, which monitors daily online inventory across dealers nationwide to track what they say is the difference between a car’s listed price and what it would be worth if not for extraordinary pandemic dynamics. In June, used-car prices were up 43%, or $10,046 above projected “normal” levels, the company says. As Danielle DiMartino Booth, CEO of Quill Intelligence puts it, companies in the business of repossessing autos are among the first to know when economic trouble is brewing. And now those companies are buying car lots to handle the flood of repossessed, used cars coming to the market because what they are seeing is a longer and harder recession, she says. Lopez says banks are in turn leasing more land to handle an expected car-repossession surge. Some auto executives have hinted of turbulence. Earlier this year, Vickie Judy, CFO of America’s Car-Mart (ticker: CRMT), discussed rising car repossession rates on an earnings call. In June, Ford (F) CFO John Lawler said the company had started to see delinquencies increase. Lopez says it is hard to track vehicle repossession rates because banks are loath to talk about them. But based on what he says he has seen from banks, subprime repos have nearly doubled since 2020, to around 11% on average. The bigger red flag is in prime repos, where borrowers have higher credit scores. Lopez says usually about 2% of prime loans wind up repossessed. Now, that rate is at about 4%. Some of that can be explained by pandemic support temporarily making some consumers look like better borrowers. But it probably doesn’t fully explain the jump in prime defaults, thus suggesting a wider swath of consumers are struggling despite narratives around large cash cushions and a strong job market buffering households as inflation bites, interest rates rise, and financial markets melt. Pamela Foohey, law professor at Cardozo School of Law at Yeshiva University, warned in 2021 of an auto-loan crisis. She wrote then that heading into the pandemic, auto loans outstanding were at record levels and auto-loan delinquencies were hitting new highs almost every quarter. The bubble was about to burst, it seemed, but government pandemic responses meant the bottom didn’t fall out of the auto-loan market. The measures were temporary, she warned then, and the bubble has since only grown. Barron’s checked in with Foohey this past week. “The bubble is beginning to show signs of bursting soon,” she says, pointing to the overall spike in car prices that has led to larger loans and to rising repossession rates.
One of your problems is that you do not bother to read what someone states, much less trying to understand what they have to say. You just automatically respond with what you perceive as intelligent or witty. Case in point, the part of my post that you chose not to respond. Then you had to add in your little bit: You sad little troll. Nobody takes you serious.
What does any of this have to do with my post? Who said anything is not affecting others or has no impact?
Price of oil falls below level prior to Russian invasion of Ukraine Oil prices have fallen to levels not seen since before the war in Ukraine began as the market weighs a recession threat in the face of the highest U.S. inflation rate in decades. Benchmark Brent crude fell as much as 6% to trade briefly below $95 per barrel on Thursday. Brent closed at $96.84 just before Russia invaded Ukraine on Feb. 24. Prices then soared to as high as $139 as markets reckoned with the fallout from the conflict. West Texas Intermediate, the main benchmark for North America, traded as low as $90.56 per barrel on Thursday. Just a week ago, WTI closed at $102.63 per barrel.
This is what drives me nuts. Creditors go nuts offering credit lines to everyone when the economy is good and then are SHOCKED when people can't pay it back when the economy is bad. Or how in a recession everyone preaches how we all need to balance our budgets and save money when something like 2/3rds of the economy relies on consumer spending.
The faster the Fed raises rates, the sooner they can then take their foot off the brakes or lower the rates. Pretty much the only thing monetary policy can do is make borrowing more expensive. We will see what type of recession we go through, very well could be a light or moderate recession buoyed by a tight labor market. Could have some fiscal policy tailwinds with the Infrastructure bill over ten years and the semiconductor/advanced manufacturing bill (if the House Dems can just pass the damn thing before the midterms).
your problem is that you follow the fad---taking a flyer on Bitcoin----and automatically assuming that you're an expert on the crypto, parroting terms that you don't understand such as store of value, hedge against the stock market/US dollar/inflation, etc.
Bitcoin is not a hedge against the stock market or inflation or a hedge against anything. It is not a store of value. Maybe one day, but not in the next decade. Any more assumptions you would like to make? You're 0/2.
pretending as if you had not been parroting this spin (that Bitcoin the panacea / cure all) in this thread, 8 Dec 2021 https://bbs.clutchfans.net/threads/joe-bidens-america.311602/page-68#post-13856797 and this 2022 post https://bbs.clutchfans.net/threads/what-do-people-think-about-bitcoin.250022/page-269#post-13798574 why the 180 degree turn?
