Exposing Who's Behind Surging Subprime Delinquencies (Hint: Rhymes With 'Perennials')

Tyler Durden's picture

For months now we've been writing about the mysteriously rising subprime delinquencies afflicting auto ABS structures despite repeated confirmations from the Fed and equity markets that 'everything is awesome' (see "Auto Bubble Burst Begins As Subprime Delinquencies Soar To 2009 Levels" and "Signs Of An Auto Bubble: Soaring Delinquencies In These 266 Subprime ABS Deals Can't Be Good" for a couple of recent examples).  Shockingly, as confirmed by the chart below from UBS strategist Matthew Mish, 2016 vintage subprime auto ABS structures are even underperforming 2007/2008 vintage securitizations.


Now, Mish is back with more survey data explaining the who/what/when/where/why's of spiking loan delinquencies. 

Ironically, survey results suggest that households making over $100,000 per year are 2.5x more likely to default on loan payments over the next 12 months than those making under $40,000...because making more money just means you can afford more debt, right?

First, the survey evidence suggests the rise in consumer default perceptions has occurred primarily in the middle and upper household incomes cohort. And those consumers concerned with missing a payment are highest in the upper income category (household incomes of $100k+). In particular, the most elevated readings occur at the lower ends of the middle and higher income categories (i.e., 50-74k and 100-149k, respectively.



Of course, the most 'shocking' results of the survey suggest that our precious snowflake millennials are over 5x more likely to default than folks aged 45 and above.  That said, we suspect that many of those defaults may come from student loan debt...which is totally bogus because higher education should be 'totes free', right?



In another shocking discovery, people with the most debt were also found to be most at risk of default...who knew?



Oddly, however, households who reported being able to cover their monthly expenses were more at risk of default than households burning through cash each month...sounds like these folks have picked up some valuable lessons from Tesla on how to burn through cash without defaulting...



Finally, this last chart was intended to shed light on why certain households are more likely to default but, in the end, the "no specific reason" category dominated responses leading UBS to conclude that people are just far more comfortable defaulting on debt, in general, in the post-crisis era.

This mosaic seems quite consistent with the reported concerns earlier around limited positive cash flow (income vs expenses) and the broader reality that real median wage growth has been largely non-existent in recent years (and for several decades) despite rising debt levels. However, the most commonly cited reason continues to be 'no specific reason'. While difficult to prove decisively other survey results on the millennial generation specifically seem to be consistent with the thesis that US consumer willingness to default (or the lack of stigma associated with bankruptcy) may have increased further in the post-crisis era.



To summarize the UBS survey results, increasing delinquencies are being driven by millennials who graduated college with massive student debt balances, but were making decent money so they levered up even more to buy a house (or 2), a couple of cars and a timeshare.  That said, now that the earnings growth they expected has failed to materialize, their sense of entitlement has taken over and they've decided to socialize their debt burdens while completely ignoring the stigmas associated with such actions.

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crossroaddemon's picture

Usual bullshit... blame everybody except the parasite class who is actually responsible for this. ZH, please stop posting this crap.

LetThemEatRand's picture

There's always plenty of blame to go around, and our economy has plenty of parasites.  I would rank the parasites as follows:

1) the Fed

2) MIC

3) police/surveillance state

4) FSArmy

5) other


NidStyles's picture

The Jews demand their pound of flesh any way you look at it. Can't opt out of dealing with them; so you have two options, try to get ahead, or just fester and waste away.

The only people that win in this system, are the Jews and those that protect them.


El Oregonian's picture

Rhymes with perennials... Centennials? 

JRobby's picture


"Where's your car dude?"

scoutshonor's picture

Very well they may have their pound of flesh--but not one drop of blood.

finametrics's picture

who would downvote this?

besides the "its a conspiracy" non argument, whats a legitimate counter-argument to this notion? anybody?

BeanusCountus's picture

Hey, stop it. It's not "the jews". Most jewish people are not in any position to nenefit from the lending of money. Yes, a very select few benefit. Don't put them all in the same category. And so what? Many non-jews benefit from the same activity. How bout you focus instead on telling people to just buy what they need, instead of everything they want? And how easy it is?

meditate_vigorously's picture

Just like the peaceful Muslims? They are all complicit whether they are active in the destruction or not, just like the Muslims.

SeattleBruce's picture

Jews are a tiny percentage of the human race, and have had impact at times - good and bad - disproportionate to their numbers.  That's one reason they're scapegoated.  Problem is people don't look in the mirror, nor do they look at biology, which tells us the fact that we're all 99.5% identical, with only 1/2% separating all human beings from ea. other.  Put that in your pipe and smoke it.  BTW, I'm half Italian, and half Scandahoovian, so I don't have a dog in this fight.

Mementoil's picture

I have personally never lent money to anyone, nor have I worked in the financial industry, nor does anyone of my family or friends for that matter. Since I became a libertarian a few years ago I have opposed the Fed's policies of ZIRP and QE. I have written countless articles about this subject on my blog and did my best to inform as many people as possible just how destructive these policies are. Oh, and I'm also a Jew. I can't help it - I was born this way.

So how exactly am I "complicit" of any of it?

panther man's picture
panther man (not verified) Mementoil Apr 14, 2017 7:16 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

mastersnark's picture

"So how exactly am I "complicit" of any of it?"


Category error. Anecdote. Also: lying.

SmittyinLA's picture

"Millennials" is a euphemism for Mexicans and children of foreigners and immigrants

They're different because they are different, they are "the replacements"

Laowei Gweilo's picture

Zero Hedge said, "To summarize the UBS survey results, increasing delinquencies are being driven by millennials who graduated college with massive student debt balances because Gen Xers let their elected officials allow secondary education pricing to run rampant, but were making decent money so they were forced to use even more debt -- in the same way they were forced to use student debt -- to acquire the basic American goals of an education and a home thanks to decades of Baby Boomers fucking over the US economy."


Fixed that for you.



Millenials decide to live with their parents longer, they're bums.

But Millenials decide to move out and get a morgage, they're reckless debtors.


Lose-lose lol the only good Millenials on ZH in theory are making 200K a year... and then they're horrible too cuz they're likely either Silicon Valley or Banksters and therefore should jump of a building.

LetThemEatRand's picture

I actually don't blame millenials for their economic situation.  My beef with that generation has to do with facebook and instagram and general smart phone/social media obsession, and a complete lack of concern with the existence of big brother.  Those are issues over which they have control.

Laowei Gweilo's picture

oh for sure don't misunderstand i hate the majority of my peers lol

Oldwood's picture

Modern culture tells us to either hate ourselves or just hate everyone else.

crossroaddemon's picture

Most people our age or older are doing the same shit. My grandma is on FB, and so are most of her friends. You're projecting onto a single generation something that in truth applies to damn near everybody.

Laowei Gweilo's picture

my mom is more addicted to FB than me


'mom...i dont care...'


anecdotally goes the same for quite a lot of my friends' moms or aunties too lol


crossroaddemon's picture

Yeah. I don't see millenials on social media more than any other age group. I'm 43 and damn near EVERYBODY I graduated HS with is on FB. Except me. I still have an account but i never go there anymore.

Don't fall for this divide and conquer bullshit, guys. The millenials are not the enemy.

just the tip's picture

really?  the p/ss @ #3 and free shit army @ #4?  just on the raw numbers alone i would put fsa @ #3 and p/ss @ #4.  yes, the p/ss have more expensive toys, but the fsa have bigger numbers of parasites.

meditate_vigorously's picture

It is incontrovertible fact that the Jews have been lobbying for "diversity" and open borders since the late 19th century and can accept the lions share of the blame for all the Mexicans here.

Is-Be's picture

Rent seeking is the dark underbelly of Capitalism

Donald J. Trump's picture

It's also part of the moral decay of this country.  People have no shame in being on welfare, bankrupt, criminals, gay, perverts, drug addicts, democrats, etc. They actually take pride in gaming the system.

crossroaddemon's picture

Don't be obtuse. The system is CUSOM DESIGNED to fuck you in the ass. Gaming it is one of the few realistic forms of resistance available to us.

Besides, what do you care if somebody is gay or whatever? Show me how it's actually hurting anybody or take your morality imposed by some mythological cartoon and shove it up your ass.

Bastille Day's picture

Says the offended homo trying to legitimize their sick and disgusting sexual preference.

meditate_vigorously's picture

And we can trace that moral decay right to the (((mass media))) that has been poisoning it for a century.

meditate_vigorously's picture

That's what I was going to say. Poor bastards never had a chance and then the rent seekers and their apologists want to blame THEM? Go fuck yourself TD.

divingengineer's picture

I used to like reading Mish, but I came to realize he firmly believes that everyone who is not a financial advisor should be replaced by a robot and work for three dollars an hour.I got news for him there are probably already robots that can out perform a human financial advisor.

LetThemEatRand's picture

I'm confused.  In an earlier article here, I read that not all millennials are the same.  But you're telling me now that some of our generational prejudices are founded in fact?  

the6thBook's picture

Probably from Neil Howell who thinks the millennials are the "hero" generation.

NidStyles's picture

Disagree with that on it's face. I think their children will be the hero generation. They will have no choice, they will be the last generation with any choice about which way to go. Into perpetual slavery, or into the fray to free themselves.

GooseShtepping Moron's picture

There will be no more generations after this. Just an undifferentiated mass of fellaheen humanity for whom time periods cease to mean much of anything, i.e. the new primitivism.

divingengineer's picture

Dark ages......with smartphones, but no watches.

canisdirus's picture

I can almost guarantee that a subset will be just this. They're staring down the barrel of WW3, so they'll end up the modern version of their grandparents. Gen Z is too young and most of the actual Millennials (not cuspers with older siblings that seem more Gen-X or the tail of Gen-X that people try to lump with Millennials) don't have children yet. TPTB would need to kick that can down the road a solid 2-3 decades for it to be their children fighting the war(s)...

silverer's picture

Well, as they said. Not all the same. But some are the same as others. There ya go. Fixed it.

silverer's picture

Millenials: many trying to live like their parents without producing concomitant income. So, what DID you learn in college, pray tell?

Anarchyteez's picture

Indoctrination and aloofness. Which equals an entitlement mindstate.

divingengineer's picture

They talk like employers should be changing their whole culture and work ethic paradigm to attract them.


canisdirus's picture

The reason for this usually isn't ultimately the children. Adjusted for real inflation, their parents were making 4-8x as much the moment they entered the workforce, even without any education beyond high school. That has a huge long-term wealth effect and these children grew up surrounded by it, thinking they would be entering a similar world.

Instead, it wasn't even possible to move out on their own, which is completely demoralizing. Even those that somehow found a way to afford college end up living with mommy and daddy for years to decades afterward as they try to establish themselves.

It's hard to blame them for some of the things they're hated for.

Disgruntled Goat's picture

I don't get it. How does perennials rhyme with negros?

foodstampbarry's picture

Millenials, scum of the earth.

divingengineer's picture

Almost as fucked up as boomers.
As a gen-Xer I can confidently say you are both (collectively) fucked in the head, as generations go.

canisdirus's picture

Having worked with quite a few Gen-X'ers over the years, I'd rather not do it again. I only end up with them when I inherit them (I have never hired one), but I always end up firing them for similar reasons.

I can't entirely blame Gen-X for being damaged goods - they're the last generation that entered the workforce with a decent economy, followed by experiencing our new normal economy during what should have been the most stable years of their lives, the combination of which seems to have permanently damaged them. They have a completely entitled mentality, unlike better Millennials the realize that their opportunity to work is a privilege, not a right.

That said, around 50% of Millennials are a lost cause.

ElTerco's picture

I would argue that Gen-Xers come across as having "negative attitudes" rather than a sense of entitlement, and people don't like it.

I once read about a psychology experiment where people were put in a room with a "controller apparatus" that would affect the outcome of the experiment. What they found is that the optimists continued to believe that the controller had an effect, while the pessimists quickly (but not immediately) realized that the apparatus was not controlling anything.

Now you tell me, would you rather hire the optimist or the pessimist to work for your organization? I think people that react to real world inputs are more valuable to an organization than people that are delusional, but maybe I'm wrong.