Sub-Prime 2.0: Is This The Needle That Will Burst the Bubble?

Phoenix Capital Research's picture

By now, anyone with a working brain knows that stocks are in a massive bubble. For most valuation metrics stocks have NEVER been more overvalued than they are today.

However, up until now the question has remained, “what will be the needle that bursts this bubble?”

We now know… once again, it’s in subprime lending, not in housing, but in auto-loans.

Auto-loan generation has gone absolutely vertical since 2009, rising an incredible 56% in seven years. Even more incredibly roughly 1/3 of these loans are subprime AKA garbage.

In the simplest of terms, this is Subprime 2.0... is the literally the fuse for a $1.2 trillion debt bomb.

I’ve been watching this industry for months now, waiting for the signal that it’s ready to explode.

That signal just hit.

Auto-sales have peaked and are now rolling over. Indeed, looking at the chart this is a virtual repeat of what happened in late 2007 right before the economy fell off a cliff and the stock market crashed

This is the signal I’ve been looking for. When auto-sales roll over, it shows the consumer is tapped out.

The fact that this is happening at a time when auto lenders are making subprime loans (meaning people aren’t buying even when the offer is ridiculous) means this industry has turned.

It’s now just a matter of months before the defaults start hitting. And given that we’re talking about well over $120 billion in garbage loans here, this could very well be the needle that bursts  the Fed-fueled $60+ trillion debt bubble.

Fortunately there are ways to profit from this.

To pick up a FREE investment report outlining three investments that you could make you a ton of money when the markets collapse… 


Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research


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toocrazy2yoo's picture

I have acquaintences that have had shitty credit all along. They get car loans because of the beacons they install that enable repop guys to easily find the car. And they make their payments. And so I wonder if these subprime loans are as hideous (for the lenders) as the author of this piece says. The folks I know that get these loans are paying 17%, a couple of them, more. That's a lot of margin to offset the few defaults AND, the lender gets the car back at the first wiff of trouble.


I call bullshit.

putaipan's picture




Lost in translation's picture

"It's just a matter of months until..!"

We've been hearing this for YEARS now.

Somebody please wake me up when it hits...

InnVestuhrr's picture

I have been eagerly awaiting the crash of the auto market and auto makers since I saw the explosion in prices and looooooong term financing. I need to replensih my fleet and will stock up on new vehicles at liquidation prices AGAIN.

After Chrysler went bust, and the obomination bailed them out, I purchased a fleet of new vehicles with lifetime warranties and included free oil changes for 7 years, at such low liquidation prices that when I sold the used vehicles 5 years later I earned a PROFIT.

I LOVE LOVE LOVE economic cycles - all you need to prosper and profit is CASH.

Gorgeous's picture

It’s now just a matter of months before the defaults start hitting....

From the graph, its a matter of about 84 months (7 yrs), and that's assuming the auto defaults were the cause, and not just a correlation with the housing crash.  But the red crayon over a blue chart makes a nice chart cartoon.


Kat Daddy's picture

Almost time to upgrade to a Porsche Boxter, slightly used.

Sirius Wonderblast's picture

I remember all the 911s that were rollling around the City in the early 90s and then suddenly they couldn't give them away.

I am Jobe's picture

PS; Netflic still works and Phone works. Entertainment is here. America need not worry since ther eis NFL, NBA, MLB, TVEEEEE shows , who cares 

I am Jobe's picture

zzzzzzzzzzzzzzzzzzzzzz, wake me up when Housing, Auto and Student Loans are collapse. Till then i will stay asleep. 

TVP's picture

Thinking the same thing. $120 B auto loans pales in comparison to $1.4 Trillion student loans.

But the fear-mongering of the Phoenix knows no bounds.  

northern vigor's picture

$120 billion was like six weeks QE to the banks...practically spit all

USofAzzDownWeGo's picture

It's a little different losing your car than your home......

Singelguy's picture

Not if you are living in your car.

Farqued Up's picture

The only reason to lose your car is to return to a stationary home where the repo monster awaits. There are nomadic jobs for wanderers, live in your super van, see the world.

Hikikomori's picture

If you lose your home AND your car, you will sleep in the shruburbs, not in your car.

SmittyinLA's picture

ISIS will buy up the used Truck surplus, I hear they really dig those v6 ecotech engines and love those big diesels you have to fill with special diesel and special diesel fluid, what's more handy in the Syrian desert than a truck that needs special fuel and special fluid? Maybe rear TV headrests with wifi.

The new diesel filters, those are handy too!

The_Dead_Bear's picture


Please, please, Phoenix Capital :  F--- OFF !!!

This bubble will not burst as long as you keep writing it's about to burst....

Please, please, SHUT UP ! 



               The Dead Bear



SmittyinLA's picture

He's just trying to sell some gold before the collapse, cuz the comisssions are much smaller after

DisorderlyConduct's picture

The whole charade goes on until some catalyst makes people not accept it. As generations come and go the knowledge of what was dies. As a result everything is relative. I'm not saying I like it but it is clearly true.

I tell my son that I used to get silver coins in change and that federal Reserve notes used to be exchangeable for silver and gold. Shrug. I tell him about the war on cash. Shrug. I tell him about the robbery of money printing and the devaluation of the dollar. Shrug. He did not know how it was - his whole generation only knows what is.

If you hold wealth outside of fiat you will do ok if it's liquid. As far as the auto bubble - why would anyone not think that there will simply be another bailout? How many have there been so far? Why is this different?

TVP's picture

I'm thankful that Economics was a required course when I was still in high school ( I believe they've done away with it now, not sure).

I paid attention in that class and got an A.  I remember my teacher saying one time, "No, printing money is not good because then you get inflation, and you don't want that".  Funny.  Of course when you're in a deflationary collapse and most of the money props up banks, the inflation gets mitigated.   

Anyway just wanted to say that some of us in the younger generation do understand all of that.  But only those who know something of elementary economics and history will even start to think about it (I hear they're going to do away with history classes, also.  Not good).  

Best ways to hold wealth in liquid form outside of fiat include and cryptocurrency.  


geno-econ's picture

Many years ago college level economics taught that the ideal was to have a " Balanced Economy " meaning a combination of manufacturing, agriculture,  energy and service sector.  Now the best paying jobs are in finance and high tech although fully dependant on a Global Economy  with deficits and consumer credit  to the moon. Not very balanced or smart

northern vigor's picture

Of course they had to stop teaching economics in high school...what purpose does it do the elite if the masses find out the real rules  of the game?

. . . _ _ _ . . .'s picture

"...rising an incredible 56% in seven years."

8% per year.

What's so incredible about that? A little above average perhaps.

Looks to be about the same growth rate since the eighties, more or less.

I do agree that it is an insane rate of growth, but it seems to be normal.

Hikikomori's picture

I think the bigger issues are: 1/3rd. are subprime - that was not the case in the '80s or '90s, and many are 6 year terms or longer - in the '80s and '90s they were two or three year terms.  It's not an apples to apples comparison.

. . . _ _ _ . . .'s picture

I agree, but the word "incredible" was used to describe the 56% total.

DrBrown's picture

Another doom sayer....

Frankly Speaking's picture

The owners of those auto loan backed securities will simply off load them on the Fed, and presto, all is well. QE to infinity.

Creepy_Azz_Crackaah's picture

" just a matter of months before..."

Finally! Someone actually calls the date of the SHTF. Place your bets, people...

scoutshonor's picture

I put my money on June 22th. 2017

Blano's picture

Even if all $120 billiion blew up, you really think that'll affect $60 TRILLION of debt?

I don't think so.

jeff montanye's picture

imo it's not so much a fuse as a detenator.  

LawsofPhysics's picture

There will be no "big bang" or implosion simply because the earth's bankers/financiers will never allow a mechanism for true price discovery so long as people ACCEPT FIAT IN EXCHANGE FOR THEIR LABOR!!!!

Houses Depreciate's picture

They couldn't seem to prevent housing prices from falling 30% from 2007-2009.


What goes up will come crashing down. It's the laws of physics my good friend. It's the laws of physics.

lasvegaspersona's picture

laws of physics bow to the Madness of Crowds

BullyBearish's picture

there has NEVER been a more dangerous, damaging WMD than fiat in the hands of bankers...

Zero Knowledge's picture

With Fed's Bazooka, $120 billion is small change.

AGuy's picture

"With Fed's Bazooka, $120 billion is small change."

FWIW: I don't think the auto loan is the only problem. Its likely that one sector goes (like auto loans) other like mortgages, student debt, credit cards will also be triggered. I think Credit card is near an all time high.

If there is a credit event in Auto loans, its very likely other lenders will also being limiting credit in other areas. Once Credit availability dries up so will consumer spending, which will lead to layoffs. The US economy is 100% depend on credit expansion.

That said, certainly the Fed will act quicker with QE and bailouts than they did in 2008/2009. The QE door has been unlocked and is readily accessible. However, there will be some pull back before the Fed pushs the QE button. I could see a 15% to 30% market correction before the QE kicks in.

I don't have any realistic way to estimate when the next credit event will begin. But usually credit events are triggered in the late summer or early fall.

Berspankme's picture

Heck even that faggot ass Bernanke could print that in a few hours

saveUSsavers's picture

repossessions are up, Ford #s ugly today, but I don't trust common dividend which they could suspend (own 4% bonds)

GM has to be even crappier, more subprime I think 35% or so

GoldToDaMoon's picture

Or will they simply create Sub-Prime 3.0?

U4 eee aaa's picture

print or die. They gave themselves no other choice

FEDbuster's picture

What is the percentage of sub-prime student loans?  Bet the number makes car loans look like chump change.  Looks like the Federal Reserve's cesspool balance sheet will have to absorb these latest pile of shit loans.

Wrenching Away's picture

Sub-prime? There are zero qualifications to get student loans as far as I remember. Most of these kids don't have a decent job and never will, unless you consider part time at Petsmart "decent".

pocomotion's picture

It takes a while for the train to stop rolling, even off the track.

ShorTed's picture

Subprime auto loan mkt is inconsequential (300bln max)...quite a bit different than the mortgage mess from a few years back.

A. Boaty's picture

Does the $300 billion figure include the gross notional value of derivative contracts outstanding?

No_More's picture

That said you gotta wonder how many 'investments' / bets have been made that sub-prime auto lendees will never default. Like 2007-2008 but instead of betting on 'housing uber alles' it's 'transportation uber alles'. Or 'education uber alles'. Or 'shopping uber alles'. Take your pick, you can choose more than one.

And from what I understand there's a LOT more betting this time thanks to the bailout 'money' being spent at the financial casinos again.

AGuy's picture

"Subprime auto loan mkt is inconsequential (300bln max)...quite a bit different than the mortgage mess from a few years back."

Unlikely that Subprime is contained to just auto loans. I am sure there is also a Subprime mortgage crisis building too. Credit issues are rarely compartmentalize. Also take a look at Credit card borrowing.

Bastiat's picture

The idea that there would be consequences is so last century.  After 2008 we don't do that kind of thing any more.  Our central planners will take care of it.  They're good people.  It's all good. It will always be all good.