The Eye Of The (Sh*t) Storm

Submitted by QTR's Fringe Finance

I think I’ve identified the four horsemen of the next stock market apocalypse — each one manageable in isolation, but collectively large enough to reshape a financial system priced for perfection.

Subprime auto, commercial real estate, private credit, and crypto all scratch me where I itch when thinking about precarious pockets of today’s stock market.

None of these areas is as systemically concentrated as subprime mortgages were before 2008, but each contains hidden leverage, murky valuations, and exposures lurking in balance sheets that investors prefer not to scrutinize until they absolutely have to — sometimes done by a bankruptcy court.

When assets across multiple pockets of the market are simultaneously stressed — and markets are trading at historic highs — even smaller shocks can cascade.

The Four Horsemen of The Apocalypse painting by George Lightfoot

The strains showing up in today’s subprime auto market feel like a replay of the early stages of the 2008 crisis — where deterioration was obvious in the underlying data but somehow absent from valuations. This was the scene in The Big Short where the defaults are rampant, but the price of their swaps hasn’t been marked appropriately.

It’s amazing how well assets perform when you simply refuse to value them.

Bloomberg recently noted that more than 1.7 million cars were repossessed in 2024, the most since the post-crisis period. That’s more than a 40% jump from 2022, driven by the end of pandemic forbearance, persistent inflation, and sharply higher interest rates. A typical monthly payment now sits in the mid-$700s (this is almost my mortgage payment on my studio apartment in Philadelphia), and many subprime borrowers are paying rates above 10%. What used to be a manageable necessity has become a financial wedge.

Now, get this. Among borrowers with weaker credit...(READ THIS FULL ARTICLE HERE).