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The Next Subprime Crisis Is Here: 12 Signs That A Day Of Reckoning Has Arrived For The U.S. Auto Industry

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In 2008, subprime mortgages almost single-handedly took down the entire financial system, and now a new subprime crisis is here.  In recent years, the auto industry has been able to boost sales by aggressively pushing people into auto loans that they cannot afford.  In particular, auto loans made to consumers with subprime credit have been accounting for an increasingly larger percentage of the market.  Unfortunately, when you make loans to people that should not be getting them, eventually a lot of those loans are going to start to go bad, and that is precisely what is happening now.  Meanwhile, automakers and dealers are starting to panic as sales have begun to fall and used car prices have started to crash.  If you work in the auto industry, you might remember how horrible the last recession was, and this new downturn could eventually turn out to be even worse.  The following are 12 signs that a day of reckoning has arrived for the U.S. auto industry…

#1 Seven out of the eight largest automakers in the United States fell short of their sales projections in March.

#2 Overall, U.S. auto sales so far in 2017 have been described as a “disaster” despite record spending on consumer incentives by automakers.

#3 Dealer inventories are now at the highest level that we have seen since the last financial crisis.  Why this is so troubling is because there are a whole lot of unsold vehicles just sitting there doing nothing, and this is becoming a major financial problem for many dealers.

#4 It now takes an average of 74 days before a dealer is able to sell a new vehicle.  This number is also the highest that it has been since the last financial crisis.

#5 Not only is Ford projecting that sales will fall this year, they are also projecting that sales will fall in 2018 as well.

#6 Used vehicle prices are already starting to decline dramatically

The used-vehicle price index from the National Automobile Dealers Association posted a 3.8% decline in February compared to the prior month. NADA also said wholesale prices fell 1.6%.

#7 As I discussed yesterday, Morgan Stanley is projecting that used car prices “could crash by up to 50%” over the next four or five years.

#8 Right now, more than a million Americans are behind on their payments on their auto loans.  This is something that has not happened since the last financial crisis.

#9 In 2017, U.S. consumers are more “underwater” on their auto loans than they have ever been before.

#10 Subprime auto loan losses have soared to their highest level since the last financial crisis, and the delinquency rate on those loans has risen to the highest level that we have seen since the last financial crisis.  By now, I am sure that you are starting to notice a pattern in these data points.

#11 At this moment, approximately $200,000,000,000 has been loaned out by auto lenders to consumers with subprime credit.

#12 Just like with subprime mortgages in the run up to the last financial crisis, subprime auto loans have been bundled together and sold as “securities” to investors.  And just like last time around, this has turned out to be a recipe for disaster

Many auto loans, including those considered subprime, are securitized and sold to investors. But Morgan Stanley recently reported that the share of auto securities tied to “deep subprime” loans – those given to borrowers with a FICO credit score below 550 — has risen from 5.1 percent in 2010 to 32.5 percent today. It said defaults on those bonds have risen significantly in the past five years.

Almost a quarter of the more than $1.1 trillion in U.S. auto loan debt is owed by subprime borrowers, and delinquency rates have hit their highest point in seven years.

In the old days, you could always count on the U.S. auto industry to bounce back eventually because of the economic strength of average U.S. consumers.

Unfortunately, the middle class in America is being systematically hollowed out by long-term economic trends that our leaders in Washington D.C. have consistently ignored.

We have become a nation of economic extremes.  There are more millionaires in this country than ever before, but meanwhile poverty is exploding in communities all over the country.

If you live in a prosperous area, things may be going great where you live for the moment.  But as Gallup has discovered, an all-time record high percentage of Americans are worrying “a great deal” about hunger and homelessness these days…

Over the past two years, an average of 67% of lower-income U.S. adults, up from 51% from 2010-2011, have worried “a great deal” about the problem of hunger and homelessness in the country. Concern has also increased among middle- and upper-income Americans, but they still worry far less than do lower-income Americans.

You may have plenty of money in your bank account, and so for you hunger and homelessness are not very big issues.  But for those that are just scraping by from month to month, having enough food and a place to sleep at night are top priorities.  Here is more from Gallup

Americans at all income levels are expressing greater concern about hunger and homelessness, and it is the top worry among lower-income Americans, who are most likely to struggle to pay for adequate food and housing.

In addition to the woes of the auto industry, the retail industry is going through the worst wave of store closings in modern American history, pension funds are melting down all over the nation, and stocks are primed for a crash of epic proportions.  Things are lining up just right for the kind of scenario that I laid out in The Beginning Of The End, but unfortunately most people are not listening to the warnings.

The same thing happened just before the great financial crisis of 2008.  All of the warning signs were there well in advance, and many of the experts were warning about what was coming as early as 2005.  But because it did not happen immediately, a lot of people greatly mocked the warnings.

But then the fall of 2008 arrived and all of the mockers suddenly went silent.

As you can see from the numbers that I shared above, a new crisis has already arrived.

The only question now is how bad it will ultimately turn out to be.

As always, let us hope for the best, but let us also get prepared for the worst.

 
  • Mark

    Many will try to use their great educational, intellectual intelligence to discuss their sense and reason understanding of what will or will not happen. Most of the discussions in here would be laughable if they the people were not so ignorant about Truth.

    • socalbeachdude

      Huh?

      • Mark

        Huh, says the educated one. My point proven.

        • socalbeachdude

          Huh?

          • Mark

            So says the intellectual educated sense and reason man. You people have no clue at all but only like to hear yourselves talk in here like you really know the Truth but in reality you know only your father.

          • socalbeachdude

            You appear not to comprehend the meaning of words and concepts which is precisely the cause of you ending up so confused and unable to deal with rational financial thought. Not unlike most all Americans these days.

          • NorthernBud

            “rational financial thought” – not a thing.

            “You appear not…” – wow, just wow.

            “Not unlike most all…” – not enough time in the world to pick this grammar apart.

          • socalbeachdude

            All of those phrases are perfectly correct.

          • Mark

            Perfectly intellectual with no real substance at all. No Truth whatsoever. You miss the point and the mark because you are too smart and intelligent.

          • socalbeachdude

            True.

          • socalbeachdude

            IMPOSTOR BS COMMENT.

          • socalbeachdude

            Laughably False!

          • socalbeachdude

            Laughably False!

          • Mark

            You are so intelligent that you make no sense at all. What does it profit a man to gain the whole world and lose his soul?

          • Mark

            Wow!! that was really intelligent! Can I be your friend?

  • natxlaw

    I swear it is going to be different this time.

  • ALWAYSTOMORROW

    This does sound horrible…..The cost to buy a car for people in the market to buy is coming down.
    That coupled with the lost cost of fuel is absolutely devastating.

    • none

      This is not that horrible! When the repo people come, they will not have to throw the people out of their cars.
      Cars are much to small to live out of today.

  • Bill

    Another great topic with interesting stats that paint a bleak forecast for the future. Too bad a couple of mouths have contaminated the blog.

    • SHAMWOW

      Like it or lump it. You always have the option to click the small inverted triangle next to a users name on the far right side of the screen and selecting “block user.”

      • Cinderella Man

        You bet! When you block the blowhard socalbeachtard the blog actually becomes readable. Lovin it!

    • ALWAYSTOMORROW

      The majority of your future is in your hands. If it looks “bleak” when then…..

  • Bob

    When people have money and a secure job, they usually buy automobiles every couple of years. The low number of auto sales shows the pulse of American consumers. The sub-prime loans only aggravate the problem.

    • Rick

      Maybe that’s part of the problem. A new car every couple of years? I made the foolish mistake of buying a new car when I was 23 years old, worst deal of my life. I’m 54, and haven’t bought a new one since. I make excellent money in the healthcare industry, but find new cars such a waste of money that it seems rediculous that anyone would ever buy a new one. But I get what you are saying. We live in a very rich agricultural area, and we see quite a few farmers with nothing better to do each and every winter than to run down to the dealer and negotiate hard on that new $70,000 pickup truck.

      • David

        why buy new when you can get 2 used cars for the price of 1 new car? Buying last years model with 2,000 miles on it will save you up to 50% of the cost of buying new and more than likely the used car will still have the Manufacturer’s warranty still attached. I personally would take savings like that in exchange for up to 2 or 3,000 extra miles on a car.

        • socalbeachdude

          David, SOMEBODY has to buy new vehicles or all of the manufactures would totally go out of business!

          • CensoredSpeech✓ᴰᵉᵖˡᵒʳᵃᵇˡᵉ

            Nobody has to “buy” anything unless it benefits them! If the dealers/manufacturers want to sell cars produce cars the public needs at a price they can afford!

          • olde reb

            Rental agencies ??

      • John Higson

        ‘ridiculous’

    • sister soldier

      That is because most incentives are with the new auto sales such as 0% interest, 0 down payment or Cash Back. It’s all smoke and mirrors as the auto industry is known to hide those costs along with your trade-in (payoff $$) in the sales contract finance charge calculation.

      As it stands today the auto industry is not required by law to tell the consumer how they come up with the finance charge amount. The interest rate is to be disclosed on the sales contract but not the finance charge (the sneaky hidden costs).

      Also, car loan maturity dates have grown beyond reasonably good business sense. Some auto dealerships/finance companies are now up to a 10 year loan on new automobiles. Longer loan terms seems on the surface to give the appearance of smaller car payments as an incentive but the problem is that cars depreciate much faster than the loan and most car owners are looking for a way out before a 7 – 10 year loan reaches maturity. Dealerships are now stuck with inventory they can’t move because of greed, deception and over zealous manufacturing and tapped out consumers stuck in a “death contract” with paralyzing payments. When automobile inventory exceeds and surpasses the population it is safe to say, “Houston we have a problem”.

      • socalbeachdude

        Those 0% deals do not apply to people with poor credit who are faced with very high interest charges on any sort of “subprime” vehicle loans.

        • sister soldier

          Wrong again. They have bent that rule also by lowering the credit score qualifications. A few tricks and some unscrupulous lenders fixed that as well as a new trick that has surfaced. Because a lot of people are trapped into these new “questionable” leases and loans they have now created lenders who will allow you to have a pulse and YOUR LOAN HAS BEEN APPROVED! It’s the Lehman Brothers – Country Wide meets Ford Motor Credit – Chrysler Capital of the 21st century on unleaded greed.

          • socalbeachdude

            Nope. What I stated is 100% correct. Those 0% offers DO NOT APPLY AT ALL TO PEOPLE WITH SUBPRIME CREDIT records and they are faced with very high interest charges on vehicle purchases.

            The major regulated banks in the US do not even issue much in the way of subprime loans. The biggest issue with those is that they come from “captive lenders” such as the finance units of CarMax, Ford, GM, and other car manufactures. That was a huge problem back in 2008-2009 with GMAC (General Motors Acceptance Corporation) which was the GM owned captive lender which had extensively expanded from vehicle loans out into risky subprime housing loans.

            The end result with GMAC was total failure and the 100% wipeout of GM stock and bond holders and the Chapter 11 Section 63 reorganization of the new GM including the recreation of GMAC as “Ally Bank.”

            Nearly all of the captive lenders of the auto companies engaging in subprime loans SECURITIZE THOSE LOANS by selling tranches of groups of loans into the securities markets and there are about $250 billion of those securities now in existence. That is where most vehicle loans that are failing are now failing with very significant implications for that securitization business just like we saw with certain MBS (Mortgage Backed Securities) instruments in 2008.

          • Falcon

            Excellent reporting.

        • YCNAN

          LEARN TO NOT BUY ANYTHING UNLESS YOU CAN PAY FOR IT IN FULL LEARN TO DO WITHOUT WHAT MADISON AVENUE KEEPS TELLING YOU CAN’T DO WITHOUT

  • socalbeachdude

    It would be really nice if BMW Rolls-Royce motor car prices fell by 50% as that would bring down the price of an entry level Ghost from over $300,000 to about $150,000 which would help break all prior sales records here in Beverly Hills, California!

  • socalbeachdude

    TINY MONEY LOSING TESLA SETS NEW STOCK HIGH…

    Tesla surpasses Ford to become No. 2 U.S. car maker by market value

    http://www.marketwatch.com/story/tesla-surpasses-ford-to-become-no-2-us-car-maker-2017-04-03

  • socalbeachdude

    Shares of car makers and their suppliers hammered after March sales disappoint

    http://www.marketwatch.com/story/shares-of-car-makers-and-their-suppliers-fall-after-march-sales-disappoint-2017-04-03

  • socalbeachdude
  • socalbeachdude

    NEW HEIGHT OF ABSURDITY FOR TINY TESLA…

    Shares in Tesla soar by more than 30% as 14-year-old electric car company tops Ford with value of $47.7bn

    Tesla has overtaken Ford to become the second most valuable player in the American auto industry – despite selling 27 times fewer cars.

    http://www.dailymail.co.uk/money/cars/article-4376990/Tesla-overtakes-Ford-automobile-player.html

  • socalbeachdude

    Why The Economy Is Heading To A Recession

    Victory of Donald Trump in last year’s presidential election led to a boom in the markets. The promises of the new regime to overhaul regulation, invest in infrastructure and cut taxes were expected to give a boost to the 8-year-old economic upturn. The problem is that the debt-financed global expansion has already lasted for a long time (eight years) and its foundations are weakening rapidly.

    There are three reasons why an economic downturn is likely to be just around the corner. First, credit creation in the US economy has stalled. Second, for the last year or so China has been supporting global growth and it is running out of road. Thirdly, the internal problems of Europe limit its ability to boost global growth. All this leads to a conclusion that we are heading to a global recession.

    http://www.huffingtonpost.com/entry/why-the-economy-is-heading-to-a-recession_us_58de6efee4b0fa4c09598874

    • David

      funny how recessions work.
      whenever we have a recession the president of the united states usually has a moment on tv with the public to announce it just like Bush jr did before Obama became america”s Savior. (Sarc) anyways when they do announce it it is because it is affecting the rich and they can no longer deny the financial crisis. they fail to mention that the middle class and lower income earners had been in a recession for quite some time & act like it’s something new! lol.

  • David

    I have never purchased a new car but my understanding is that car dealerships have done away with dealer & handling costs and are setting up loans that can be as long as 8 years. they try to take away every excuse you think you might have for not buying a new vehicle.

  • socalbeachdude

    CarMax shares could drop 20 percent as charge-offs, risky loans rise: Barron’s

    Shares of CarMax Inc (KMX.N), the biggest U.S. used car dealer, are vulnerable to a 20 percent decline if investors are unnerved by falling used vehicle prices and weakening credit quality when it reports its results, Barron’s said on Sunday. The company is scheduled to report fourth-quarter and fiscal year ended Feb. 28, 2017 results on April 6.

    CarMax’s captive auto finance unit contributes about 40 percent of the company’s operating income and could come under pressure as defaults and delinquencies rise, the report said. Last year, the company rolled out an online financing initiative to help customers pre-qualify for a loan before a store visit, hoping to improve customer conversion rates.

    The economy is becoming less friendly to used-car buyers, personal bankruptcies have ticked up in recent months and interest rates are on the rise, meaning CarMax might find itself underreserved for loan losses, according to Barron’s.

    http://www.reuters.com/article/us-carmax-barrons-idUSKBN1740VL

  • Cinderella Man

    My brother is in auto sales. He fully adknowleges that we are in the height of the subprime bubble. Did you know they have devices that can shut your car down if you don’t make the payment? My brother reasons that it won’t be as bad as the morgage subprime crisis because cars are easier to repossess than homes. I hope it dosent get much worse for his sake but I have been warning him for years to have a back up plan. I know I wouldn’t be able to sleep at night if I had his debt. So he has to sell hard everyday seven days a week just to keep the lifestyle he’s grown accustomed to. I think about the millions out there just like him. Its like living life on Rent a center. Sure you have the car and houses now but you don’t own them they own you. For me I keep it simple. Save buy used pay cash for everything. The only thing I use my debit card for is online purchases. And I don’t spend my money on things that don’t make me more money. I’ve learned my lesson from the last crisis. My construction business went under and I went thru a rough stretch. Around that time I slept in my car for a month. I made my mind up then that I would go into a recession resistant business. Agriculture. People always need to eat. That’s the key to surviving hard times.

    • socalbeachdude

      Very good advice and observations.

      • Dare Tuitt

        I second that. The most important work today is organic food production. A most valuable study. One can earn $40,000 or more a year just from small acreage gardening. Do an Internet search; plenty of information on how to start.

        • Cinderella Man

          I can’t read his idiotic replies because I blocked him but socalbeachtard knows nothing about agriculture. He tried to tell me cattle commodity prices are related to the costs of raising the animal. He dosent realize if the commodity price is low yet everything else is rising it just makes a deeper hole for the producer.

          • socalbeachdude

            Laughably false!

          • socalbeachdude

            Laughably True!

          • socalbeachdude

            FAKE IMPOSTOR COMMENT.

          • SnodtBlossom

            CinderellaBoy embraces his dirtbags and they embrace him

          • Dare Tuitt

            It’s easier to believe people will learn in time, especially when the wrong choices and decisions effect themselves directly. If he raises cattle and expends too much in their care and upbringing, compared with what he ultimately earns for them when he sells, he will experience first hand the truth you tried to share with him.

        • LIZ THE SHIZ

          $90k if you grow pot

          • dlewenz

            More if you live in MI, 12 plants per Medical Card. You will average a harvest yield of 1.5 pounds per plant 18 pounds per harvest @ $1000 per pound to Medical Pot retailers, which is legal, x 4 harvests per year. $72,000 less electrical cost of $2,000.

          • none

            There are more costs with growing medical grade?
            That guy on the documentary series Breaking Bad did great. I tried to find his formula for Making his grade A_MC. Product on Utube, but I couldn’t find it. I think the show was on AMC ?

          • olde reb

            The penalty for competing with the CIA is awful.

    • David

      Alcohol industry is another one. people will continue to drink weather in celebration or in sorrow. Bartenders will always have a job no matter what happens with our economy.

      • sister soldier

        I wouldn’t argue bartenders but if you make “moonshine” or “microbrew beer” you have a head start in the next depression.

        • olde reb

          And if you cannot sell it, you can always drink it.

          • sister soldier

            Definitely another way to go!

      • socalbeachdude

        Actually, the bar business is way down with a number of bars going out of business due to 1) high prices, 2) law enforcement on the roads, and 3) social networking which obviates the need for people to go out to bars to meet other people, and 4) huge increase in rents that bars must pay.

    • Goldfinger

      A relative of mine here in flyover country works for a repo company. In January they repoed over 600 vehicles and February over 500 (mostly subprime), both records and they’re not even the biggest in town. March wasn’t as bad (or good depending on your point of view) because tax refunds allowed some debtors to get caught up.

      I’m with you, buy used and pay cash. If it’s paid for you don’t have to worry about the with the hook pulling up to your driveway.

    • olde reb

      Agriculture may be recession resistant if you grow and store your own food. Many farmers around here are deeply in debt for very expensive equipment that may be used few hours per year..

  • Cinderella Man

    Another problem that comes to mind is the price of the vehicle itself. Don’t these bozos who take out a 50k loan to buy a new car or truck realize that they will be underwater on the loan almost as soon as they drive it off the lot? Add in the fact that the car dealers are giving out 7 year loans on a vehicle? This is ridiculous rationale. And unfortunately it will end in disaster.

    • socalbeachdude

      Absolutely correct.

    • Rick

      You are spot on. But give them credit, maybe they are planning ahead. Maybe they know 3 years down the road they will be living in their car/truck, so are just making sure they have a good one. No poke at you brother, you were in a bad place at a bad time with construction. And I respect the underlying determination you have not to quit. Yours is a story our high schools should be teaching these snowflake bozos that graduate with 4.0s each year, but couldn’t tell you what the first Amendment to the Constitution is about.

      • Cinderella Man

        Hence why I picked the handle Cinderella man. Jim Braddock’s story of falling to his knees during the first great depression and his rise back to the top changed my life gave me hope during a hopeless time. I’ve realized in the past 8 years there are many stories of heroes making a difference in the face of adversity. My advice to anyone struggling is never quit trying. Keep on keeping on. Because the stuggle is indeed real.

    • GSOB

      The more American dollars increased in global circulation, the more things cost the consumer.

      • socalbeachdude

        Absolutely false. The biggest cost increase to vehicles has been to do with MASSIVE GOVERNMENT REGULATION IN THE USA as to how vehicles can be built over the past 40 years.

        • UncleCarm

          Absolutely false. The biggest reason for the high cost of new cars is ‘third party payers.’ If people had to come up with that money, or even pay it off in 4 years like the old days, those vehicles would not be priced so high. Third party payer is the blight on America. Look at the major categories for third party payer: vehicles, homes, college and healthcare. Now look at any source you want to that reports inflation, and these 4 will be at the top.

          • socalbeachdude

            Huh? There is no question at all that the biggest cost increase in vehicles in the US has come from FEDERAL GOVERNMENT REGULATIONS regarding how vehicles are built. IF vehicles could be built and sold in the US like they were 40 years ago they would be VASTER CHEAPER than they are today. Labor costs have also been a contributing factor.

            The FINANCING of vehicles has little to nothing to do with the cost of production of vehicles and is just the way many vehicles are paid for. All you are referring to by saying “third party payers” is LENDERS ON VEHICLE LOANS. If credit standards including both credit scores and income requirements on borrowers were to be tightened substantially, that WOULD NOT REDUCE THE COSTS OF VEHICLES AT ALL but would simply result in the sales of far fewer vehicles.

          • Falcon

            You’re fighting against Dunning-Kruger Syndrome, the silent killer of a once free People and Republic.

  • alan

    It seems now the way dealers make money is through the loans they offer. So then they approve risky people. But we really see it in everything. You want something you’ll have to get a loan. It just keeps getting worse.

    • socalbeachdude

      40 years ago most dealers were FAMILY OWNED LOCAL BUSINESSES but over the past 40 years dealerships have been bought up and concentrated into huge multi-dealership organizations such as AutoNation and CarMax and it those companies that have decided to get into the finance business.

      About 40% of the revenue of CarMax comes from the loan (sharking) business and most of those loans have then been SECURITIZED as Michael pointed out above just like was the case with the mortgage brokers hustling loans and then pushing them through banks and then out into the securities markets for the actual financing.

      The bottom line issue is WHO ULTIMATELY BEARS THE RISK WHEN THE UNDERLYING LOANS GO BAD and there is totally insufficient collateral to cover them as vehicle prices plunge and as the financial mess created by that process becomes a swamp so thick it is nearly impossible to untangle.

      • Spatial Memory

        100% INACCURATE GUESSWORK

        • socalbeachdude

          What I stated is 100% true, accurate, and fully correct.

          • Spatial Memory

            Not even close. Seems you’re here daily wilfully REPEATEDLY posting INACCURACIES. If it were my site I sure would be seeking legal redress by now. Good luck. 🙂

          • socalbeachdude

            Your utter ignorance stupidity are just mind boggling and highly embarrassing for you. I would suggest you acquaint yourself with what the SEC regulates as securities at:

            http://www.SEC.gov

          • Spatial Memory

            I’m much more familiar with that agency any thier resources than you realize. 🙂

          • socalbeachdude

            First, the word “THEIR” is spelled “their” and not “thier” (too bad English is your second language) and obviously you aren’t even slightly familiar with the SEC and again, I would suggest you learn about securities at their excellent web site at:

            http://www.SEC.gov

          • chris

            ‘Your utter ignorance stupidity are just mind boggling’ !!!

            Please check your own posts for grammar and spelling before correcting others. Huh?

          • socalbeachdude

            Huh? What do you find to be in any way grammatically incorrect or misspelled in any of my comments? Please do tell!

        • socalbeachdude

          I know, I just like to hear myself talk.

          • socalbeachdude

            IMPOSTOR COMMENT.

          • socalbeachdude

            IMPOSTER COMMENT.

  • socalbeachdude

    Borrowers really have to work hard at it by being grossly irresponsible to get such extremely low credit scores in the 500 range. That only happens when people miss a lot payments, are late on a lot of payments, and doing other things very adverse to their credit history proving they are totally unworthy of getting a single penny of credit.

    That puts them in a situation where they are CHARGED VERY HIGH RATES OF INTEREST which makes them “attractive” to high unscrupulous lenders (nearly none of which are regulated banks) and those sorts of borrowers now account for about $250,000,000,000 ($250 billion) of the nearly $1 trillion in vehicle loans which are severely deteriorating just as was inevitable.

    • billtheguy

      Don’t forget kids in the 18-20 year range who may or may not payoff the loan.

      • socalbeachdude

        Yep, they are very high credit risks to lenders as they have no proven credit history.

        • GSOB

          The FRB is a very high credit risk for the US.

          • socalbeachdude

            The Federal Reserve poses no “credit risk” whatsoever. Do you even begin to comprehend what “credit risk” even means?

          • socalbeachdude

            100% True.

          • socalbeachdude

            Another absurd IMPOSTOR comment from the FAKE socalbeachdude with 51 comments that needs to be removed

  • socalbeachdude

    Securitization of loans is all part of the vast $25 trillion US financial system which is totally OUTSIDE OF THE REGULATED BANKING SYSTEM in the US which is supervised by the Federal Reserve and the OCC and which comprises only about $13.5 trillion of M2 deposits n the United States.

    The SHADOW BANKING SYSTEM is nearly DOUBLE THE SIZE of the regulated traditional banking system in the US and is very thinly regulated and that is a very core part of the problem with what has happened with the vehicle loan system in the US these days.

    • Spatial Memory

      If you had any clue what the definition of a security means then you’d immediately recognize how laughably false that comment is.
      Rotflmao

      • socalbeachdude

        Again, your utter ignorance never ceases to amaze and just boggle the mind. What I stated clearly is, of course, 100% true and correct.

        • Spatial Memory

          You have ABSOLUTELY ZERO CLUE what you’re typing, nor do you care that the majority of your comments are replete with INACCURACIES and NONSENSICAL GUESSWORK.

          • socalbeachdude

            The term SECURITY is a very broad term that comprises all sorts of financial instruments which are TRADABLE AND AT RISK and for the full definition of SECURITIES that they regulate, I would suggest you refer to the Securities & Exchange Commission web site and learn about some of the various forms at:

            http://www.SEC.gov

            How you think you can come on here and display your extreme ignorance of such basic financial matters is mind boggling and yet that is all you ever continue to do. Sad.

          • Spatial Memory

            Another of your LUDICROUS attempts at constructive deception.

            Educate yourself on the elements of a security and you will immediately recognize how ABSURDLY INACCURATE your NONSENSICAL GUESSWORK.

          • socalbeachdude

            Hardly. What I stated is 100% true and correct and how the SEC defines securities is the only thing that even matters regarding securities in the USA and prior to you displaying any further GROSS IGNORANCE AND STUPIDITY I would suggest you learn about what they consider to be securities at:

            http://SEC.gov

          • Spatial Memory

            Possibly one of your most ABSURD GUESSWORK yet. Keep digging. Rotflmao

          • socalbeachdude

            So now you’re trying to assert that what the US SEC (Securities & Exchange Commission) defines as a security is “absurd guesswork.” Really? Seriously?

          • Spatial Memory

            I’m very familiar with the definition and the elements of a security and you may want to familiarize yourself ASAP. 🙂

          • socalbeachdude

            Obviously not, and if you have any issues with the SEC definition of securities then I’d suggest you take that up with SEC Chairman Mary Jo White and not with me.

          • Spatial Memory

            :).

          • HE WILL NOT DIVIDE US

            Teach him Walker 😉

          • socalbeachdude

            I’d suggest you work on reading and comprehending the facts I have stated!

          • Spatial Memory

            You have stated ZERO FACTS. You have PROVEN beyond doubt you do NOT know the elements of a security nor anything other than your OBSESSIVE repertoire of constructive deception- not limited to.

          • socalbeachdude

            All of the key facts concerning SECURITIES are at the excellent SEC web site at:

            http://www.SEC.gov

            I would suggest you attempt to read and comprehend it and learn about securities and their regulation in the US.

          • Falcon

            Gov’t/Gov’t contractor troll?

          • socalbeachdude

            Yes, teach me.

          • Spatial Memory

            TRADABLE AND AT RISK = R O T F L M A O

            Check out the statutory definition and elements of SCIENTER on that site. Good luck. 🙂

          • socalbeachdude

            Obviously you don’t even grasp the most basic concepts related to securities.

          • Spatial Memory

            You sure may be VERY surprised what I’ve grasped along the way 🙂

          • socalbeachdude

            Obviously not.

          • Spatial Memory

            🙂

          • Falcon

            Dunning-Kruger Syndrome…

      • Cinderella Man

        Laughably true socalbeachtard is an idiot who parrots recycled garbage articles

        • billtheguy

          Do you think Spatial Memory and socalbeachdude are married? They argue like they are.

          • socalbeachdude

            Obviously not. My personal opinion is that Spatial Memory is just a little troll trader in China for whom English is his (or her) second language based on its comments.

          • socalbeachdude

            Hardly, that thang is nothing but a total and utter TROLL and is absolutely crazy as it has proven QED here this morning.

        • socalbeachdude

          What utter nonsense. Do you really consider excellent financial articles from Bloomberg, MarketWatch, the WSJ, Hussman, the Financial Times, Business Insider, CNBC and a wealth of other top financial sources to be “garbage?” Really? Seriously?

        • Spatial Memory

          Parrots don’t foist such ludicrous misinterpretations nor disrupt the entire blog when proven inaccurate. Jmho

    • df NJ

      The interesting thing about the banking system is it is self-regulating. If the bankers with new money destroy the value of the money of the older bankers, the newer bankers will be liquidated.

      • socalbeachdude

        The $13.5 trillion official banking system in the US is HEAVILY REGULATED by the Federal Reserve, the OCC, the FDIC, and others contrary to your assertions. What is not significantly regulated is much of the $25+ trillion shadow banking industry which includes hedge funds, pension funds, money market funds, ETFs, mutual funds, and the insurance industry’s investment operations.

        • Falcon

          Well then…how did George Soros become arguably the singularly most powerful man on the planet? 😉

  • socalbeachdude

    One of the biggest problems with securitization of any types of loans as it done these days and prior to the so-called 2008-2009 “financial crisis” is that they are based on bundles of loans for which a series of securities split into many (typically up to 32) TRANCHES are then sold to “investors” with each tranch having a different degree of RISK TO THE PURCHASER of those securities. Those tranches with the highest degree of risk has the highest potential return but can easily end up with 100% losses to people who “invest” in those when the underlying loans go into default.

    • Spatial Memory

      More ABSOLUTE LUDICROUS NONSENSE.

      Why detract from the discussions on this blog with constant CONTINUOUS INACCURACIES and GUESSWORK?

      • socalbeachdude

        What I clearly stated is 100% true, accurate, and fully correct, and your ignorant snarky nonsense is what is 100% ludicrous nonsense. How on earth did you ever get to be so utterly clueless?

        Moreover, what I stated goes right to the heart of this very issue of vehicle loans going bad and the implications of that. Don’t you even comprehend that? Really? Seriously?

        • Spatial Memory

          Not even one sentence close to 100% accurate. Good luck. 🙂

          • socalbeachdude

            Every single word and sentence that I stated is 100% accurate!

          • HE WILL NOT DIVIDE US

            Not even 20%

          • socalbeachdude

            100% of what I stated is true and correct.

          • Spatial Memory

            No even 0.2% ROFL

          • socalbeachdude

            Your utter ignorance is beyond astounding.

      • HeyAHuman

        It’s funny, because every time you try to shoot him down, it sounds exactly the same, and you offer NO counterargument. Just “ludicrous” this, “guesswork and inaccuracies” that…

        • Spatial Memory

          No counterargument needed:
          Elements of a security:
          1. Consideration paid.
          2. Agreement of returns of capital.
          3. No active role in management.

          Simple.
          No nonsense about “TRADING AT RISK”

          No prerequisite requirements for trading. Certain securities do NOT trade.

          🙂

    • chris

      You are just copying out articles you find on the net. The only times you don’t do this are when you reply to comments about your articles, with your typical reply being ‘laughably false’ or ‘huh?’ or ‘are you serious?’ or some other insult. These are the only bits you write yourself. And you still vote up your own posts! It’s beyond pathetic. It’s sad that you feel such a need to justify your presumably trivial life by swamping this site with your ‘wisdom’ .

      • Cinderella Man

        You can always block the retard. Little triangle in the corner block user

        • socalbeachdude

          And then lose access to some of the most insightful material here on the comments!

          • Spatial Memory

            Laughably false. ROFL

          • socalbeachdude

            That certainly describes your bogus and nonsensical assertions!

        • socalbeachdude

          You’re right I’m 100% retarded. Laughably True!

          • socalbeachdude

            STUPID IMPOSTOR COMMENT THAT NEEDS TO BE REMOVED. Apparently this debris impostor nonsense is coming from Spatial Memory as all of this nonsense is directly related to its comments.

          • Spatial Memory

            No debris imposter necessary. Just debunking your plethora inaccuracies and forwarding the most prolific source of intentional misinformation on the www appropriately…
            🙂

          • socalbeachdude

            What utter stupidity. What is wrong with you? Are you incapable of rational thought? Or what? Stop the stupidity on this comment thread as it is obnoxious.

          • Spatial Memory

            You’ve been asked to stop your obnoxious repertoire REPEATEDLY by nearly every person leaving comnents, the capital markets have REPEATEDLY REJECTED your HORRENDOUSLY INACCURATE GUESSWORK.

            Yet you continue OBSESSIVELY foisting misinformation.

          • socalbeachdude

            Your absurd LIES, IGNORANCE, and UTTER STUPIDITY are just beyond absolutely mind boggling. Making an utter FOOL out of yourself is apparently your goal in life and in that regard you have totally succeeded. Pathetic. Pitiful. Sad. As to my comments, everything I have stated is absolutely 100% correct.

      • socalbeachdude

        Given the fact that I wrote that comment above within the past 12 hours with no reference to any research material at all, that is a rather astounding and laughable assertion you are making! Moreover, when I do put up comments of comprised of other news sources, they are ALWAYS linked to the original source of publication.

        • Spatial Memory

          The comment is completely inaccurate in whole and in part. 🙂

          • socalbeachdude

            Why keep making an even bigger fool out of yourself with totally false assertions?

      • Spatial Memory

        Much more importantly his homespun guesswork paraphrasing his ‘originated versions’ of greatest hits MANY times result in inaccuracies and even when given non negotiable FACTs the idiosyncratic repertoire scrambles with constructive deception and compound lies. Jmho

        • socalbeachdude

          What utter nonsense as usual from you!

        • socalbeachdude

          I get my information from Cracker Jack Boxes.

          • socalbeachdude

            Yet another bogus IMPOSTOR comment.

  • socalbeachdude

    It has never been easier – or more free – than it is today for consumers to monitor and check their credit scores and work to improve them than it is today. Many credit cards provide free access to current FICO scores and you can you Credit Karma to check your Equifax and TransUnion scores to get a very clear picture on your current credit score status as well as very helpful tips to improve it and keep it in the 800+ range at:

    http://www.CreditKarma.com

    It is best to maintain around 12 credit cards and keep them paid in full each month as credit utilization is a very major factor in your credit score. Never be late on any payments. And the best advise is to never buy anything on credit that you cannot easily afford to completely pay off in full including vehicle loans.

    • df NJ

      PAYGO is better.

      • socalbeachdude

        PAYGO has nothing whatsoever to do with credit

        monitoring by consumers and is an entirely different concept related to federal government spending.

        PAYGO – Wikipedia

        PAYGO (Pay As You GO) is the practice in the United States of financing expenditures with funds that are currently available rather than borrowed.

        https://en.wikipedia.org/wiki/PAYGO

    • GSOB

      lol

  • df NJ

    No one saw the internet coming. I think there are several technologies on the horizon that will cause and explosion of positive growth in our economy. Animal spirits will return in force.

    • GSOB

      A cure for cancer would be great.

      • socalbeachdude

        There are many types of cancers and there is no single cure for cancer.

        • Carl

          There are many different types of cures for different types of cancers. Not all cures will cure all people as different bodies need different remedies.

          However the FDA and AMA think all human bodies both male and female, young and old should have the same standard of care based on the cancer they have.

          One size fits all medicine is just laziness on the part of the medical field.

          Same with public education and one size fits all learning.

          • Bill

            So true.

      • socalbeachdude

        Do you have a cure for stupidity? I need it Badly.

        • socalbeachdude

          Another BOGUS IMPOSTOR COMMENT.

    • socalbeachdude

      Anyone who paid any attention knew the internet began back in 1971 at UCLA and Stanford here in California as a DARPA / ARPA project and it took the next 21 years for the web browser to be developed but email was fully operational between UCLA and Stanford back in 1971.

  • HE WILL NOT DIVIDE US

    When one walks into a stealership to buy a vehicle, the salesman is selling you finance not the actual product. Wake up dummies.

    • socalbeachdude

      Many people pay cash for vehicles.

      • HE WILL NOT DIVIDE US

        Not as many as financing

  • FirstGarden

    Newton’s Law –

    For every socalbeachdude action, there is an equal and opposite Spatial Memory action.

    • Cinderella Man

      Lol

    • billtheguy

      now that is funny!

    • socalbeachdude

      He (or she) really dug a rather deep hole for himself (herself) on the last exchange over securities and the SEC!

      • Spatial Memory

        The only hole dug was by you incorporating their web link into your comments which contained intentionally misleading information and omissions of material data. Watch and learn. 🙂

        • socalbeachdude

          There was nothing in any way misleading about my comment which always directed you to the SEC web site for specific definitions of what all encompassed the topic of securities and which is at:

          http://www.SEC.gov

          Go read it and attempt to comprehend exactly what securities are regulated.

          • Spatial Memory

            🙂

    • karuna

      I was searching for someone to make a comment like this.

      • socalbeachdude

        !!!

    • FirstGarden

      I go away for a few days and come back to this?
      Too funny!

  • Rick

    Again Michael this is all good, as its occurring early on in the Trump years. As you mentioned a few times in previous writings, it won’t be easy, won’t be fun, but let’s bring on this beast of a recession/depression now, while it can still be blamed on Obama and Bush. 3-4 years in, it will have blown over, and Trump will be re-elected. I totally agree with that.

  • “V”

    I purchased 2 vehicles in 2016, both slightly used, both payments for the wife and I are affordable. I could have purchased 2 new vehicles with all the bells and whistles but that would be living above my means. Now if everyone could learn to live within their means none of these problems would exist.

    • David

      I remember in the 1990’s one of my co-workers purchased a slightly used Mercury Cougar for $12,000 with only 1,600 miles on it and he would have paid like $24,000 if he had purchased it new. who cares about a miniscule amount of mileage for savings like that. smart move “v”

    • sister soldier

      That is very true but our current culture does not cater to our means it caters to our wants and desires. If we could live within our means the country would come to a complete stop as most criminal acts would be arrested/abated/remdiated with the paradigm shift. To live within one’s means requires discipline, integrity and a strong self will. Three things that would one would be hard pressed to find in ALL people. Human nature always demands more than we deserve.

  • LIZ THE SHIZ

    being a repo man will be the next hot growth profession and don’t worry ISIS will buy all those repo cars and turn them into car bombs

  • billtheguy

    Just think if the bankers, and the government would have heeded in 2007 and 2008, done the right thing….. where would we be? A lot better off I bet.

    • socalbeachdude

      What in your opinion was the “right” thing to do then?

      • Falcon

        No TARP, break up of banking cartel….for starters.

  • socalbeachdude

    Federal government spending in 2007 was around $2.7 trillion, but has been increased by around $1.3 trillion PER YEAR since then to the current spending of around $4 trillion which is generating a federal deficit of $1+ trillion a year. In Fiscal 2016, the federal debt increased by $1.4 trillion from what it was at the end of Fiscal 2015. When is enough more than enough?

    • Gary marshall

      Hello Dude,

      I think you missed my point. The Federal deficit is every dime government spends, taxed or borrowed, because government contributes nothing to its expenditures. So the deficit is actually $4 trillion, and the true public debt every dime government has spent since its inception in 1776 or somewhere around $100 trillion. This debt has never been paid to the taxpayer.

      The government may enlarge its deficit by spending more or decrease it by spending less, but it can never get rid of it.

      • socalbeachdude

        Your “understanding” of federal government debt is not only severely deficient but DEAD WRONG. Federal government debt occurs when EXPENDITURES EXCEED REVENUES. The federal government gets revenues from tariffs, liquor taxes, excise taxes, federal income taxes, Social Security and Medicare taxes, and a whole host of other taxes and fees. Those are INCOME (REVENUES) to the federal government that have no association with debt at all.

        Federal debt occurs when the US government issues US Treasuries to finance the shortfall between its revenues and its expenditures and that has now reached nearly $20 trillion which is at the ceiling of the current debt limit set by Congress for federal government spending.

        The federal deficit as most correctly measures is the DIFFERENCE BETWEEN THE GOVERNMENT DEBT AT THE END OF THE PRIOR FISCAL YEAR AND ITS CURRENT LEVEL.

        • Spatial Memory

          Another INACCURATE NONSENSICAL GUESS
          Rotflmao

          • socalbeachdude

            Since you have no comprehension at all as to accounting, it is no wonder that you don’t comprehend the 100% CORRECT facts as clearly stated above.

          • Spatial Memory

            Still manic about me correcting your many basic accounting misconceptions. Rotflmao

          • socalbeachdude

            What utter nonsense. My comment is 100% correct as to the accounting in determining the increase in the federal debt and your lack of comprehension of accounting is what is at issue, not my excellent understanding of accounting principles which are clearly proven 100% correct mathematically above. You are not “correcting” anything but rather just making an utter fool out of yourself.

          • Spatial Memory

            Rotflmao

          • socalbeachdude

            Your stupidity is just mind boggling. As they say in the UK, “the maths never lies.”

          • Spatial Memory

            …as the say in the scienter whistleblower forums “dress warm”…

          • Falcon

            Well unless we’re talking about global warming (Whateva) or real unemployment figures. ;0

        • Gary marshall

          Hello Beachdude,

          How is the surf?

          The government has no revenues. Taking is not earning. The government does not have to go out and earn its money like you or I or some firm, offering goods in the market place where purchases are voluntary. It just shows up at your door with its hand out, taking as much as it pleases while providing as little as possible in return.

          So your description of government “revenues” is inapt.

          Its taxpayers’s money, not government money. And its public debt, funded by the taxpayer, not government debt. Taking is what one calls confiscation, not income.

          If you agree with the foregoing, then you must agree with everything else that follows.

          See ya, Dude!

  • Cinderella Man

    I think people lose sight of the fact that a car is just supposed to get you from point A to point B. It dosent matter what it looks like as long as it’s dependable. I do the same with autos. What’s more important? Having a flashy ride or just a ride to get you to work? Priorities man priorities!

    • aldownunder

      Exactly……good point

    • sister soldier

      The best car to drive is the one you hold the title for and not the one where someone else holds the lien.

      • socalbeachdude

        For you perhaps, but certainly not for everyone.

      • socalbeachdude

        Indeed.

        • socalbeachdude

          IMPOSTOR COMMENT.

      • YCNAN

        AMEN AND AMEN

    • Evan Elliott

      I agree wholeheartedly, but many others don’t sadly.

    • illusion

      I laugh when I see these so called road tests of cars like the Toyota Camry, Nissan Altima..etc. You always seem to have some snob writing the review that has little or no respect for a car that costs less than 80K. What most financial columnists need to realize is that the cost of new cars are very prohibitive. The stickers are a joke.

  • socalbeachdude

    Dimon Warns ‘Something Is Wrong’ With the U.S.

    JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has two big pronouncements as the Trump administration starts reshaping the government: “The United States of America is truly an exceptional country,” and “it is clear that something is wrong.

    https://www.bloomberg.com/news/articles/2017-04-04/dimon-still-optimistic-warns-something-is-wrong-with-u-s

    Chairman and CEO letter to shareholders – JPMorgan Chase

    https://www.jpmorganchase.com/corporate/investor-relations/document/ar2016-ceolettershareholders.pdf

    • Falcon

      Read it, but since some of us have been expecting another crash for years…

  • William Lutz

    It needs to collapse, and I hope it does.

    • sister soldier

      Fire Sale! Let’s rebuild the economy the right way this time if we are afforded another chance.

      • socalbeachdude

        And just what is the “right way” to rebuild the economy here in the USA?

  • socalbeachdude

    Overall demand for purchasing vehicles in plunging and that includes demand for used vehicles which is falling by even more than new cars due to tightening of credit, rising interest rates, and the fact that folks have purchased so many vehicles that they don’t need any more right now.

  • socalbeachdude

    Well, obviously SOMEBODY has to buy new cars or there would be no new vehicles! About 17 million new vehicles are sold in the USA each year to the around 325,000,000 US consumers.

  • alan

    This is somewhat easy to solve. Create a government agency to over see the new safety and emission standards. Next any cars over the age of four years old be deemed unsafe for the road. Collect them up and ship them off to Africa. /sac

    • Falcon

      Uh, that is exactly what is happening. Don’t need a gov’t agency when you have its partner (Insurance industry) forcing evermore ‘safety’ requirements of the auto industry. Your insurance will likely skyrocket if the vehicle doesn’t have the cameras and blind spot warning, and automatic braking doohickey, etc. Just reading recently about the big push for gov’t (Fascist) mandating of the newest safety requirements.

  • I’m driving a 1997 Nissan XE pickup with well over 300,000 miles on it. I’m hoping to keep it running for a few more years. Maybe by then used vehicles will have fallen even further in price and I’ll be able to replace it.

  • Spatial Memory

    Spatial Memory HeyAHuman
    8 minutes ago
    Hold on, this is waiting to be approved by The Economic Collapse.
    No counterargument needed:
    Elements of a security:
    1. Consideration paid.
    2. Agreement of returns of capital.
    3. No active role in management.

    Simple.
    No nonsense about “TRADING AT RISK” as socluelessbeach insists roflmao

    No prerequisite requirements for trading. Certain securities do NOT trade.

    🙂


    Avatar
    socalbeachdude Spatial Memory
    a day ago
    The term SECURITY is a very broad term that comprises all sorts of financial instruments which are TRADABLE AND AT RISK and for the full definition of SECURITIES that they regulate, I would suggest you refer to the Securities & Exchange Commission web site and learn about some of the various forms at:

    • socalbeachdude

      What an utterly nonsensical jumble of quotes out of context. What on earth is wrong with you? Are you crazy?

      • Spatial Memory

        Your CONTINUOUS INACCURACIES are NONSENSICAL in whole and in part and in time will likely be examined much more closely as to form and content. Patience. 🙂

        • socalbeachdude

          Absolutely false. There is nothing even slightly inaccurate about any of my comments, whereas yours are as bogus as a $3 Euro as everyone can clearly see.

          • Spatial Memory

            No telling who you think everyone is, however those with education and experience CLEARLY see the reaction when your constructive deception repertoire is confronted by non negotiable laws, directives, statutes and facts.

          • socalbeachdude

            What utter nonsense. Are you really, seriously THAT STUPID? Or what?

          • Spatial Memory

            Put down that mirror 🙂

          • socalbeachdude

            What utter ignorance on your part. Stop making such a jackass out of yourself.

          • Spatial Memory

            Look homeward. 🙂

          • socalbeachdude

            For you, that apparently is the PRC.

          • socalbeachdude

            I can’t I’m a narcissist.

          • Spatial Memory

            At least long enough to check the facts and statutes. You sure seem to be posting an extraordinary amount of false and inaccurate representations. Jmho 🙂

  • illusion

    Wow…2018 Corvette ZR1 convertible caught at GM proving grounds. I have to have one.

  • Lorungee

    I’m underwater in my auto insurance. Never mind the car payment, that’s doable.

  • Pic889

    Of course, the financial institutions will be bailed out, the subprimes will enjoy new cars for a while till they get repossessed, and prudent savers will see their money inflated away as money is printed to fund the bailouts.

    The abolition of Glass-Steagall was a side-door to socialism. A very well concealed one.

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