The Fuse on the Subprime 2.0 Debt Bomb is About to Ignite

The Subprime 2.0 story is now gaining traction in the financial media.

By way of brief review, here is the template for Subprime 1.0 (the mortgage meltdown).

1)   Banks, hungry for profits, began issuing mortgages to sub-prime borrowers (people who couldn’t possibly pay the loans back).

2)   Housing prices and sales began to fall.

3)   Subprime borrowers began defaulting on their mortgage.

4)   Subprime mortgage lenders began to collapse.

5)   A crisis unfolds as the issue spreads throughout the banks.

Subprime 2.0 is following the exact same pattern, just replace the words “housing” with “automobiles” and “mortgages” with “auto-loans.” As the Wall Street Journal  notes…

Banks Pull Back on Car Loans as Used-Auto Prices Plummet

Car loans have been among the fastest growing consumer lending categories since the last recession. Banks and other lenders began increasing originations about seven years ago in search of more revenue as the mortgage market slumped.

As competition intensified, lenders loosened underwriting standards by courting borrowers with lower credit scores and extending repayment periods on loans. Small nonbank lenders also jumped in, relying on the bond market as an outlet to sell their loans.

But increasing losses have sapped some banks’ enthusiasm. Annualized net losses on securitized subprime auto loans increased to more than 10% late last year, the highest level since February 2009, according to Fitch Ratings. The figure slipped back to 9% in March, but that was the highest loss reading for that month since at least 2001.

Source: WSJ

In terms of the above template Subprime Template, we’re currently at #3 and on our way to #4.

All we need now is some auto-lenders to start blowing up, and the fuse on the Subprime 2.0 Debt Bomb will have been lit.

Keep an eye on Ally Financial (ALLY) and Capital One (COF). Both have large auto-loan exposure.

GPC54172

GPC54171

When Subprime 2.0 ignites the markets will move into crisis mode.

And smart investors will use it to make literal fortunes from it.

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

CLICK HERE!

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research
 

 

Disclaimer: The information contained on this website is for marketing purposes only. Nothing contained in this website is intended to be, nor shall it be construed as, investment advice by Phoenix Capital Research or any of its affiliates, nor is it to be relied upon in making any investment or other decision. Neither the information nor any opinion expressed on this website constitutes and offer to buy or sell any security or instrument or participate in any particular trading strategy. The information in the newsletter is not a complete description of the securities, markets or developments discussed. Information and opinions regarding individual securities do not mean that a security is recommended or suitable for a particular investor. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. 

Opinions and estimates expressed on this website constitute Phoenix Capital Research's judgment as of the date appearing on the opinion or estimate and are subject to change without notice. This information may not reflect events occurring after the date or time of publication. Phoenix Capital Research is not obligated to continue to offer information or opinions regarding any security, instrument or service. 

Information has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. Phoenix Capital Research and its officers, directors, employees, agents and/or affiliates may have executed, or may in the future execute, transactions in any of the securities or derivatives of any securities discussed on this email. 

Past performance is not necessarily a guide to future performance and is no guarantee of future results. Securities products are not FDIC insured, are not guaranteed by any bank and involve investment risk, including possible loss of entire value. Phoenix Capital Research, OmniSans Publishing LLC and Graham Summers shall not be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. 

Phoenix Capital Research is not responsible for the content of other websites or emails to which this one may be linked and reserves the right to remove such links. OmniSans Publishing LLC and the Phoenix Capital Research Logo are registered trademarks of Phoenix Capital Research. Phoenix Capital Management, Inc.
What Happens When the Everything Bubble Bursts?
  • By trying to corner the bond market (risk-free rate)
  • the Fed has created a bubble in everything
  • We call this THE EVERYTHING BUBBLE
  • Reserve your copy of our Executive Summary
  • To prepare for what's coming down the pike!