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Subprime Auto Death: Never Cross the Streams

It’s been a day or two since I was in the industry but to see the raw statistics from the Federal Reserve it has become quite obvious that there is some serious pain on the way.

The problem, just like I warned in 2006, is the media focuses on a false narrative. It’s almost as if yelling “squirrel” is now the sport of the bubblevisions but not focusing on the reality.

The average American is tapped out.

Inflation has created a new cost structure which the middle class can no longer “keep up” with the Kardashians thus the lower middle class and poor are now being left out and forced to “make do” with whatever they can.

On Monday a fascinating chart was published by the Fed courtesy of the Twitter account Neely:

Let’s zoom in closer:

The biggest warning sign is that auto loan delinquencies are the highest they have been in the last decade as S&P Global highlighted last month:

The one reason I do not see this vaulting much higher?

People still need a place to live and at low credit profile homeowners will be the next credit risk as the economy rapidly contracts in Q1 2024.

IF, and that’s still a big if because God knows what our insane Fed will do, this trend persists, then for the first time in the last decade auto retailers will accelerate the shunning of the worst credit risks. If this is not a major recessionary sign, I’m sorry, I do not know what is. Because housing, revolving credit, and small business loans will be the next dominoes to fall.

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