I’m biased against credit because of soaring debt coupled with inflated housing values and soaring borrowing costs. The math does not add up, and I feeeeeel at some point we will have a credit event.
The market is sensing it. Look at shares of AMBC, PFSI, GS, C and countless other banks.
The only problem is: I can’t find any evidence of a pending disaster in any of the data.
Sure, US credit card debt has ballooned to record highs of $930b, but delinquencies are low.
CMBC delinquencies are at record lows. Unemployment rates are near record lows. People appear to be rich as fuck.
Mortgage delinquencies did rise for the first time in 9 months, with 97k early stage delinquencies. US foreclosures are +541% YOY mostly thanks to post pandemic laws being removed. Nevertheless, the numbers are small and you can only find doom in the numbers based upon a forecast, not actual reality.
What we will need to see that will support a housing crash and credit crisis is an uptick in unemployment, rise in credit, auto, and housing delinquencies — and crashing of bank stocks to distressed levels.
As of now, in spite of all of the craziness happening, Americans are holding on.
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Anecdotally, 2 associates in a million years I would never think, are planning on BK. The shadows by the urinal are suggesting something wicked this way comes. Food for thought.
“rich as f”? Delusional! The jig is up. Wait for it.
One tangent path I could see is
1) high interest rates cause new sale payments to balloon
2) budgets can’t absorb higher payments, sellers forced to lower asking prices
3) home prices decline significantly
4) existing homeowners see equity collapse but hold up
Let’s call this the “Now You’s Can’t Leave” pathway. There are much fewer mortgage gimmicks going on than 2007, so maybe it doesn’t all blow up. What if it just stagnates?
Much fewer mortgage gimmicks is right, but if I’m reading the charts right we also have higher debt load this time, real incomes crashing as of the last 30 days, and a larger portion of the single family home real estate bought up by hedge funds and similar. I really wonder if the hedge funds are gonna hold if prices dip 25% over 2 to 3 years.
I fully expect a decline north of 25%.
Yes but your mortgage is the first bill each month around which all your budget is based. Real incomes collapsing means less disposable income. Other bills get left unpaid first.
If the economy just overheats but doesn’t implode, the mortgage keeps getting paid even as everyone is underwater and can never sell.
Isn’t it true that Hunter is qualified for a refinery job now? After all, is he not an expert on the ‘crack spread’?
Somewhat peculiar is that while to 10Yr rose by 23% since March 15, high-yield credit spreads have FALLEN 8% (to 5.8%).
I don’t know whether consumer trouble leads corporate or not, but high-yield is getting back up closer to norms, and if it shoots past that’s where you will begin to see big chunks of finance start to fall.
What do you mean by “chunks of finance start to fall”?