Thursday, March 30, 2017

Everyone Gets What They Deserve

"Then the robber barons lent out all of their money...because they forgot, not everyone's a billionaire..."

Markets are democratic to the extent that when people ignore reality, they pay the full price...

The dominant delusion since Trump got elected is that the eight year business cycle which started under Obama has now been magically extended for another four to eight years under Trump. Leave aside that the current bull market is already the second longest in U.S. history, exceeded only by the 1987-Y2K rally.

Because dammit, all reality aside, this generation is owed another eight years...

Some perspective is in order. Despite three interest rate increases, the U.S. Fed Funds rate is still lower than it was at any point during the Bush Housing bubble. Which means that instead of 1.5 years of over-borrowing at 1%, we've now had eight years of over-borrowing at below 1%:

"Subprime auto-loan default rates match those seen just before the 2007-2009 recession."

Concerns were elevated in part by the latest reading for the National Automobile Dealers Association used-vehicle price index, down 8% year over year through February

Credit-rating firms and market participants have been scrambling to explain subprime default rates for recent vintages (loans made in 2015, 2016) that have now reached levels consistent with those originated just before the 2007-09 recession 

Subprime is now twice as big as it was in 2007:

To recap, bank stocks are collapsing because the bond market (yield curve) doesn't believe the Fed's bullshit. However, the Fed is too busy tanking the economy to listen:

Subprime and banks, two things that collapse great together...

This will end at any minute in any time zone...

You know, like last time...

"It's working so well, we're going to extend it"