Sunday, April 9, 2017

The Batteries Are Tapped Out

Reflation is a hoax, propagated by 7.5 billion people desperate to believe that this is not the end of the cycle - accompanied by an army of industry-owned con artists willing to assist with that delusion. Sales and marketing being the last dry ground for the erstwhile economy...

When over-indebted companies want to increase their leverage without affecting their debt/equity ratio, what do they do? They use off-balance-sheet financing aka. leasing.

Rewind to last December:
ZH: Record High Lease Returns Set to Implode Used Car Prices
Fast forward to March this year:
ZH: Used Car Prices Plummet Most Since 2008

Herein lies the problem:
"Not surprisingly, these dynamics have caused lease share of U.S. vehicles to skyrocket in the wake of the "great recession" as people seek to maintain their excessive lifestyles on smaller budgets."

Consider this chart in the context of household debt approaching 2008 levels. In other words, household debt does not include these leases:

Delinquencies for all loans and leases:

Annual percent change in loans and leases outstanding:

As they tap out other sources of credit, they turn to credit cards at the end of the cycle:

Revolving credit flow:


"We're seeing an increase in loan losses on credit cards, a big increase in loan losses on auto loans, we're seeing losses creep up on student loans, we're seeing it happen with commercial real estate in two places — on shopping center loans and on construction loans."

"What's in your wallet?"

Financials asset allocation

In an old age home if they don't shit their pants, they're having a good day...