Juggling Dynamite

Guy Hands, chairman and chief investment officer at Terra Firma, discusses the current level of market volatility, the availability of financing for deals, and the U.K.’s upcoming “Brexit” vote. Here is a direct video link.

Who could of seen this one coming? See:  More subprime borrowers are falling behind on their auto loans.

High margin pick up trucks ‘sold’ (more like borrowed) with little to nothing down were the epicenter of profits (or was it really just cash flow rather than profits?) at North American auto makers the past 5 years. Credit was so easy to get, that people with no money were upgrading vehicles like titans and consolidating balances onto new larger loans with ease.

Now Texas and Alberta are leading North America in layoffs and auto loan defaults.   Canadian banks are particularly exposed to the over-extended auto loan market which has grown at an eye watering 20% a year since 2007.  See:  How Canada’s auto loan bubble has become a ticking time bomb.

But this buck won’t stop at bank income statements.  Investors holding bank shares and subprime auto backed bonds are exposed.  You see, it’s not actually investing when one buys into a Ponzi scheme:

More borrowers with spotty credit are failing to make their monthly car payments on time, a troubling sign for investors who’ve snapped up billions of dollars of securities backed by risky auto debt.

Delinquencies on subprime auto loans packaged into bonds rose in January to 4.7 percent, a level not seen since 2010, according to data from Wells Fargo & Co.

Gary Shilling, president at A. Gary Shilling & Co., and Chris Verrone of Strategas Research Partners, discuss the failures of central bank monetary policy, global currencies devaluing against the U.S. dollar, and the strengthening of the Japanese yen. Here is a direct video link.

Gary Shilling, president at A. Gary Shilling & Co., and Chris Verrone of Strategas Research Partners, examine the mining industry following BHP Billiton reporting that first-half profits tumbled 92 percent. Here is a direct video link.