Subprime Consumer Debt Soars to 7-Year High

This will not end well:   “The trend stems from lenders and investors seeking high yields in a low-interest rate environment. So it’s no wonder that total household debt rose $306 billion, or 2.7 percent, in the fourth quarter from a year earlier to the highest level since 2010.” (Newsmax)

Subprime lending as a percentage of total consumer lending is now close to where it was right before the financial collapse of 2007 (click to enlarge):

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Of course, if you blow away the Orwellian smoke from the Graham-Dodd legislation, U.S. lenders of all varieties are not subject to less scrutiny and oversight than before the de facto financial collapse in 2008.

The Fed’s 6-year ZIRP policy has created a situation in which banks and other financial institutions are now taking excessive risk in order to pick up yield:

Lenders’ interest in customers who were the hardest hit by the financial crisis reflects…firms’ desires to take more risks at a time when ultralow interest rates are depressing profits.  (Wall Street Journal)

This is setting up the next catastrophic systemic financial melt-down and will be the excuse the Government/Fed is looking for to roll out a QE4 program that will have to be larger than the last time around…

In connection with this information, THE best way to play a subprime debt blow-up is to short Amazon.com (NASDAQ:AMZN). AMZN plunged from $407 to $284 at the beginning of 2014 thru early May. It has been unable to hit a new all-time high despite the SPX hitting new highs nearly every day now. I have a report available that will explain exactly why AMZN is eventually going to hit the wall:   AMAZON.CON

6 thoughts on “Subprime Consumer Debt Soars to 7-Year High

  1. Consumer debt, but the tip of the iceberg! What about the 90% of debt which is out of sight below the waterline? The derivative markets.
    The global financial system is being held hostage by the TBTF’s derivative exposure.
    The collateralized debt obligation (CDO) has made a come back even bigger than it was at the height of the 08 crash. These so-called “investment vehicles” contain a toxic mixture of mortgages, student loans, credit card debt, car loans and even some asset backed (rehypothicated) securities.
    About as good as Goldman Sachs Abacus 2007-AC1 that exploded during the 08 crash, and left financial devastation in it’s wake. Whose loses were picked up by ? None other than Mr. & Mrs. John Q. Taxpayer, compliments of the Fed and government bailouts.
    The next explosion of this toxic dump will be epic. Coming soon.

    1. Yup, I expect we will go to bed one evening in the not to distant future
      and everything will appear OK and when we wake next morning the shit
      will have hit the fan and our lives will be changed forever.

  2. Dave it´s going to be very interesting following the AMZN story and to see how it develops.

    I wonder if it could be like Enron if it crashes with Bezos in court questioned about fraudelent accounting and due to that pumped up stockprices that don´t reflect reality.

    This will be exciting!

      1. Yes it will probably collapse big time.
        I guess the people who pumps the bubble also realizes that it will eventually collapse.
        The strange thing is that these idiots don´t understand that it would be better to deflate the bubble in order to get a smaller blast when it blows up.
        Instead they inflate a bigger bubble that will create a bigger explosion with more damage.
        Maybee that will bring them more bailout money in the end.

        1. Maybe they can’t deflate the bubble without popping it. Has any bubble ever deflated without bursting?

          Maybe they (the bubble blowers) are slowly getting out of the bubble before it blows, cashing in their chips and leaving small investors to lose their shirts (again).

          Maybe they refuse to see a bubble, just like in 1929 when no one believed a crash could happen, or if it did it would be short lived.

          Lots of unknowns here, though hubris and the self delusion of invincibility of the TBTF have a hand in the decision making (greed blinds the eyes of the prudent, greed gags reason and caution.)

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