Over the last couple of months a lot of hoopla has been made about surging US auto sales and its supposed positive impact on the overall US Economy. So much so that most market pundits believe that surging auto sales is just the first sign that the US Economy is about to catch fire.
Unfortunately, the reality is quite different. In a nutshell, sub prime auto loans, reminiscent of the sub prime mortgages circa 2000-2007 is what is driving these sales highers. The Wall Street securitization machine has made it so easy that a jobless bum with 5 DUIs can probably get a brand spanking new set of wheels at ZERO down.
Issuance of securities backed by the debt has reached $10 billion this year, up 5 percent from the pace in 2013 through May 30, according to Wells Fargo. Total sales of $17.6 billion last year were more than double the $8 billion sold in 2010, when securitized-debt markets started to revive after all but shutting down amid the 2008 financial crisis.
Yet, we all know how this story ends. If you don’t……the stock market initiates a 2014-2017 bear market (as per our mathematical/timing work), liquidity dries up, auto loans collapse, the US Economy falls into a severe recession, people lose jobs, vehicle repossessions surge and auto sales collapse. To bad.
If you could only fix up and flip these cars, this bubble would go on a little bit longer.
