I got my brothers out on Tuesday.
On Monday, an entire asset class was destroyed - XIVs. There was a 91% swing which activated a termination event, and poof, $3.4B gone.
Then HNA, one of China’s biggest companies, their Real Estate Group missed a $270M interest payment. Technical default - triggering event.
Wednesday, a calmer day, the Plunge Protection Team was wearing out the buy button it appeared.
Thursday, HNA is forced to sell billions in US properties - immediately. They are $15B in the hole. They own a ton of Deutsche Bank stock too.
The kindling under this is companies borrowing money to buy their own stock. The loans stay, the value will go away.
Add to that the $1.2B in automotive loan debt, the automotive industry’s addiction to leasing, and the 9% default rate on auto loans (more than 20% now made to people with FICO < 660).
Automotive is 3% of GDP and 5% of overall employment. It impacts 50% of all US business in some way.
Student loan defaults are through the roof, 6 year (yes, 6) graduation rates are below 60 percent.
Add it all up and there is no middle class to get your economy back on track.
Enter the tax cut - repatriate cash in order to get hiring up and let people work their way out of the debt.
If China doesn’t collapse, it might work.
Pressure on interest rates, however, will make consumer borrowing on autos and homes more expensive. It MAY also, however, drive the price of homes down, which would be good.
If you throw in any bad actors out there trying to tank the market to spite Trump, its a tall order for anybody, even a savvy dude like President Trump.
Your numbers are way off.
Auto loan balances increased by $23 billion, continuing their 6-year trend. Auto loan delinquency rates increased slightly, with 4.0% of auto loan balances 90 or more days delinquent on September 30.
https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2017Q3.pdf
According to the New York Fed report, most of the subprime delinquencies are held by finance companies. While the delinquency rate is around 4% for subprime loans issued by banks and credit unions, finance companies have a 9.7% default rate. Finance companies also hold approximately two-thirds of the total subprime auto loan debt – in essence, verifying the risk factors associated with subprime loans.
Auto loan originations remain high in the third quarter of 2017. The $150.6 billion value reported by the Fed is the second-highest level in over a decade. However, there has been some market correction to reduce the subprime risk. Auto loans to consumers with credit scores below 660 decreased by 8.3% over the previous quarter, while loans for borrowers with scores over 660 increased by 5.4%.
https://www.benzinga.com/news/17/12/10931255/auto-loan-delinquencies-rise-among-subprime-borrowers
And having the RINOs in the Senate go beserk on Spending, and the House looking to cave to Nancy Pelosi on DACA...
Well, if the government is shut down, it cannot overspend *quite* as quickly.
Getting rid of illegal immigrants, visa overstays, and the like would cut a LOT of government spending.
Getting rid of H1-B visas would help a lot more.
HNA Says Debt Scrutiny is an Anti-Chinese Plot and More Asia Real Estate Headlines
https://www.mingtiandi.com/real-estate/crelist/hna-says-debt-scrutiny-is-an-anti-chinese-plot-and-more-asia-real-estate-headlines/
When China finally blows up financially, it will be interesting to see whether Chinese companies sell their overseas holdings. Because Japanese companies certainly sold their foreign assets, which turned out to be a big mistake - they should have sold their Japanese holdings and basically expatriated, because those foreign assets have kept their value much better than the Japanese ones. Mitsubishi Estate sold Rockefeller Center for peanuts in the 90’s. That stake is probably worth 10x today, where commercial Tokyo real estate bottomed with a 90% loss.