Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18
How to Know If This Stock Market Rally Will Continue for Two More Months? - 14th Jan 18
Everything SMIGGLE from Pencil Cases to Water Bottles, Pens and Springs! - 14th Jan 18
Land Rover Discovery Sport Very Bad MPG Fuel Economy! Real Owner's Review - 14th Jan 18
Gold Miners’ Status Updated - 13th Jan 18
Gold And Silver – Review of Annual, Qrtly, Monthly, Weekly Charts. Reality v Sentiment - 13th Jan 18
Gold GLD ETF Update.. Bear Market Reversal Watch - 13th Jan 18
Stock Market Leadership In 2018 To Come From Oil & Gas - 13th Jan 18
Stock Market Primed for a Reversal - 13th Jan 18
Live Trading Webinar: Discover 3 High-Confidence Trade Set-Ups - 13th Jan 18
Optimum Entry Point for Gold and Silver Stocks - 12th Jan 18
Stock Selloffs Great for Gold - 12th Jan 18
These 3 Facts Show Gold Is Set to Surge in 2018 - 12th Jan 18
How China is Locking Up Critical Resources in the US’s Own Backyard - 12th Jan 18
Stock futures are struggling. May reverse Today - 12th Jan 18
Three Surprising Places You See Cryptocurrency - 12th Jan 18
Semi Seconductor Stocks Canary Still Chirping, But He’s Gonna Croak in 2018 - 12th Jan 18
Land Rover Discovery Sport Panoramic Sunroof Questions Answered - 12th Jan 18
Information About Trading With Alpari And Its Advantages - 12th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

Could Cars Be the Death of Us This Time Around?

Interest-Rates / Debt Crisis 2017 Feb 02, 2017 - 04:25 PM GMT

By: Harry_Dent

Interest-Rates The shining star of the 2009-2016 recovery has been auto sales.

We weren’t surprised. In fact, we saw it coming. After all, cars are the last large purchase people make before stepping quietly into their years of increased saving and decreased spending. From around the age of 57 to 64, one task takes center stage: save for retirement. In the durable goods sector, housing peaks first around age 40, then furnishings at age 46. Only automobiles continue to grow after the peak in spending at age 46.


We’re in the midst of updating our consumer expenditure data. The biggest change thus far is how QE and super-low interest rates have shifted the new car sector. In the 1990s, spending peaked at around age 54. But now, older Americans have been buying better cars later into life, into age 62. In general, auto sales don’t so much grow as move sideways in a plateau between ages 41 and 62 and the steep drop-off now occurs after 66, not after 54.

It makes sense. My car leases have gone as low as 2%. Back before 2008, I was paying as much as 5% to 6%! That makes hundreds of dollars of difference in my car payments and allows you to buy a better car.

But time has proved that low rates weren’t enough for an industry with highly aggressive lending practices (I’m talking worse than mortgages and home loans) and an inevitable demographic cliff…

In the last boom, subprime mortgage lending peaked at $44 billion per quarter. Subprime lending for cars peaked at $42 billion! That’s surprising given that the housing industry is so much larger… and you’re buying an asset so much bigger than a car.

In this current boom, the auto subprime loans exploded again, this time without mortgage loans for company. Subprime auto loans have hit as high as $38 billion in Q2 2015, while subprime mortgages have been flat, around $20 billion.

So, basically, car dealers have been willy-nilly extending credit to more and more people who have less than 620 credit scores… all to boost sales further. And they’ve been pushing loan terms out to six years, sometimes even seven, while keeping interest rates at insanely low levels, just like they did into 2007.

It’s no wonder we’re once again faced with a massive auto-loan debt bubble, and a “booming” industry.

Just look at this insanity…


From 2003-2007, auto debt rose by $210 billion. From 2011-2016, it has surged more than twice as much, by $433 billion, to $1.135 trillion, higher than all credit card debt. And it’s still rising rapidly.

Whatever happened to learning from your mistakes? Not repeating history? Clearly the lessons of the last bust in the economy, housing and cars, has been lost on this industry.

Now there are early signs that trouble is brewing and that the wheels are starting to come off this bus. Auto loan delinquencies are rising again. But this time around they bottomed at 3.2% and have risen to 3.6%. Last time they started at 2.0% and were at 3.2% in Q1 2008, when the recession started. They reached 5.3% in Q4 2010. So, they’re starting higher and will almost certainly go much higher as well, to 6.5%-plus in the next downturn.



This rise in subprime auto debt and delinquencies it yet more evidence that we’re on the verge of the next downturn…

And you know what I think! What we now face will be the worst downturn since the Great Depression… and the final bubble crash will finally lead to serious debt deleveraging and deflation, unlike last time when we were spared by $13 trillion in QE globally.

I really don’t believe the public will buy letting central banks double down and print $25 to $30 trillion to bail us out this time. I really see no way out of this.

And by the time we come out of this next crash, the auto boom will be over demographically and will not be as strong in the next boom.

But I do see opportunity, which I detail in my book The Sale of a Lifetime. Have you read your copy yet?

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2017 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules