Here’s what’s going on now.
Subprime auto lender goes bust
Subprime loans were at the heart of Bear Stearns’ demise. The focus today is not on toxic mortgages but on subprime auto loans.
Tricolor Holdings, a Dallas-based auto lender specializing in loans to borrowers with weak credit scores, went bankrupt in September.
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The bankruptcy shines a spotlight on how millions of Americans are hurting from the high cost of living and sluggish job market. Cars are more expensive than ever, and more and more people are falling behind on their car loans.
Even JPMorgan, which prides itself on what Dimon has dubbed a “fortress balance sheet,” suffered $170 million in losses linked to the Tricolor bankruptcy, according to the company’s earnings call on Tuesday. A web of murky financing is exposed
Just a few weeks later, First Brands, a privately owned auto-parts supplier, filed for Chapter 11 bankruptcy.
Been saying this for years. Subprime loans for cars have been insane. One of the reasons the used car market looks so crazy too
How about relative to the AI bubble?
Different classes caught up in the bubble, and living in the socialism for the richest investors and rugged individulism for the rest of us.
Dimon ? Takes a cockroach to recognise a cockroach I guess.
I don’t know what you mean with this - could you explain?
What he means is the following: When you discover one such company going bust because it was cooking its books, there are probably dozens hidden ones which are not yet uncovered and are doing the same. Like cockroaches: When you spot one, there are likely many.
He’s a banker himself and has a net worth of $2.5 billion.
Adding this into the already wildly unstable market is gonna be the death blow
Another thing is that car insurance costs are also rising sharply in the US. This is caused by the surge of extreme weather which in turn is caused by climate change:
https://www.dailyclimate.org/climate-change-increases-car-insurance-2669563061.html
In a nutshell, car insurers make a profit by covering events that are expensive but happen rarely. Like your car being stolen, or being destroyed in a road accident, or going up in flames because something is wrong with the motor.
Extreme weather adds to this profile risks that are expensive and happen much more frequently. Like a large part of the cars in the area of Houston being destroyed by flooding. Against such risks, insurance does not help much, which means that owning cars becomes even less economical than it is already.
That scenario is becoming more realistic:
Reid said that markets were especially wary of a domino effect, as the issues faced by the two banks followed the bankruptcy of the sub-prime automotive lender Tricolor last month.
The US regional banking industry has been under scrutiny after First Brands, an auto parts supplier, filed for chapter 11 bankruptcy in late September over creditor concerns.
In its bankruptcy filing, First Brands disclosed that it had at least $10bn to $50bn in liabilities against $1bn to $10bn in assets, the product of what appeared to be risky off-balance-sheet financing.Reid said that markets were especially wary of a domino effect, as the issues faced by the two banks followed the bankruptcy of the sub-prime automotive lender Tricolor last month.
