Many investors believe that the next big short will be in
the subprime car loan market.
Subprime car debt is
becoming the latest problem area in finance, with consumers falling behind on
most of their loans, Morgan Stanley analysts said this week. Wall Street banks
have become more willing to underwrite asset-backed securities packaging the loans
as new regulations brought in after the financial crash make it harder for them
to make a profit. Read more
However yesterday Bloomberg reported that car sales are in
decline.
Recent history
suggests American automobile sales indicate subsequent moves in U.S. equities.
Declines in 2011 and 2012 were followed by a retreat in the S&P 500 index,
and gains in the fall of 2015 came before a market rally. While the
relationship isn’t exact, and correlation doesn’t equal causation, the
surprising slump in vehicle sales last month comes just as investors are
questioning how much to believe off-the-charts surveys of American confidence
levels. Read more
Can these two conditions coexist ?
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