Tuesday March 28 2017 Housing and Economic stories

TOP STORIES:            

Subprime Auto Loans Crushed Worse than in 2009, Auto Industry Bleeds, Knock-on Effects Commence - (www.wolfstreet.com) Subprime auto loans, a big force behind booming car sales in recent years, are getting crushed by defaults, particularly those originated between 2013 and 2015 when the proportion of subprime loans began to surge while underwriting standards became loosey-goosey, as private-equity-backed auto finance companies with a ravenous appetite for risk, subprime, and securitization elbowed into the market, amid the exuberance of the greatest credit bubble in history. “Bad deals are made in good times,” says the old banking saw. Auto lenders package their loans into asset-backed securities (ABS) and sell them as bonds to yield-hungry institutional investors. Fitch Ratings, which rates auto lenders and auto-loan ABS, just reported on the state of the industry. The Fitch Auto ABS Indices show that 60+ day delinquencies were relatively low for prime auto loans at the end of Q4, but for subprime loans they’ve surged to 5% of outstanding balances, the highest since at least 2008, during the depth of the Financial Crisis!

Ford Warns "Used Car Prices Will Drop For Years"  - (www.zerohedge.com) Earlier this morning we noted Ford's "CFO Let's Chat" meeting with analysts before which Ford announced weak 1Q adj. EPS guidance of 30c-35c, coming in well below analyst estimates of 47c, which they blamed on higher costs, lower volume & unfavorable exchange rates. With the call now concluded, here are a couple of the key takeaways: First, the bad...

• Volumes will start to fall off this year, next year
• Used car prices will drop for several years
• European profit will fall this year
• China sales down sharply in 1Q
• India more difficult than expected

Your Pension Will Be At The Center Of America's Next Financial Crisis - (www.zerohedge.com) But the next financial crisis that rocks America won’t be driven by bankers behaving badly. It will in fact be driven by pension funds that cannot pay out what they promised to retirees. According to one pension advocacy organization, nearly 1 million working and retired Americans are covered by pension plans at the risk of collapse. The looming pension crisis is not limited by geography or economic focus. These including former public employees, such as members of South Carolina’s government pension plan, which covers roughly 550,000 people — one out of nine state residents — and is a staggering $24.1 billion in the red. These include former blue collar workers such as roughly 100,000 coal miners who face serious cuts in pension payments and health coverage thanks to a nearly $6 billion shortfall in the plan for the United Mine Workers of America. And when the bill comes due, we will all be in very big trouble. It’s bad enough to consider the philosophical fallout here, with reneging on the promise of a pension and thus causing even more distrust of bankers and retirement planners. But I’m speaking about a cold, numbers-based perspective that causes a drag on many parts of the American economy. Consider the following.

Europe Prepares for Tough Brexit Negotiations - (www.spiegel.de) The official divorce proceedings between Britain and the European Union are expected to begin on Wednesday, when Prime Minister Theresa May triggers Article 50. So far, the UK and the EU haven't even agreed on the first issues they intend to negotiate. Michael Barnier is Europe's divorce lawyer, the man charged with negotiating Britain's departure from the EU. It's a divorce unlike any seen before -- it will be expensive, protracted and closely watched by the entire world. Everyone wants to talk to him these days -- national leaders, politicians, members of parliament -- and when they get the opportunity, the Frenchman pulls out a presentation. It is, if you will, the secret strategy for the divorce proceedings.

GOP Eyes Tax Overhaul -- And Lessons From Health-Care Failure - (www.bloomberg.com) Moments after their hopes of undoing Obamacare unraveled, President Donald Trump and top Republicans said in unison that they’re moving on to another ambitious goal -- overhauling the U.S. tax code. “We will probably start going very, very strongly for the big tax cuts and tax reform,” Trump said to reporters Friday after the House bill was pulled from a scheduled floor vote. “That will be next.” House Speaker Paul Ryan told reporters that Republicans will proceed with tax legislation -- and said he met with Trump and Treasury Secretary Steven Mnuchin earlier on Friday to discuss taxes. Ryan sounded a note of caution: The health bill’s failure “does make tax reform more difficult,” he said, “but it doesn’t in any way make it impossible.”

OTHER STORIES:

Yen Gains to Weigh on Japan Stocks as Bonds Rise: Markets Wrap - (www.bloomberg.com)
Here’s why the GOP is coming up short on votes to repeal Obamacare - (www.cnbc.com)
Trump Tantrum looms on Wall Street if healthcare effort stalls - (www.reuters.com)

A Donald Trump vs. Janet Yellen clash is getting closer to happening - (www.cnbc.com)
China’s Love Affair With Leverage Is Tricky to Break, PBOC Finds - (www.bloomberg.com)
With Sears' future in doubt, vendors begin pulling back - (www.reuters.com)