Equity 1 Group
Pushing back the frontiers of economic ignorance and restoring sound financial foundations, one family at a time.

Jul
17

ZeroHedge  |  Tyler Durden

The only problem is that roughly $5 billion worth of those loans, or over 40%, are currently in default.

Image result for student debt images

National Collegiate Funding (NCF) is an umbrella name for 15 trusts that collectively hold 800,000 private student loans, totaling some $12 billion in outstanding obligations.  The only problem is that roughly $5 billion worth of those loans, or over 40%, are currently in default (and you thought auto delinquencies were bad).

Now, ordinarily when a student defaults on their loan, NCF simply files a lawsuit in local or state court as a means for negotiating a settlement or payment plan with the borrower.  Often times, NCF wins these cases automatically as the borrowers don’t even bother to show up for their court date.  In cases like that, NCF can use their court victory to garnish wages and/or federal benefits from entitlement programs like Social Security which can haunt borrowers for decades (we actually wrote about it here:  Baby Boomers Increasingly Having Social Security Checks Garnished To Cover Student Loan Payments).

That said, NCF is increasingly finding that, much like the subprime mortgage debacle from 10 years ago, student lending institutions apparently had a really hard time keeping tracking of paperwork over the years and/or processed deeply flawed contracts with incomplete ownership records and mass-produced documentation (who can forget that whole robo-signing catastrophe).

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Jul
17

ZeroHedge  |  Tyler Durden

“one of the biggest subprime auto finance companies, verified income on just 8 percent of borrowers”

In the years after its 2009 bankruptcy, Chrysler looked for a dedicated lender to help customers “finance their cars quickly”…which was code for a lender who could help the struggling OEM expand their market share by making extremely risky loans to subprime borrowers all while laying off the credit risk to unsuspecting pension funds.  As such, Chrysler ultimately picked Santander due to its expertise in “automated decisioning”…which was code for the ability to advance credit without actually performing income verification tests on borrowers.

For a time, Chrysler and Santander enjoyed a perfect symbiotic relationship as it offered Santander an opportunity to aggressively expand in the U.S. subprime loan market, and Chrysler, the perennial third wheel among the “Big Three,” was able to target customers that were previously deemed untouchable by lenders.  Of course, as Bloomberg points out today, the problems surfaced almost from the start.

Many of them, detailed in the settlement between Santander and authorities in Delaware and Massachusetts, recall some of the excesses of the subprime housing era.

Attorneys general in both states alleged Santander enabled a group of “fraud dealers” to put buyers into cars they couldn’t afford, with loans it knew they couldn’t repay. It offloaded most of the debt, which often had rates over 15 percent, reselling them to yield-hungry ABS investors.
 
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Jul
17

MacroAllocation  |  Paul Brodsky

Red Flag Warning – Two identifiable dynamics may signal significant market shifts imminently:

1. The US debt ceiling will be debated soon and signs point towards a messy outcome.

2. Recent economic data have been weak, confirming our thesis that US economic growth is slowing and will not be reversed until a recession is acknowledged.

Excessive debt has a way of catching up with people and institutions, and the first true test for the US government may be at hand. Congress was expected to raise the debt ceiling by October or else Treasury could not fund all the government’s programs and current obligations. Yet talk of Trump tax reform in 2016 may have given taxpayers incentive to defer their liabilities. As a result, Treasury received about 3 percent less in revenues than expected, accelerating the timetable to debate and raise the debt ceiling. Progress on raising the ceiling will unlikely be made in August, as Congress is in recess.

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Jul
17

WeeklyMarketComment  |  John Hussman

“There will be no avoiding the completion of this market cycle for investors in aggregate… Indeed, the 30-day crash probability that we estimate from [Sornette’s model of log-periodic power law bubbles] is rising vertically,”

Image result for market cycle wrecking ball images

What the “low interest rates justify high valuations” mantra has really done is to ensure that all asset classes are now priced at levels that are likely to generate dismal returns in the coming years. The chart below shows our best estimate of 12-year prospective nominal total returns on a conventional portfolio mix invested 60% in the S&P 500 Index, 30% in Treasury bonds, and 10% in Treasury bills. The red line shows actual subsequent 12-year returns on this mix. The current estimate is only about 1% annually, with the Treasury bond and T-bill components responsible for virtually all of that return, as the expected return on the S&P 500 component is close to zero.

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Jul
17

SovereignMan  |  Tyler Durden

“one of the major features of the US equity market since the low in 2009 is that the US corporate sector has bought 18% of market cap, while institutions have sold 7% of market cap.”

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When discussing Blackrock’s latest quarterly earnings (in which the company missed on both the top and bottom line, reporting Adj. EPS of $5.24, below the $5.40 exp), CEO Larry Fink made an interesting observation: “While significant cash remains on the sidelines, investors have begun to put more of their assets to work. The strength and breadth of BlackRock’s platform generated a record $94 billion of long-term net inflows in the quarter, positive across all client and product types, and investment styles. The organic growth that BlackRock is experiencing is a direct result of the investments we’ve made over time to build our platform.”

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Jul
17

FinancialTimes  |  Rob Williams

“We think the magnitude of this short could be bigger than subprime,”

Short Sales

Hedge funds on the prowl for the next big opportunity since the collapse of the subprime housing bubble are placing bets against the U.S. retail industry, according to the Financial Times.

Ten retail chains have filed for bankruptcy so far this year, while other companies are closing unprofitable stores as consumers shift their spending online.

“We think the magnitude of this short could be bigger than subprime,” Stephen Ketchum, the head of Sound Point Capital, a hedge fund that manages more than $13 billion for investors, told the newspaper. “Go to the Amazon website and type in ‘batteries’. What you see is just the tip of the future iceberg. And retail is the Titanic.”

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Jul
16

JMBullion  |  Staff Writer

Gold VS Bitcoin Showdown

In an age of digital enterprising, it is not uncommon for an individual to have to purchase an item online or make their payments through a website. However, recently, one man has taken the online payment process a step further by creating a brand new form of virtual currency known as Bitcoin.

What is Bitcoin and How is it Used?

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Jul
16

SovereignMan  |  Simon Black

“We have stumbled upon the perfect business model. We will lose money on every sale, and we will make up for up it in volume.”

In 1999 my colleague Tim Price had front row seats to the first Internet bubble.

He tells a great story about being a private client portfolio manager at Merrill Lynch in London at the time, and describes how clients were clamoring to buy technology stocks.

‘Giddy’ doesn’t really do the mania justice. ‘Insane’ comes closer to describing the popular mood.

James Glassman and Kevin Hassett had just published a book, Dow 36,000 (the title speaks for itself), and Merrill Lynch thought it fitting to give a copy to every single person on staff.

The NASDAQ stock index, which was heavily comprised of the technology companies that everyone loved so much, consistently hit fresh all-time highs. It was practically a daily occurrence.

Stock valuations soared; companies that lost grotesque amounts of money were “worth” billions of dollars simply because investors no longer cared about conventional metrics like profit.

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Jul
16

ZeroHedge  |  Tyler Durden

He closed the interview with a warning about the dangers of Keynesian economics, deficit spending and central bank monetization of government debt.

The global dollar-based monetary system is in serious jeopardy, according to former Texas Congressman Ron Paul. And contrary to Fed Chairwoman Janet Yellen’s assurances that there won’t be another major crisis in our lifetime, the next economy-cratering fiat-currency crash could happen as soon as next month, Paul said during an interview with Josh Sigurdson of World Alternative media. Paul and Sigurdson also discussed false flag attacks, the dawn of a cashless society and the dangers of monetizing national debt.

Paul started by saying Yellen’s attitude scares him because “central bankers are always wrong – especially before a bust.”

“There is a subjective element to when people lose confidence, and when is the day going to come when people realize we’re dealing with money that has no intrinsic value to it, we’re dealing with too much debt, too much bad investment and it will come to an end. Something that’s too good to believe usually is and it usually ends. One thing’s for sure, we’re getting closer every day and the crash might come this year, but it might come in a year or two.”

“The real test is can it sustain unbelievable deficit financing and the accumulation of debt and it can’t. You can’t run a world like this, if that were the case Americans could just sit back and say “hey, everybody wants our money and will take our money.”

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Jul
16

ZeroHedge  |  Tyler Durden

One month after we reported that the “restaurant industry hasn’t reported a positive month since February 2016”, we can add one more month to the running total: according to the latest update from Black Box Intelligence’s TDn2K research, in June both same-store sales and foot traffic “growth” declined once more, dropping by -1% and -3%, respectively, extending the longest stretch of year-over-year declines for the US restaurant industry to 16 consecutive months – the longest stretch since the financial crisis – with sales rising in 45 markets while declining in 150 with Texas, the worst region in the US, suffering a 2.2% and 4.1% decline in sales and traffic respectively.

As Black Box adds, “bad news is same-store sales and traffic growth were still negative in June and the second quarter of 2017; and year-over-year, same-store sales have been declining for the last six consecutive quarters.”

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