This NEXT Bubble Is Going To Hurt!

Discussion in 'Stock Market' started by DarkFury, Jul 3, 2018.

  1. Indeependent
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    Indeependent Platinum Member Gold Supporting Member Supporting Member

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    Sarbanes/Oxley...
    The banks received no punishment for their irresponsible behavior.
    Did they tell stockholders they were approving billions of dollars in loans that were definitely going to tank?
    I'm sorry, but the borrowers were rejected by the software and the loans were rubber stamped.
     
  2. Toddsterpatriot
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    Toddsterpatriot Diamond Member

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    Sarbanes/Oxley...

    More terrible legislation.

    Did they tell stockholders they were approving billions of dollars in loans that were definitely going to tank?

    If banks knew they were making loans that would tank, why did they end up holding so many of those loans?

    It's like the idiot above who said banks did it on purpose, to buy cheaply at the bottom of the crash.
    The banks lost trillions. They weren't as smart or as prescient as some people feel.
     
  3. saveliberty
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    saveliberty Diamond Member

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    Leases are typically where automakers lose money when they try to increase market share. There is a shortage of good used cars, trucks and SUVs. Off lease vehicles help fill that need. People that took six to eight year loans on a vehicle are probably in big trouble. Most buy a payment, so as long as that is affordable and the vehicle works, things are probably okay. Leasing is also used to get rid of negative equity in a trade frequently.

    Foreign car makers are in more trouble as most are pushing cars, which appears to be a smaller and smaller market.
     
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  4. Indeependent
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    Indeependent Platinum Member Gold Supporting Member Supporting Member

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    Fees and commissions and thinking Japanese and Chinese banks would rather take partial payments in lieu of full payments.
    And if your boss says to rubber stamp or enjoy unemployment, well...
     
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  5. TroglocratsRdumb
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    TroglocratsRdumb Gold Member

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    New cars are overpriced
     
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  6. Andylusion
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    Andylusion Gold Member

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    So the short answer is, deregulate the auto industry, and this will go away.

    The mid-size answer is, it is specifically because the government bailed out GM, by allowing them to apply their GMAC arm as a bank and get a bail out, that has setup this situation.

    By bailing out the auto companies, now all the auto companies think they can continue to run their business the same risky way it was before, and if the world implodes, then the government will bail them out.

    This is why you NEVER BAIL ANYONE OUT. Ever.

    And the long answer is.......

    This is not going to be a huge problem.

    The sub-prime crash caused large problems throughout the country, because the entire industry was built on assumptions that housing prices will continue to rise, because housing prices generally continue to rise.

    When housing prices started to fall, that threw an entire chunk of the economy into spiral, because they were all geared for increasing housing prices, and had no contingency plans for falling prices.

    That problem can't happen with automobiles, because prices for automobiles always fall. All cars go down in value like a rock. That's where Chevy got that slogan.... Like a Rock. Values of autos goes down, like a rock.

    So there won't be any banks buying automobile assets, saying "Oh my goodness! It though these would go up in value!".

    Not happening.

    Equally, most people grasp that cars go down in value. No one is sinking their retirement into their car, like they do a property, and thinking "Oh crud! I thought with this Ford, I'd be set for retirement!".

    No one is going to do that.

    The only way this becomes a major economic problem, is if the US government intervenes again into the economy. If they do, then yes, we will have problems just like before. If they don't, then this will recover pretty quickly.

    One thing that irritates me, is when people freak out that 'people are underwater on their auto loans'.

    Um.... Yeah. That's virtually 100% of all auto loans.

    That is, almost inherent to an auto loan. Literally by definition, you will be underwater on an auto loan.

    The reason most people who buy a home, are not underwater, is because the standard requirement for a prime rate loan, is 20% down payment, and the home goes up in value over time.

    This is the opposite for cars. Most car loans have you pay less, or zero percent down, and the car goes down in value.

    Most people are underwater on their car loan, the moment they drive it off the lot. Remember, when your car rolls over that curb at the dealership, your car loses 10% of it's value. The loan is $20,000 on a $20,000 car, and within 5 minutes, the car is worth $18,000. You are underwater on your car loan.

    By the end of the first 12 months of ownership, your car loses another 10% of it's value, and unless you paid $4K down on that car in the first year, you have a loan for $19K, on a car worth $16K. You are way underwater in the first year.

    And that isn't even true, because most of your payments are going towards interest on that loan. So you owe more than $20K, on a car worth less than $16,000 in the first year.

    Auto loans have always been underwater. This is not new, and not worth freaking out over.
     
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    Last edited: Jul 4, 2018
  7. Andylusion
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    Andylusion Gold Member

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    If they were over priced, they wouldn't sell. I don't buy stuff that is over priced.
     
  8. DarkFury
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    DarkFury BANNED

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    Plastic does not hold up like steel. Cars ARE over priced and under built.
     
  9. Andylusion
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    Andylusion Gold Member

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    Again... if that was true, then people wouldn't be buying them.

    The market suggests your opinions are not universal.
     
  10. Indeependent
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    Indeependent Platinum Member Gold Supporting Member Supporting Member

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    We're in a construction bubble right now...commercial and residential.
    If the economy doesn't continue to expand or contracts just enough, it might not be so pretty.
     

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