After just finishing reading ‘The Big Short’, I have an interest in what has become of the US housing market since the 2008 collapse of the sub-prime market and federal housing bonds. As I trade across the DOW, NasDaq and S&P500, I thought there might be something interesting to take away from a deeper dive.
I monitor US housing data monthly along with other Tier 1 & 2 data, with the hope of catching a market reaction to any out of line figures. Having just come back from a trip to UTAH, Arizona and Texas, I was amazed at how most places I went, there were billboards offering houses for $1,000 down, no documentation required. I thought back to book I just read and thought,
‘Is this shit still going on?’
So wanting to put my jet lag to use, I came across this great documentary looking at the affordable housing market and tax credit programs in the US. The great quote to take from this doc is ‘Zipcode is destiny’.
Click on the image to view, you will need a US VPN or IP address. I suggest Betternet for chrome.
So, sub-prime collapse, crooked ratings agencies, old news, blah blah; however the ratings agencies who were implicit in the creation of the crisis have only just reached settlements and paid their fines this year.
Coming back to the documentary, one scene (6:00min to 7:00min) uses stock footage of lower income families running as fast as they can to get a form 8 to get them rent credits. I couldnt help but think about ‘The Hunger Games’ and how it actually isn’t a funny meme anymore, but a firm reality for literally millions of Americans. They simply can not afford to buy or even rent property. I think PBS creates some of the greatest documentary and investigative journalism there is. So have a look around on their site for some more great docs.
My current market theory at the moment on the US economy, is that there is a slow swelling of credit card delinquency (failures to pay off owed amounts) which may reach peak delinquency in 2018 or early 2019. We are already seeing downside on a small batch of the biggest credit card companies in the US –
All have had recent corrections to the downside and possibly more to follow. From the charts above, we can see they are already taking on water. As Im a futures guy, I’m not currently in any position on these equities.
My thinking here is that with poverty building across America at the moment, people are going to lean on their credit cards as hard as they can until they are cut off. This will then lead to massive debts owed to these companies. On top of this, these companies are also under pressure to cut charges and change, given the environment of Bitcoin and Ethereum. 1 Bitcoin is now, today worth €2150.85. An ounce of Gold is worth €1119.5.
Added to this we now have seen Trumps cards where he wants to slash billions from current budgets which have been designed to help people out of poverty. The future of the lower and lower middle income earners is not bright in the US.
So the traditional credit card industry in the US is flagging with serious downside ahead.
Watch the documentary, Short the credit card majors.
While we are on documentaries, a personal favorite and a MUST WATCH doc series from PBS is called ‘The Commanding Heights‘ well worth a look-Its a 3 part series. If you want to know how the worlds economies and nations are configured, watch it.