🚨 A Leveraged Nation with a sub-standard living for Consumers.

- The prime auto loan ABS is deteriorating rapidly - a downgrade is imminent.

- A considerable chunk of consumers feel that homeownership is out of reach.

- a thread🧵 1. For a moment, let us forget politics and the stock market. Let us purely focus on the welfare of the people and that of our country as a whole. We are in deep economic trouble. The United States is facing an economic identity crisis.

We want to state the obvious yet overlooked fact: The United States and its citizens are heavily in debt.

🚨 The Systemic Risk Lurks in Private Credit (Shadow Banks). - a thread🧵

🚩The signs of economic distress are often first visible in the credit markets, such as difficulties with loans and financial defaults.

In contrast, the equity market lags in reflecting these issues.

We are at the cusp; where extreme swings are a norm. 1. Frothy stock markets occur when investors become overly excited about companies (such as SPACs and AI-driven tech valuations) and are overly focused on the potential upside. Frothy credit markets are when people stop worrying about the downside (think of ‘extend and pretend’ in CREs*, auto loan, BNPL, etc).

🚨 Prime Auto Loan Deterioration. Fitch expects an imminent rating downgrade.

- According to Fitch, some ABS pools are facing liquidity issues. ABS market is deteriorating.

- Impending Credit Risk in the ABS markets With Focus on multiple Shadow Banks.

- a thread 🧵 1. You can review some of our work on shadow banks here: substack.com/home/post/p-10…

and here: contrarianunicus.substack.com/p/the-weekend-…

🚩All you need to know about May 5, 2025 student loan resumption.

#3 details the percentage of garnishments.
#4 when the garnishment begins.. and it is not May 5.
#5 offers links for other options.

- a refresher thread 🧵

For a detailed thread check our earlier post:

https://x.com/UnicusResearch/status/1915127920642699646

1. Student loan garnishments for defaulted federal loans begin on May 5th.

- FSA will restart the Treasury Offset Program, which allows the govt. to withhold federal payments, such as tax refunds and SS benefits, from borrowers in default.

- The Department will also authorize guaranty agencies that they may begin involuntary collections activities on loans under the Federal Family Education Loan Program.

🚨By the end of 2025, nearly all subprime consumers (30%) will be CREDIT DEPRIVED.

🚩BNPL and student loan defaults are the culprits.

- a detailed thread 🧵on BNPL Live Credit Reporting. 1 (a)🚩BNPL firms have begun reporting consumers' real-time usage to credit agencies.

- Consumers are trapped in debt forever and tapped out of credit.

- BNPL users are using their credit cards to payoff their BNPL loans. Sadly, exact data is not available.

- A 2024 study by the Federal Reserve found that 71% of BNPL users revolved on their credit cards in 2023, compared to 40% of non-users.

- between 2020 and 2023, the average credit card utilization rate among BNPL borrowers remains notably high, between 60 and 66 percent.

🚨 The student loan repayment resumption is expected to significantly shrink consumer credit availability for prime and subprime consumers.

The 2020 student loan forbearance and the upcoming reality shock for the consumer credit...

- a detailed thread🧵 1. A combination of higher interest rates, higher debt levels, inflation/affordability issues, and the resumption of student loan payments - a perfect storm for American consumers.

Consumer distress is spreading to higher credit score and income cohorts. We expect this to impact consumer discretionary spending.

🚩 The Death of Consumer Affordability - a thread🧵

“The price level from all 2025 tariffs rises by 2.3% in the short-run....Annual losses for households at the bottom of the income distribution are $1,700.” 1. According to the new report by the Yale Budget Lab, the hit to the regular American families’ pocketbook will be significant - as much as $3,800 annually.

🚨 The unregulated, unreported, and unsecured shadow bankers and predatory lenders, like, BNPL, are a problem.

BNPL might be on its way to replace traditional credit cards. It is also risky. Here is why- a🧵 1. In the event of $AFRM's earnings beat, we thought of sharing this.

Fast Facts on BNPL:
- Consumers an option to pay in four or five installments.
- Low default rates compared to credit card.
- defined as zero-interest loans repaid in four or fewer installments.
- Not reported or tracked by any credit bureaus
- yes we checked with them.
- If the customer default or delayed payments on BNPL, the BNPL hands over the account to a collection agency. Now, that will impact the credit.

🚨 Trump to hit Canada and Mexico with 25% tariffs on Saturday. Is it a bluff?

If not, the US consumers will be in deeper trouble. Food, gas prices will spike if the US levies 25% tariffs on Canada and Mexico.

Here is how it will impact the US consumers- a thread🧵 1. According to Wells Fargo, Mexico and Canada are two of the United States’ top trading partners. Aside from the European Union, comprised of 27 sovereign nations, Mexico is the largest source of all U.S. imports.

🚨 Dealerships are quietly closing without warning, OEMs are denying responsibility, and customers are stuck paying for cars they do not have.

Dealership bankruptcies have begun. Expect more in 2025 - a thread🧵 1. We have been researching auto sector over the past year. Speaking with dealers across the United States revealed that dealers are quietly shutting their dealerships. Only a few incidents are reported in the main stream media.

🚨 Nothing makes sense because banks, dealers, and OEMs refuse to accept the reality and do not want to be the first to blink....and the bond holders are holding the bag.

Here is how a systemic risk is unfolding as prime and subprime auto ABS losses are rising- a thread🧵 1. Auto loan delinquencies are spiking.
Serious delinquencies on US auto loans are skyrocketing. Auto loan 90+ day delinquency rates are now 2.88%, the highest since Q2 2010. The percentage has almost doubled in just 2.5 years.

🚨 Auto Sector Implosion: Higher prices, lower quality cars, high negative equity, longer months and higher delinquencies across the board - a detailed thread🧵 1. Roughly there are 276M vehicles on the road, of which, 32% are associated with auto loans and leases.
There are nearly $1.56 B auto loans+ $61B auto leases.

(Source: Experian)

🚨 $STLA layoffs more employees across the U.S. triggers ripple effect, and $ALLY is a ticking time bomb - and consumers are not O.K and are in deep trouble- a thread🧵 1. Wednesday: $STLA indefinitely laid off more than 1,100 workers at Jeep plant in Ohio.

Friday: $STLA cuts 400 plus jobs at Detroit parts warehouse.

🚩 $STLA is one of the most terribly managed publicly traded companies in the world.

Dealerships that are carrying $STLA's inventory are folding - a thread🧵 1. Stellantis stuffed over-priced inventory onto the dealers and is refusing to offer decent rebates to push the metal off the dealer lots. Recently, the dealers confronted the CEO, Carlos, and the management’s response was, “Deal with it.”

🚨 The Market is Open tomorrow.

1. Inflation is spiking, again.
2. The U.S Consumer sentiment falls on higher costs.

Here is what to know for the week ahead- a thread🧵 1. Last week’s Consumer Price Report validates that inflation is a nagging problem. Healthcare costs rose 0.4%, lifted up by a 0.9% surge in the cost of doctor services. Prescription medication prices fell 0.5%. Motor vehicle insurance increased 1.2%, while apparel prices advanced 1.1%.