There’s A New Sub-Prime Crisis, Another Housing Meltdown Is Now A Certainty

There’s a new sub-prime crisis, but it’s not what you think

  •  The struggles of Provident Financial have fuelled concerns about a new sub-prime crisis
  •  Buyers of Provident’s car loans are up to their eyeballs in debt
  •  Regulation has discouraged big banks from offering affordable credit to the poor

A decade on from the financial crisis, the reports today about the sub-prime lender Provident Financial have given us a nasty case of déjà vu. Within the space of a year, its loan repayment rates have fallen from 90 per cent to 57 per cent – leading to profit warnings, the departure of its chief executive, and a collapse in its share price.

It feels like a frighteningly familiar story. Overstretched customers at the bottom of the economic food chain rack up unaffordable loans from greedy financiers. When the music stops, the credit failures cascade upwards, bringing down lender after lender until the whole financial edifice comes apart.

capx.co/theres-a-new-sub-prime-crisis-but-its-not-what-you-think/?omhide=true&utm_source=CapX+Newsletter&utm_campaign=2fe4994fa0-EMAIL_CAMPAIGN_2017_07_17&utm_medium=email&utm_term=0_dcdc78d804-2fe4994fa0-241772733
Provident Financial sees nearly 1.7bn wiped off stock market value
www.theguardian.com/business/2017/aug/22/provident-financial-dives-second-profit-warning-peter-crook

The company, which specialises in lending to people in financial difficulty, issued its second profit warning in two months, parted company with its chief executive and cancelled a dividend for shareholders.
It also announced that it is facing a regulatory probe by City watchdog the Financial Conduct Authority into the sale of a product that allowed people to freeze their credit card debt.
The perfect storm of bad news for investors sent shares in the sub-prime lender plummeting more than 66%, from more than £17 to 589.5p, wiping nearly £1.7bn off its stock market value.
The rapid deterioration in Provident’s performance, less than two years after it entered the FTSE 100, comes after a botched attempt to overhaul its 130-year-old business model by cutting staff numbers and ramping up its use of technology.

Provident’s Share Price from January to August this year.

View post on imgur.com


Will others follow suit?

Chart of the Day: New Homes Sales Falter—-At Levels Still Below Those First Hit In 1963!

Gregory Mannarino: Another Housing Meltdown Is Now A Certainty: You Have Been Warned

HANSON: House Price Bubbles 2.0 in Pictures

mhanson.com/8-21-hanson-house-price-bubbles-2-0-pictures/

The Market Is Already Heeding Dalio’s Warning on Risk

  • Volatility in stock, bonds and forex markets has bottomed out
  • Small-cap stock decline may signal wider rally is tiring

www.bloomberg.com/news/articles/2017-08-22/dalio-warnings-on-risk-find-market-already-heeding-his-advice
 
 
Bonus:

Even the Junkiest Sovereign Debt Now Pays Less Than 6%

Bloomberg4 minutes ago
To see how much central bank bond-buying has distorted market valuations, just take a look at the lowest-rated sovereign debt. The junkiest emerging-market …
S. Korea’s household debt hit record high in Q2
Yonhap News 11h ago

Drowning in debt, Connecticut faces budget crunch

Reuters3 hours ago
Some $23 billion of outstanding municipal debt has also constrained spending. Bondholders must be paid ahead of most other expenses like non-essential …

Liabilities Grow (Much) Faster Than Assets for Connecticut Pension …

ValueWalk19 hours ago
And its unfunded liabilities grew an astounding 73% to 20.4 billion, from 11.8 … have underestimating the true cost of their pension debt by billions of dollars.

Older Americans Have More Student Debt Than Ever, Face ‘Overly …

Nasdaq20 hours ago
37% of 65+ y/o loan borrowers are in default: As the general population also struggles with loan payments, older borrowers are leading in missed payment rates, …

Kentucky’s pension crisis can’t be solved with 401(k) plans, group says

The Courier-Journal16 hours ago

Moving from traditional pension plans to 401(k)-type plans “would increase the cost of paying off the existing unfundedliabilities” of about $43 billion within ..

Fixing New Jersey’s failing pension system is an economic necessity

NorthJersey.com22 hours ago
New Jersey’s public pension crisis is a stark case in point. With more than $235 billion in unfunded liabilities – $26,000 for every man, woman and child – the …

Employee Out-Of-Pocket Health Costs Will Eclipse $2500 Next Year

Forbes2 hours ago

Companies have had to manage rapidly accelerating health care costs via cost-sharing and through other traditional strategies such as vendor re-negotiations

Iowans can sound off Saturday about 57% health insurance increases

DesMoinesRegister.com16 hours ago
Iowans facing health insurance premium increases of 57 percent or more will have a chance to air their grievances to the state’s insurance commissioner …