Subprime Consumer Debt Soars to 7-Year High

by Dave Kranzler, Investment Research Dynamics

This will not end well:   “The trend stems from lenders and investors seeking high yields in a low-interest rate environment. So it’s no wonder that total household debt rose $306 billion, or 2.7 percent, in the fourth quarter from a year earlier to the highest level since 2010.” (Newsmax)

Subprime lending as a percentage of total consumer lending is now close to where it was right before the financial collapse of 2007 (click to enlarge):

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Of course, if you blow away the Orwellian smoke from the Graham-Dodd legislation, U.S. lenders of all varieties are not subject to less scrutiny and oversight than before the de facto financial collapse in 2008.

The Fed’s 6-year ZIRP policy has created a situation in which banks and other financial institutions are now taking excessive risk in order to pick up yield:

Lenders’ interest in customers who were the hardest hit by the financial crisis reflects…firms’ desires to take more risks at a time when ultralow interest rates are depressing profits.  (Wall Street Journal)

This is setting up the next catastrophic systemic financial melt-down and will be the excuse the Government/Fed is looking for to roll out a QE4 program that will have to be larger than the last time around…

In connection with this information, THE best way to play a subprime debt blow-up is to short Amazon.com (NASDAQ:AMZN). AMZN plunged from $407 to $284 at the beginning of 2014 thru early May. It has been unable to hit a new all-time high despite the SPX hitting new highs nearly every day now. I have a report available that will explain exactly why AMZN is eventually going to hit the wall:   AMAZON.CON

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