11 July 2017: Subprime car loans

In one of the major Dutch newspapers, Algemeen Dagblad, (and, with it, in most regional newspapers), there is a large article on car loans. The funny thing is that the Dutch hardly ever buy a car on credit. The article focuses on car buyers in the US and the UK. In these countries, the majority of car owners have bought their car with money they did not own at the time of purchase. No less than 85% of the Brits make use of an installment loan to buy a new car. Although such a high number in itself should ring alarm bells, it is even more worrisome that people are buying cars they would normally not be able to buy (think Mercedes, think Audi), because of the low interest rates. Does that sound familiar? Regulations on home mortgages haven been tightened, so financial institutions have been looking for other sectors to dump their cheap credit. A rise in interest rates and/or inflation could have devastating effects on this pile of subprime car loans. Many car owners may be forced to sell their cars in a market that will be flooded by a large number of cars that have been bought too easily. Anyone interested in a Vauxhall Black Swan GTI?

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The NASDAQ and the S&P 500 finished higher Monday as technology and energy stocks were in vogue after a less positive week. The Dow closed slightly lower: -0.03%. The S&P 500 gained 0.09% and the NASDAQ added 0.38%. Volatility eased: the VIX closed 0.71% lower. XIV ETNs gained almost 2.5%. UVXY ETFs lost close to 5%.
Danny Daredevil has trouble finding momentum: his RSS dropped well below 300% at 284%. Danny is negative for the year for the first time since the end of May. Adventurous Anny is holding cash and her RSS remained at 33%. Solid Suzy and Lazy Larry were the winners for the day. Their RSS is approaching 25%.
None of our models gave a trading signal at the end of yesterday’s session.

Model Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

284.19%

-4.70%

-11.74%

142%

Adventurous Anny Cash 6 March 2017

32.57%

32.57%

-4.39%

125%

Solid Suzy XIV 6 March 2017

24.33%

24.33%

-0.67%

87%

Lazy Larry
XIV 6 March 2017

24.33%

24.33%

-0.67%

87%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

 

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René met an old friend who told him this wonderfully funny, classic story. It is called ‘The Fisherman’s Parable’ and it is said to have its origins in Buddhist tradition.
A businessman is relaxing along the riverside.
A fisherman rows his small fishing boat toward the shore.
The businessman notices that the fisherman has caught some big fish. “Did it take you long to catch those fish?” he asked.
“Not at all,” the fisherman replied.
The businessman raised his eyebrows. “Then why don’t you spend some extra time, to catch even more fish?”
“Because this is enough for me and my family.”
“How do you spend your day, if I may ask?”
“Well, in the morning I wake up, then I take my boat to catch some fish. After that, I get back to my village to relax with my family and friends until nighttime.”
“Let me help you,” said the businessman. “I am successful in business. You can become successful as well. I suggest you spend more time fishing, and catch as many fish as you can. With the profits you make, you can buy a bigger boat.”
“And then what?” asked the fisherman.
“Don’t you see? The bigger the boat, the more fish you will catch. So you will earn even more money, to buy more boats.”
“What’s the use of more boats?” asked the fisherman, starting to look disturbed by now.
“With more boats, you can start a fishing company. You can then hire personnel to do the fishing for you. You don’t need to get up every day to go fishing. Instead, you can live in the big city if you like. From there, you can manage your company.”
“And then what?” asked the fisherman.
“You live the good life. And as soon as your company is successful enough, you go public.”
“Public?”
“Yes. Your company will be listed on the Stock Exchange. So people can buy shares in your company. That brings in a lot of money. It will make you a rich man.”
“And then what?” asked the fisherman.
“Then you can retire. Move to a house near the river, wake up in the morning, take your boat to catch some fish on the river, and spend the rest of the day just relaxing with your family and friends.”
Now the fisherman raised his eyebrows. “And what do you think I am doing now?”