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Subprime Crisis Shifts Into Overdrive

Posted October 25, 2023

Matt Insley

By Matt Insley

Subprime Crisis Shifts Into Overdrive

“Protests for evil should be banned,” says a reader, commenting on Monday’s missive. “Evil should not be supported under any circumstance.”

And Scott M. writes: “For me, it comes down to the same issues we experience in the USA. Are the Muslims and Jews in France natural-born citizens or immigrants?

“If natural-born, they should have the right to dress however they and their religion determines. If they are immigrants, then they should assimilate to the customs of the country.

“I don't think that we should place restrictions on the various religions in our country, so I can't endorse restrictions in France.” 

Last, James P. says: “If Macron’s government is going to ban pro-Palestinian protests, are they concurrently going to ban pro-Israel protests?

“What about pro-Ukraine? Don’t forget the Armenia-Azerbaijan conflict. I’m sure somebody is protesting for both of those sides in their conflict.

“Would the French go so far as to ban protests for all African causes? Their former colonies of Algeria, Mali, Côte d'Ivoire, etc. all have expat populations with something to protest for or against.

“Maybe they should ban pro-green energy and climate change protests. That would certainly cut back on greenhouse gas emissions.

“Stifling free speech, particularly political speech, is the first step in the downfall of a republic. Clearly, France is well on its way into the trash bin.” 

To our readers who took the time to write… Cheers! 

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Your Rundown for Wednesday, October 25, 2023...

Buckle Up! 

Here’s a story we’ve been following since July 2022… when we noted a “ticking time bomb that too few people were talking about.” Namely? An under-the-radar subprime loan crisis. 

Today, Paradigm’s income-investing ace Zach Scheidt provides an actionable update: “[Auto loan] delinquencies are hitting an all-time high as inflation makes it more and more difficult for families to pay their bills. 

“Take a look at the chart below that shows the percentage of subprime auto loans that are at least 60 days late: 


Source: Fitch Ratings, Rich Retirement Letter

“This chart is particularly concerning when you think about the way many families organize their budgets,” he adds. 

“Typically, most families start by making sure their housing payment is covered with the family's car payment being a close second on the priority list.

“Once those two items are covered, families then divide the remaining income [among] other family expenses.

“The fact that auto delinquencies are hitting an all-time high is a very sobering statistic for our consumer-led economy,” says Zach. 

“While many affluent consumers are in decent shape because of rising home values, many middle-class and lower-income families are struggling with stubborn inflation.

“Wage gains simply haven't been strong enough to offset rising costs. And that's why we're seeing more people default on auto loans.

“The risk of default continues to climb [especially] for companies who lend to lower-income families. Lenders simply can't charge enough interest to make up for the delinquencies and defaults,” Zach says. 

“Shares of credit issuers Discover Financial (DFS) and Capital One Financial (COF) are now in clear downtrends and could have much further to fall.”

[Full Disclosure: Zach has a personal bearish position in COF as part of his Income Alliance model portfolio.]

“Buying put contracts on these subprime lenders is a great way to protect your wealth and actually profit in a challenging period for investors,” Zach says. 

“To be clear, buying put contracts on DFS or COF won’t harm the families that borrow money from these credit card companies. So you're not making money off the backs of working-class consumers.

“However, shares of these lenders are likely to continue lower as delinquencies rise. And as investors, it's our responsibility to take advantage of the opportunities that this market presents. 

“It's certainly a challenging time for investors,” says Zach. “But with the proper tools, you can continue to grow your retirement wealth even while traditional investors are stuck treading water.” 

Market Rundown for Wednesday, Oct. 25, 2023

The S&P 500 is down almost 0.60% to 4,220. 

Oil’s staying put at $83.65 for a barrel of WTI. 

Gold is up about 0.40% to $1,979.10 per ounce, according to Kitco. 

And Bitcoin continues to rally: up 1.75% to $34,375. 

Send your comments and questions to,

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