Markets have become so ultra focused on the short-term that we often wonder whether anyone even remembers what happened last week much less what happened in the wake of the housing collapse in 2008 that nearly toppled global financial markets.
In fact, auto sales, fueled by the latest subprime lending frenzy, are the perfect illustration of the lack of institutional memory. Despite the brutal ramifications of lending to subprime real estate borrowers just 8 years ago, today we see billions of dollars flowing into subprime auto loans, with reckless abandon, as auto sales bubble over courtesy of $0 down, 0% APR, 70 month loans that would have been unimaginable just a short time ago (sound familiar to anyone?).
Of course, the current subprime auto bubble is the direct result of reckless central banking policies that have forced trillions of dollars out of sovereign debt and into any asset with a reasonable term and a yield above 0%. And who cares about the consequences of this misinformed investing strategy because every time it looks like the music might be ending, central banks just step in with more stimulus and the party keeps going.
Alas, at least one analyst, Jim Reid of Deutsche Bank, has cautioned that now might not be such a bad time to take a step back and look at the longer term demographic and economic trends. Reid argues that global demographic trends, including the addition of “1 billion cheap workers” from China and India and a wave of highly productive 35-54 year old workers, have created a 35-year super cycle that is just about ready to reverse. Going forward, Reid warns that the “extrapolation of the last 35 years could be the most dangerous mistake made by investors, politicians and central bankers.”
This post was published at Zero Hedge on Sep 8, 2016.
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