CryptoCondom
Crypto Market Commentary
Large-cap banks such as JPMorgan and Carvana are exposed to a coming credit crisis that war headlines are distracting investors from. The private debt market keeps imploding, and troubles at JPMorgan, Morgan Stanley, BlackRock and Deutsche Bank are symptoms of a broad debt-market problem. More esoteric debt such as subprime auto loans is likely to come under scrutiny next, which is why the short positions remain. x.comÂ
Subprime auto loans continue to hold up, yet Carvana still looks weak. x.comÂ
Carvana's and Credit Acceptance's losses from rising auto-loan delinquencies will take time to surface, because lenders let borrowers miss payments and extend the loans, an extend-and-pretend approach. This answers @lifelong72 asking whether the companies will eat the losses. x.comÂ
Carvana's rising costs and falling loan-sale gains leave volume growth without operating leverage. Ad spending rose to $152M from $121M last quarter, and $3.45B of inventory enters a seasonally weak quarter. Gain on sale fell less than expected; it still tops $2,000 upfront on a roughly $25,000 car, but the chart uses all retail units, not just financed ones. The after-hours rise should fade, and an ABS-market freeze would make those gains irrelevant. x.com x.com x.com x.comÂ
Carvana and CarMax face a worsening used-car demand outlook: search growth has rolled over, and their app-download growth has slowed. Inflation and interest rates are among the pressures behind the slowdown, on top of the previously noted weaker pricing power and rising inventory. x.com x.com x.comÂ
Carvana and CarMax face a day of reckoning from negative equity in auto loans. Buyers with 72- or 84-month loans re-enter the market before their loans are paid off, a mismatch between loan length and ownership behavior that sets up negative equity. Incentives on new cars are also trending up. x.com x.comÂ
Credit tightening and data-center delays threaten the debt-funded AI boom behind the S&P 500. Junk-bond sales fell from $51B in September to $7B in October's first three weeks; CCC yields hit a four-year high, though quality firms still borrowed. Per S&P Global, 146 data-center projects were delayed or canceled, potentially weakening buildout credit. With 40% of the index in 10 names, this is dot-com and 2008 combined; stocks have not caught up, and even good firms may be sold. x.comÂ
Carvana faces a tough road ahead based on its earnings and management commentary. Anyone expecting 30%+ growth for a while could be surprised within a few quarters by major deceleration and margin pressure. x.comÂ
Carvana is headed back below $2 next year as 2027 becomes the year of blowups, when misallocated capital gets punished. A nasty head-and-shoulders pattern on the long-term chart adds technical evidence. x.comÂ
Flagstar's deteriorating asset quality and difficulty improving earnings increase its credit risk. Fitch cut the bank's outlook to negative on its BB+ credit rating, prompting renewed concern about bank failures. x.comÂ
Private credit and major financials, including Ares, Carlyle, KKR, Blue Owl, Blackstone, JPMorgan and Goldman Sachs, are in the doghouse over a risk the market fears more than the Iran war. Anthropic's Dario Amodei has said something similar, and more and more companies are letting people go. x.comÂ
