In a concerning economic landscape, bank liquidity and funding are rapidly declining, and the Business Term Funding Program (BTFP) is running out of time, with just three months left. The situation is exacerbated by subprime debt, comprising 21% ($332 billion) of outstanding auto loans, of which roughly $24.5 billion is severely delinquent.
Renowned investor Howard Marks warns, “Securing loans is becoming tougher, posing challenges for businesses needing refinancing.” This sentiment points to impending obstacles for businesses seeking financial support.
Further compounding economic woes, US restaurant activity indicators show consistent weakness. Strikingly, this decline aligns almost perfectly with the Federal Reserve’s decision to raise interest rates.
Despite reaching an all-time high in August 2021, restaurant activity has sharply declined since the Fed’s rate hikes in March 2022. This pattern underscores the impact of interest rate changes on economic sectors, particularly in the face of depleted savings and persistent inflation.
As consumers cut back on spending, relying on more credit card debt is not a viable solution. With the BTFP clock ticking and subprime auto loans under stress, collaborative efforts among policymakers, financial institutions, and businesses are crucial to navigating these economic challenges.
Sources:
3 months until BTFP runs out. This is what bank liquidity/funding looks like without it. pic.twitter.com/sGznOXP19q
— zerohedge (@zerohedge) December 3, 2023
Securing loans is becoming tougher, posing challenges for businesses needing refinancing. Howard Marks highlighted this issue in his October interview: pic.twitter.com/DSvefv1e9e
— Phoenix Capital (@PhoenixCapitalH) December 3, 2023
Retail is the most bullish that they've been since April of 2021, according to @AAIISentiment 🤑 pic.twitter.com/jvGz7jSJ2D
— Markets & Mayhem (@Mayhem4Markets) December 3, 2023
Subprime debt made up 21% of the $1.58 trillion in outstanding auto loans or roughly $332B.
That means roughly $24.5B in subprime auto loans are SEVERLY delinquent. t.co/4exV9Qktxz
— Darth Powell 🦈🇺🇲🇺🇦🇵🇱🇫🇮 (@GRomePow) December 3, 2023
Indicators of restaurant activity continue to show signs of weakness in the US.
Interestingly, this has been almost perfectly correlated with the Fed raising rates.
Restaurant activity in the US hit an all time high in August 2021.
Since the Fed started raising rates in March… pic.twitter.com/DHd7TKRSQX
— The Kobeissi Letter (@KobeissiLetter) December 3, 2023