The Canadian Investor

Subprime Lending Skyrockets as Cyclical Stocks Face Challenges

Sep 12, 2024

Discover the implications of the Bank of Canada’s recent rate cut on housing and consumer debt. Dive into Couche-Tard's ambitious acquisition of 7-Eleven and the surrounding market risks. Explore disappointing earnings from BRP, alongside the alarming rise of subprime lending. The segment on 'buy now, pay later' reveals increasing financial vulnerabilities among consumers. Finally, unravel the effects of rising living costs on spending habits and lending trends, all while navigating a complex economic landscape.

54:59

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Quick takeaways

The Bank of Canada's recent 25bps rate cut may stimulate borrowing, raising concerns about increased consumer debt amidst inflationary pressures.

The disappointing earnings of BRP highlight the challenges faced by companies in luxury sectors due to declining consumer spending and excess inventory.

The rise of subprime lending indicates a shift in borrowing behavior as more consumers turn to high-interest loans amid economic struggles.

Deep dives

Impact of Interest Rate Cuts

The recent cut of 25 basis points by the Bank of Canada has prompted discussions around the implications of ongoing interest rate changes for Canadians. While rates are expected to decline, there are concerns about the potential increase in consumer debt as lower rates might encourage more borrowing. The press conference highlighted that inflation, particularly in housing and services, continues to exert pressure, affecting the overall economy. Observing market trends, a balance between stimulating the economy and curbing inflation remains a challenge for policymakers.

Intro

2min

Navigating Interest Rate Cuts in Canada

11min

Acquisition Challenges in Retail

12min

Financial Struggles and Market Resilience

9min

Understanding Cyclical Stocks and the Rise of Subprime Lending

4min

The Dynamics of Interest-Free Financing and Subprime Lending

14min

The Impact of Rising Costs on Consumer Behavior and Lending

2min

In this episode, we dive into the Bank of Canada's recent 25bps rate cut and its implications for the Canadian economy. With inflationary pressures persisting in shelter costs, we discuss whether the central bank’s decision could reignite the housing market while balancing economic slowdown. We also analyze Couche-Tard's ambitious bid to acquire 7/11, their Q1 earnings, and the potential risks of such a massive acquisition. Finally, we cover BRP's disappointing earnings and the rise of subprime lending, examining how companies like Affirm Holdings and Propel Holdings are faring in an economy where more consumers are struggling to make ends meet.

Tickers of Stocks & ETF discussed: PRL.TO, AFRM, BRP.TO, GSY.TO, ATD.TO

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