You forgot car loans. A few years ago my wife was offered an 84 month loan when she was unemployed. Very few people keep a car for 84 months. I'm sure there will be a lot of people underwater on those loans pretty soon.

Oh... given the people inside my little bubble I'm surprised to hear people don't. If the economy tightened up, presumably people would compensate by keeping the car longer though?

And service the debt with what job?

are you not underwater immediately on any car loan? sure it's worse on 84 months, but the old saying about "once you drive it off the lot" would apply to any loan would it not?

Most normal car loans are for four or five years and leave you about even three years in so If you trade it in you don’t owe anything.

This is only true in the short run for new vehicles. A well-maintained vehicle will hold a significant amount of value after 10+ years. And if you are fortunate or savvy enough to buy a car that will obtain “collector” status you may even make a nice profit. One extreme example is the 86’-91 Volkswagen Vanagon Syncro, which can be sold for up to $90k today.

A more common example is the first generation Toyota Tacoma (00’-04’) that is currently going up in price, I’ve seen closing prices at $15k in the last year. Small trucks are now extinct and this particular model is proven to be absurdly reliable, but who would have predicted that 10 years ago when these were selling for $3k-$5k?

Your examples are trendy vehicles that have hordes of fools lining up to pay multiple grand for examples that can't even move under their own power. Nobody in their right mind would say that classic VW vans or any Toyota pickup is indicative of market patterns in general. They are what the "cool kids" drive and pricing reflects that.

Diesel trucks used to be grossly overpriced too but now that most of the older stuff has aged out and the "new enough to still be kinda nice" market segment is full of emissions era diesels the crazy pricing has mostly gone away.

Wow a little harsh, don’t you think? Maybe I should have used the Toyota Corolla instead? These weren’t trendy vehicles when they were new, that’s my point. Perhaps you missed the part of my comment where I prefaced with “If your fortunate...”? Because obviously this was an off-topic side comment countering GPs generalizing that all cars necessarily lose value, not a strong claim about the market as a whole.

I can't speak to the VW but the Tacoma was absolutely trendy when new. From 2000 or so to present it has been the official pickup of "I don't 'need' a pickup but I make good money, I like nice things and I want a pickup" (I'm not saying there's anything wrong with that reasoning). They've always (even back to the 80s and 90s) been more expensive than the alternatives when new so only people who are dead set on them tend to get them.

They're comparable to the Jeep JK and the WRX STI or a performance trim Mustang/Camaro but for different demographics. Anyone could tell you that they would hold value better than average when new.

Losing less value than average is not all that remarkable. Gaining or failing to lose value is exceptional and subject to the whims of consumer culture (see my tangent about diesel pickups). Jeep Wranglers used to be like that but as the 4dr JKs hit the used market it calmed down a lot. Old full size Broncos are probably about to stop losing value if the rumors of a new fullsize are to be believed.

Also I toned down the language in the original a little.

Are you sure you're not mistaking it with the later post-2004 models? The early model MSRP'd at <$20,000 ($26k today infl. adj.) and was a small pickup, nothing like the full-size $45k beast that is offered today. It would be odd to compare it with the $35k WRX STI.

Anecdotally, I purchased a used Tacoma in 2011 for a few thousand dollars as a family workhorse vehicle. I sold it for nearly double five years later with only making regular oil changes. This really changed my impression of the used car market and have since started a side hobby buying and restoring "almost-classic" vehicles.

I'm not comparing it in terms of cost, I'm comparing it in terms of how buyers think about it. People buy a WRX STI not because they don't know what they want and it seems reasonable. People don't buy a WRX STI because they want a sedan, do a bunch of number crunching and decide it's the best fit for their needs. People buy a WRX STI because they're in the market for a sedan and they want a WRX STI. The same is true for the Tacoma and a whole host of other vehicles. People buy a Tacoma because they specifically want a Tacoma and they pay out the nose for it (especially if buying used).

These are outliers though, and in macroeconomics will have near zero impact.

Yes I’m aware, didn’t intend to imply otherwise

It's the difference between book value and economic value

Even 84 months ago around a third of those trading in a car for a new one were underwater on the trade-in.

Auto-loans are the only ones that I've ever heard of that allow you to take the balance of one note and just move it to a new note. Maybe credit card balance transfers, but those are just moving debt from one holder to another. Car loans are adding the balance of the existing note to the new loan.

Isn't the average 10 years?

The average new car loan is 5 years 9 months. The average used car loan is 5 years 5 months.

> Oil and gas companies - the entire "fracking revolution " has been funded by loses from bondholders.

That's no longer a serious problem (and is in fact an opportunity for the majors that have taken over). That's several years in the past as a large risk. At the scale of the US economy and its wealth, the remaining debt implosion risk in the fracking (Permian etc) segment is trivial.

The fracking buildout is over and consolidation has already largely occurred. There are only a few relevant small players left to be acquired by the majors. Companies like Exxon, Chevron, ConocoPhillips, Devon, Pioneer, Apache, Concho and Occidental own everything. And a few of those are guaranteed future acquisitions for the big guys, including Devon and Apache. The majors have no real capital problems when it comes to affording to deal with swings in the price of oil, unlike the early years of the fracking boom when dozens of smaller firms still mattered and were highly leveraged. And at this point we know where most of the oil is at in the prime fracking zones, the little wildcatters served their purpose.

Please tell me where you can read more about the idea that "the entire "fracking revolution " has been funded by loses from bondholders"

To be fair there have been plenty of losses from stockholders as well.

1. Economically speaking, this is actually a really good thing in terms of stability. We would be much more concerned if these borrowers could default. Instead, they have to work, which is good for our economy and good for this specific debt market's health as a whole.

No it’s not. The need for work doesn’t offset that economic calamity that happens with a liquidity crisis and the subsequent devaluation of the dollar. That means people need to work and there’s no money available to pay them. You get a run on banks with more debt than cash available. Everyone is frozen.

Are you saying that student debt being non-renounceable is bad if and only if we have a liquidity crisis? Because, that's the way your comment reads, to me at least. For the record, I am not endorsing this type of structure for all forms of debt. I am simply bringing to light a more positive view on the supposed "student loan crisis". If so, let's look at some numbers to paint a broader picture: the US mortgage market is 10x the size of the student loan market with average monthly payments in the $1000-1600 range, whereas the national average student loan payment is less than $500. If there were to be a liquidity crisis, the worst we would see out of the student loan market is a larger fraction of borrowers struggling to come up a few hundred dollars per month throughout the recessionary cycle. I just don't think this market is large enough to have the kind of effect your are describing in your comment. I think your comment makes sense for debt as a whole, but I don't think it scales well with the market it's targeted towards.