Subprime auto, commercial real estate, private credit, and crypto all scratch me where I itch when thinking about precarious pockets of today's stock market.

None of these areas is as systemically concentrated as subprime mortgages were before 2008, but each contains hidden leverage, murky valuations, and exposures lurking in balance sheets that investors prefer not to scrutinize until they absolutely have to — sometimes done by a bankruptcy court.

When assets across multiple pockets of the market are simultaneously stressed — and markets are trading at historic highs — even smaller shocks can cascade.

The strains showing up in today's subprime auto market feel like a replay of the early stages of the 2008 crisis — where deterioration was obvious in the underlying data but somehow absent from valuations. This was the scene in The Big Short where the defaults are rampant, but the price of their swaps hasn't been marked appropriately.

It's amazing how well assets perform when you simply refuse to value them. And when major banks are complicit in pumping them...

Bloomberg recently noted that more than 1.7 million cars were repossessed in 2024, the most since the post-crisis period. That's more than a 40% jump from 2022, driven by the end of pandemic forbearance, persistent inflation, and sharply higher interest rates. A typical monthly payment now sits in the mid-$700s (this is almost my mortgage payment on my studio apartment in Philadelphia), and many subprime borrowers are paying rates above 10%. What used to be a manageable necessity has become a financial wedge.

Among borrowers with weaker credit, more than 6% are over two months behind — worse than during prior recessions — and nearly one in ten is sliding into default. People generally sacrifice everything else other than their house before they lose their cars. When transportation — the thing that gets you to work and keeps life functioning — becomes unaffordable, that's not a marginal data point. That's financial strain turning into lifestyle disruption.

The pressures extend well beyond driveways and impound lots. Consumer credit balances are at record highs, and delinquencies are trending up. Meanwhile, a parallel stress is building in commercial real estate. Office buildings financed under pre-COVID occupancy assumptions now face empty floors and refinancing costs that defy the original business plans. Declining property values remain largely unacknowledged on lender balance sheets, but everyone in the system knows the math is getting worse.