If it looks like sh*t and smells like sh*t… it’s probably sh*t…

Back in 2020, Jim Chanos (Founder of Kynikos Associates) called it: markets were in the “golden age of fraud.” Fast forward four years and he’s now saying fraud hasn’t slowed… it’s been yeeted higher. Which feels accurate, because two dominoes in consumer credit…Tricolor Holdings and First Brands…just collapsed, and the stench is atrocious. 

(Source: Giphy) 

In short, Tricolor specialized in subprime auto loans to lower-income and immigrant households. First Brands supplied auto parts. And now, both are bankrupt. The rot showed up in their books the same way it usually does: opaque financing structures, rehypothecated invoices, debt stacked on debt until nobody could track which collateral was already spoken for. Meaning, investors who thought they were buying safe, asset-backed yield suddenly realized they’d been spoon-fed 2008 in a new wrapper.

(Source: Financial Times) 

Case in point: As of 2025, the $2 trillion private credit market looks like the subprime CDO factory that detonated Wall Street last time around. High yields dressed up as “safe senior debt” should be the red flag, but pension funds, banks, and alt managers are still shoving money into the machine. Which is why Chanos calls the opaqueness “a feature, not a bug.” Translation: you’re not supposed to know what’s inside because the answer is “junk, but rated.” 

Even worse, the consumer side of this whole house of cards isn’t holding up either. Auto loan delinquencies are spiking. The lowest-income households are breaking first, hit by higher rates, inflated used car prices, and tariffs that raised the cost of both parts and imports. Insurance and maintenance costs climbed faster than CPI, which means even people who can make their payments are stretched thinner than ever. And now delinquency creep is showing up in middle- and upper-income borrowers too.

(Source: Giphy) 

And guess whose knee deep in this pile of shat? Big banks. More specifically, JPMorgan and Fifth Third are exposed to hundreds of millions in these loans, and somehow nobody caught the irregularities before the paper blew up. One investor told the FT they were stunned JPM “missed” it. Which is a polite way of saying: when yields are fat enough, Wall Street’s due diligence department clocks out early. Translation: Jamie Dimon is punching air as this is his second “miss”... first Charlie Javice and now 450 FICO scores trying to finance a sedan LOL. 

Of course, subprime borrowers defaulting on used Hondas isn’t new. But what makes this moment a massive clusterf*k is the way those loans have been repackaged, sliced, and sold across the credit market at scale. If you don’t know how this works, Anthony Bourdain gives a nice explanation of it in the Big Short (right after Margot Robbie’s wonderful explanation). Meaning, the time bomb is ticking and auto bankruptcies are just the first leak in a pipeline that runs straight into private credit funds, banks, and structured products. 

(Source: Giphy) 

Which means… which means… if the market keeps whistling past these defaults, the next surprise won’t be a subprime auto lender. It’ll be someone bigger holding the same rotten collateral. Until next time, friends… 

At the time of publishing, Stocks.News does not hold positions in companies mentioned in the article.