Will a tumultuous 2016 that brought forth a Trump presidency and Brexit, among other potential black-swan events, lead to a global, systemic downside event in the near future? That is a question to which any investor, banker, airline or risk analyst wants the answer.
International Recovery Group's president of operations Ken Cage is perhaps better placed than most to offer a take, as his day job involves repossessing assets from cars to Boeing 737s, giving him a unique insight into the economy's health.
"We are the canary in the coalmine," Cage tells FlightGlobal. "During the last financial crisis, it got hot and heavy on our side in 2007 and 2008. But, it wasn't until about 2009 that the news media said: 'What's going on here?' We see this stuff coming before it hits the fan."
His current take on the economy's health? The first canaries are falling off their perches.
"Right now, I think we are teetering on the edge of something, or at least that is what it feels like. It's not at the pace we had 10 years ago, but the auto [car] repos are ticking up, and we are starting to see the $300,000, $400,000 type of cases come in again," he says.
In 2016, these kinds of repossession increased, but people were able to redeem their assets. Crucially, this has not been the case in 2017 so far, Cage says.
"People aren't redeeming like that now. Bear in mind that these aren't rich people – these are people doing alright, but with loans to go out and buy stuff. During the crisis, we reached the third stage – the $1 million, $2 million asset bracket. That's when you know the wealthy are being affected. Who knows if we'll reach that level this time. We think it probably will, though!"
However, Cage admits that today's market is not easy to read.
"It is a more confusing time than 10 years ago. People seem to be optimistic, and a giveaway about that is the fact that the Dow Jones is up. That's how I've always read that market – it tells you how people are feeling," he says.
But the warning signs are tangible. "One thing that has made me think that things are happening is that I've been to California four times this year already for repos. To put that into perspective, we have only been there a couple times during the last few years. Do you see the difference? During the crisis, we basically lived there. That's a money state as well, so when people start to struggle there, it is a bit of a sign."
Given the downside factors present in the market – a rise in nationalism across the global political landscape threatening the neoliberal hegemony, plus financial factors such as China's ability to handle slowing economic growth, and a likely end to the low interest rates that have persisted since the global financial crisis – Cage's diagnosis of an incipient downturn seems not unreasonable.
Source: Cirium Dashboard
