Goddammit, here we go.

There’s nothing I despise more as a chronicler of daily macro-market events than what I’ll call “embryonic tail-risk realization.” At times like these, simply documenting current events can be tantamount to throwing gas on a fire, particularly for mainstream media outlets like Bloomberg and the Journal.

Far be it from me to question Jamie Dimon — let alone the eternal wisdom of an exhausted old saw — but nine times out of 10, there’s just one cockroach. Maybe two. Not an infestation.

If you follow financial news, you know exactly what I’m referring to. On Tuesday, Dimon’s “favorite” bank analyst (some of you will know why I used scare quotes there) Mike Mayo asked about Tricolor, one of two auto sector bankruptcies to grab headlines in recent weeks.

Long story short, nearly half the car loans Tricolor used for ABS deals and lines of credit might’ve been double-pledged or, who knows, triple- and quadruple-pledged. If that’s true of the company’s car loans, it’s likely true of their actual cars too. (Shades of William H. Macy’s Jerry Lundegaard.)

In simple terms: Tricolor allegedly used the same collateral to secure multiple obligations, which is — you know — frowned upon. That loan (or that car) can secure my line of credit to you or it can secure someone else’s line of credit to you, but it can’t secure both. Because if you go bust overnight (Tricolor went bust overnight), there’ll be more claims than collateral (there were more claims than collateral), and chaos will ensue (chaos ensued).

JPMorgan’s caught up in that, but their actual exposure’s far less concerning than the associated embarrassment. The day a deep subprime auto lender sinks Jamie Dimon financially is the day hell freezes over, but the very fact that his bank had any exposure at all to an entity which, on one account, made a habit of selling cars to people who not only lacked credit scores, but in fact lacked driver’s licenses, was enough to elicit a sheepish concession from modern history’s most powerful banker.

“It’s not our finest moment,” Dimon remarked, of the $170 million charge-off tied to Tricolor. In response to Mayo, Dimon said “whenever something like [Tricolor] happens we scour all process, all procedures, all underwriting, all everything.” He went on to muse that “when you see one cockroach, there are probably more.” He mentioned the other big auto sector bankruptcy, First Brands, which has Jefferies all fucked up — for lack of a more concise way to encapsulate what I’m still confident calling a discrete collapse.

Note the emphasis. Discrete. Dimon’s contention is that even when there’s no direct connection, these things tend to occur in bunches and can be indicative of underlying problems, or even presage cycle turns, in macrospeak. “Everyone should be forewarned on this one,” he cautioned, during the same exchange with Mayo. “First Brands, I put in the same category, and there are a couple of other ones that I’ve seen.”

Forewarned is one thing, but I’d caution against assuming the worst or otherwise using Tricolor and First Brands to make the case that something semi-systemic’s in the offing. Unfortunately, that’s the way Jefferies and some of the regionals traded on Thursday.

There’s the chart. Jefferies, which was already in a tailspin, shed another 10% it couldn’t spare, while Zions and Western Alliance got hit hard too. Both of those banks warned this week on souring loans and potential borrower fraud.

I don’t want to downplay what’s going on here, but at the same time, we should be careful not to talk ourselves into a mini-crisis like we did in March of 2023. If you’re old enough to remember 2023, you’ll recall that a run on one specialty bank ended up triggering a panic which ultimately had to be quelled by Jerome Powell, Janet Yellen and, naturally, Dimon.

SVB wasn’t, on its own, a crisis. Rather, the market convinced itself that SVB was a crisis and because banking’s just a giant confidence game, it self-fulfilled, requiring a policy backstop (and a Dimon intervention).

That brings us full circle. I don’t enjoy covering the early innings of tail-risk realization because the very act of doing so increases the odds of a spiral. There’s no question that social media and the 24-hour nature of the news cycle helped turn what would’ve been an isolated incident in SVB’s unraveling into a near-miss national debacle.

The old cockroach adage aside, there’s no reason to believe the almost comedic circumstances behind Tricolor’s demise and the highly idiosyncratic nature of the First Brands collapse, have systemic implications, or even implications for timing the end of the cycle. But that won’t stop folks from suggesting otherwise.