Optimism Porn – used car prices
There is so much bad news out there that I thought I might start a little bit of optimism porn to counter the pessimism porn that is becoming so common.
So here is your first dose of optimism porn: the used car business is holding up surprisingly well. This was mentioned in the Federal Reserve’s Beige Book – but also in the Manheim index of used car prices at auction. This index spiked up last month!
The biggest single determinant of losses in a subprime auto finance book is not loss rate – it is severity – the loss after the car is auctioned. I am not about to buy non distressed auto securitisations or anything – but if you want to play in the distressed stuff this is clearly good news.
John
PS. One comment from below deserves highlighting:
that is great news. anyone in NY want to buy a 2003 mazda protege with 55k miles really cheap? i bought it to commute to my hedge fund job and don't need it any more.