Auto Finance Wreck Down the Road?

Published on
February 19th, 2018
29 minutes

Auto Finance Wreck Down the Road?

The Expert View ·
Featuring Max Wolff

Published on: February 19th, 2018 • Duration: 29 minutes

Several catalysts could come together to wreak havoc in the consumer auto lending space, argues Max Wolff of The Phoenix Group. He delves into the macro and micro components of the trade, and presents a few possible ways to play it.


  • BB
    Bojo B.
    24 March 2018 @ 10:09
    Very good presentation, and sense of humor !
  • GG
    George G.
    19 February 2018 @ 19:55
    Tough for me to take someone seriously who is this young and says the only people that don't agree with him and the herd (interest rates have to rise) are "living in rooms that should be locked from the outside." Reminds me of Krugman. Should we assume you think Lacy Hunt is crazy Max? The more I study history, finance and investing the more I realize those who are most wise are also most humble and are the first to acknowledge they could be wrong.
    • AS
      Alex S.
      19 February 2018 @ 22:01
      wonderfully said
    • DS
      David S.
      20 February 2018 @ 20:59
      I agree wisdom comes with making many mistakes and learning from them. Youth does not have this advantage, but the analysis can still be correct. Use your wisdom to see if you wish to invest. DLS
    • NT
      Nathan T.
      22 February 2018 @ 10:44
      Tough for me to take someone seriously who... judges on someone's age...GG you offer wisdom, mixed in with assumptions, and a 'me me I I' perspective served beside a bumper sticker epiphany.
    • KS
      Kashyap S.
      9 March 2018 @ 02:34
      Lacy Hunt's core argument is that since the world is awash in debt, interest rates will keep reducing (add more debt, the lower the interest rate goes). Having acknowledge that the world has a debt problem, the investment thesis is.. *drumroll* buy US treasuries. Yes, to buy the securities offered by the largest debtor nation in the history of the planet. Lacy Hunt might not be a crazy Max but he sure is missing the part of the brain dealing with logic.
  • CA
    Craig A.
    25 February 2018 @ 13:58
    More people like this pls
  • SJ
    Sy J.
    25 February 2018 @ 08:13
    His comments about minimum wage and gutting of consumer protection agency felt smarmy. He is a little too confident about everything he says.
  • SP
    Sat P.
    23 February 2018 @ 11:00
    As someone who hasn't owned a car since 2004, I simply don't understand these things about the Rental Car companies: (Q1) Why aren't they living through a Golden Age right now? (Q2) Why haven't they innovated to make their Apps amazing so that hiring cars is easy and ubiquitous? Try using Hertz online or their App, it is a depressing experience, I have abandoned hiring a car many times because of errors on both, but mainly their app. (Q3) Why are their car hire locations are usually far from where I live? i.e in locations that I can only get to if I had a car in the first place!
  • GG
    Glenn G.
    23 February 2018 @ 04:19
    This was a good update to "Big Idea - Car Crash" from 9 months ago and introduced some new ideas with people being less reliant on cars. Clearly the declines has taken longer to play out then the original presentation had suggested. For example we have sat back and watched Santander Consumer rocket up from $11 to $19 during that time which was suggested as a potential short in the original presentation. Looks much better as a short now at $16.50. What I would like to see to get me excited about playing the downside as an investment opportunity is evidence of a higher proportion of lesees walking away from their leases at end of term because the residual value of their vehicle is less than their buyout. To me that is a structural problem that can't be fixed easily. Growing evidence of that in the face of rising interest rates would get me interested. I believe Max nailed it that this one is still 12-18 months out. $KMX is a good used car sales bellweather to keep an eye on - it has had a rough ride recently. Good presentation!
  • BP
    Brandon P.
    21 February 2018 @ 22:08
    Stansberry has been covering this narrative for awhile.
  • JT
    Jimmy T.
    21 February 2018 @ 13:13
    This is exactly the perfect presentation - short, explanatory, and actionable. Thanks much.
  • RM
    Russell M.
    19 February 2018 @ 12:07
    This is a good report. To be great, edit out the repetition, and deliver concisely in half the time. Its worth the time to make it great.
    • JD
      John D.
      20 February 2018 @ 05:58
      Respectfully disagree Russell. Sometimes I find repetition helps in reinforcing a key point or message. This is a well known technique for public speakers and politicians. Cheers John.
    • DS
      David S.
      20 February 2018 @ 21:12
      For me it is not a matter of time. Tighten up the argument and give more information in the same amount of time. If there is no more pertinent information, then a shorter video would be appropriate. DLS
  • RA
    Robert A.
    20 February 2018 @ 19:43
    I thought this was a very good piece although clearly a bit repetious and in need of some better editing (personally I didn’t mind the repetition as I thought the points were so good and I viewed it as “poor man’s rewinding”). Some of the Internet Banks are heavy into this sub prime Auto lending space. They avoid the Bricks and Mortar expenses and can offer higher CD rates under their FDIC umbrella while putting that money out at fairly high rates. A good business until defaults occur with lower collateral values. I believe Ally Bank, Synchrony Bank and Cit Bank (not Citicorp) are all heavily into this space. Caveat Emptor, IMO.
  • AL
    Alex L.
    20 February 2018 @ 05:28
    As an audio listener, I really appreciate narrating the questions! Interesting content, especially after the previous Big Story on autos.
  • RP
    Ryan P.
    20 February 2018 @ 02:10
    Daniel Ruiz
  • JC
    Joseph C.
    19 February 2018 @ 21:57
    Max mentioned that we can track auto loan delinquencies on the NY fed website. I’ve been poking all around the site and can’t seem to find it. Can someone please help? Thank you.
    • JO
      JOHN O.
      19 February 2018 @ 22:29 St. Louis Fed also gives a lot of good data - as does several of the others.
    • PP
      Patrick P.
      20 February 2018 @ 01:56 Blue box that says Downloads it on for charts
  • MH
    Mark H.
    20 February 2018 @ 00:38
    Vote Keynesian! LOL We are ruled by idiots and criminals.
  • RT
    Rune T.
    19 February 2018 @ 16:08
    Porter Stansberry has been talking about this for years so no real news, but still interesting as it feels the end is nearer for every passing day.
    • JO
      JOHN O.
      19 February 2018 @ 18:48
      You're right, he has been. But if anyone stands by his gloom and doom scenario for long enough (or bright skies scenario) eventually it will come true. Just for haha's I googled Stansberry's 2012 predictions. He was way off on just about everything. In December of 2011 he was advocating that we dump everything and get into gold at 1700 and silver at 33. Maybe he's been right at other times but I doubt if there is much overlap between RV and SR subscribers.
    • RT
      Rune T.
      19 February 2018 @ 22:16
      John O. You're right - one needs a fairly good doom-filter to find the nuggets in SR and others of the same style. I found though that a fair amount of it makes sense, but often the timing is extremely early (aka. wrong) but some of his fundamental ideas makes sense to me - it's a source of ideas in my world at least. But yeah, beware of gold bugs and people who thinks the music stops... someone has a repeat button. Still I find good value in the paid research from SR, one should entirely disregard to marketing BS they use to draw people in, but I guess that's what works strangely enough.
    • JO
      JOHN O.
      19 February 2018 @ 22:37
      Rune: So true. My wife tells me that my optimism needs to be tempered from time to time to bring me back to reality. Maybe SR is the right prescription. The podcast I listened to did cause me to look at a few things from a different angle. Kind of like listening to the other stations on AM talk radio. You never know what will make the the light bulb over your head turn on.
  • SS
    Sam S.
    19 February 2018 @ 22:34
    Complete and well spoken. Thank you.
  • MM
    Mattias M.
    19 February 2018 @ 20:56
    I have a hard time finding listed auto finance [companies]. Im just finding banks, capital one seems to be pretty aggressive in giving out loans though.
  • NG
    Nitin G.
    19 February 2018 @ 19:18
    To be honest these arguments that Maxx used to construct his thesis have been out there for a while. If you have been following the subprime auto lending space , like I have been for the past several years now , these things weren't at all surprising. Consumer credit is getting stretched, spreads are tightening , yet sub prime lenders have been posting decent volume growth. Part of it is from loose underwriting , part of it from demand, and part of it is from a lot of lenders moving upstream meaning moving up on the credit score. Loosened regulations added fuel to the fire under the current political climate. I'd argue the presentation Daniel Ruiz did was more meaningful .
  • JO
    JOHN O.
    19 February 2018 @ 18:21
    Max gave a good analysis with a number of easy-to-understand exercises one can employ to track the progress of the trend. Well done.
  • fd
    frank d.
    19 February 2018 @ 13:26
    Surely, he did not say the word "Thug" to represent class of people with a low credit rating by FICO. Did he?
    • ML
      Michele L.
      19 February 2018 @ 17:20
      no, he did not. he said "folks" a few times, perhaps that's what you heard.
  • DJ
    D J.
    19 February 2018 @ 16:09
    Wonderful. Totally agree
  • TJ
    Terry J.
    19 February 2018 @ 13:22
    A most informative presentation from Max on an area of the market I have been wanting to learn more about. I am not sure I necessarily agree with Max on the speed of interest rate rises, as I would be surprised if the Fed keeps raising rates as intended in light of the recent Wall Street correction, and the implications for the derivative time bombs we learnt about in an RVTV video last week, and which too many rate hikes might just denonate. In the fullness of time however, the scenario Max paints is sure to happen, thanks as always to greedy inappropriate lending by those whom should have known better.
  • PU
    Peter U.
    19 February 2018 @ 13:22
    very good