Auto Finance Wreck Down the Road?

Featuring Max Wolff

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.

Published on
19 February, 2018
Credit Market, US Economy, Lending, Consumption
29 minutes
Asset class


  • B

    Bojo .

    24 3 2018 10:09

    0       0

    Very good presentation, and sense of humor !

  • CA

    Craig A.

    25 2 2018 13:58

    0       0

    More people like this pls

  • SJ

    Sy J.

    25 2 2018 08:13

    0       3

    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 2 2018 11:00

    0       0

    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 2 2018 04:19

    6       0

    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 2 2018 22:08

    0       0

    Stansberry has been covering this narrative for awhile.

  • JT

    Jimmy T.

    21 2 2018 13:13

    3       1

    This is exactly the perfect presentation - short, explanatory, and actionable. Thanks much.

  • RA

    Robert A.

    20 2 2018 19:43

    1       0

    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 2 2018 05:28

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    As an audio listener, I really appreciate narrating the questions!
    Interesting content, especially after the previous Big Story on autos.

  • RP

    Ryan P.

    20 2 2018 02:10

    2       0

    Daniel Ruiz

  • M

    Mark .

    20 2 2018 00:38

    3       1

    Vote Keynesian! LOL We are ruled by idiots and criminals.

  • SS

    Sam S.

    19 2 2018 22:34

    1       1

    Complete and well spoken. Thank you.

  • JC

    Joseph C.

    19 2 2018 21:57

    0       0

    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 2 2018 22:29

      5       0
      St. Louis Fed also gives a lot of good data - as does several of the others.

    • PP

      Patrick P.

      20 2 2018 01:56

      6       0
      Blue box that says Downloads it on for charts

  • MM

    Mattias M.

    19 2 2018 20:56

    0       0

    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.

  • GG

    George G.

    19 2 2018 19:55

    8       9

    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 2 2018 22:01

      0       1

      wonderfully said

    • DS

      David S.

      20 2 2018 20:59

      3       0

      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 2 2018 10:44

      2       0

      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 3 2018 02:34

      0       0

      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.

  • NG

    Nitin G.

    19 2 2018 19:18

    5       0

    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 2 2018 18:21

    1       0

    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.

  • dj

    daniel j.

    19 2 2018 16:09

    1       0

    Wonderful. Totally agree

  • RT

    Rune T.

    19 2 2018 16:08

    2       0

    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 2 2018 18:48

      4       0

      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 2 2018 22:16

      0       0

      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 2 2018 22:37

      0       0

      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.

  • fd

    frank d.

    19 2 2018 13:26

    0       4

    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 2 2018 17:20

      6       0

      no, he did not. he said "folks" a few times, perhaps that's what you heard.

  • TJ

    Terry J.

    19 2 2018 13:22

    3       0

    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 2 2018 13:22

    4       1

    very good

  • rm

    russell m.

    19 2 2018 12:07

    13       5

    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 2 2018 05:58

      3       0

      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 2 2018 21:12

      2       0

      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