The Used-Car Loan Bubble

The stock market is down this morning but in the present age of low volatility, it’s not by much. The S&P 500 is currently holding at 1,972.76. This is a very big week for Buy List earnings. No reports are due today, but a total of seven stocks will report this week. Monday is usually a light day for earnings reports.

It’s still early, but 76% of the companies in the S&P 500 that have reported so far have topped earnings estimates; 68% have beaten on sales. Analysts expect to see an overall earnings increase of 6.2% and a sales increase of 3.3%.

Yesterday, the New York Times had an article on the subprime bubble for used car loans. (“In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates”). I thought this was interesting because we had invested in used car loans years ago with Nicholas Financial (NICK). The difference is that when we got into NICK, no one was interested in this business, so it’s a shock to hear that it’s now officially “a bubble.” The article focuses on the sleazy tactics in the industry and the usual complaints about securitization, which NICK doesn’t do. We left NICK this year, and I’m glad we did, but it’s nice being well ahead of the crowd.

Posted by on July 21st, 2014 at 10:13 am


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