By Tyler Durden
For months we’ve been warning that soaring auto sales represent nothing more than the latest bubble created courtesy of low interest rates, deteriorating lending standards in the form of stretched maturities and weaker credit profiles, and an insatiable demand for auto securitizations from yield-thirsty pension funds which wall street is happily trying to meet (see here, here and here).
Of course, with subprime auto ABS issuance soaring past 2006 levels last year…
…and total outstanding auto loans up 34% over the previous peak set back in 2005, it’s not that difficult to understand our concern.
Meanwhile, as Craig Kennison of Baird’s Consumer Leisure Group points out, the “Deplorable Economy” (i.e. demand for big-ticket discretionary goods like RV’s, boats and 4-wheelers) may also be getting “ahead of itself” despite the expectation of lower taxes rates from the Trump administration.
We like ideas exposed to the deplorable economy, but our powersports checks suggest the Trump-trade may be ahead of itself. Early 2017 could repeat the trading action in early 2016, when many stocks bottomed only after management teams reset expectation. Look for a post-Christmas sale on deplorable ideas like Polaris. We also would look for discounts in the marine space, …read more