Saturday, November 29, 2014

"Under Pressure From Uber, Taxi Medallion Prices are Plummeting"

NYT article on taxi medallion prices falling because of Uber competition:

In Chicago, for example, there have been only 11 medallion sales since July 1, compared with 147 during the same period last year. Just because somebody sold a medallion for $300,000 doesn’t mean it will be consistently possible to sell at that price into a thin market.
“Those are fake prices,” said Mohammad Kamran, a medallion broker in Chicago, who blames UberX. “The price has plunged big time, and there are no buyers or sellers because the lenders are not lending money.”
Mr. Kamran said owners are increasingly unable to charge Chicago’s maximum weekly lease rate for medallion taxis, which is around $780, including taxes and insurance, for a late-model Toyota Prius. Drivers have been bargaining that rate down to $700 or $725, he says; others are defecting to services like Uber.
From a correspondent who is short TAXI
"Credit, Capacity and Collateral. What do you have when the collateral value starts to drop? A $1MM loan on an asset with a declining yield owned by a guy six months off the boat from Karachi. Good luck with that."

10 comments:

Unknown said...

TAXI was written up on VIC as a long in 2012. As with the MUSA writeup, the author all but admitted it's a bad investment. A couple choice quotes:

Although taxicab medallions have appreciated in value over time, they are difficult justify as an income investment to new investors and non-industry participants. The argument for a medallion investment revolves around the regulated supply and recession-proof taxi-fare industry dynamics..."

"The majority of [medallion] buyers are taxi insiders from Long Island who are using past investments and ownership as equity to finance additional medallion purchases."


This could get ugly quick.

Unknown said...

The most interesting part of the NYT article is its description of how much medallion prices have risen in the past decade.

In November, Chicago medallion sale prices averaged $298,000, well below the $357,000 price that was typical this spring, but far up from the $50,000 price of a decade ago.

Not long ago, with demand for taxis rising and the supply fixed, medallions soared in value: A medallion that could be bought for $250,000 in New York a decade ago (or about $315,000 in inflation-adjusted dollars) was worth over $1 million last year.

A 40% LTV sounds really conservative until you realize the collateral is >70-80% overvalued.

Stagflationary Mark said...

I proposed a crisis solution based on taxi medallions. I don't know why I couldn't get anyone to take it seriously though, lol. Sigh.

January 22, 2011
Crisis Solution: Tenderloin Medallions

If it works for the taxi industry, then why can't we just apply it to the beef industry?

CP said...

James, that is a great point about VIC ideas. That's something we've talked about a little bit before.

http://www.creditbubblestocks.com/2014/05/review-of-cooked-natural-history-of.html

Especially:

"Low-quality stocks have had an incredible 14-year run, and I think that's trained people to underestimate the risks inherent to emerging markets, low-P/E cyclicals, turnarounds, etc. A lot of VICers mistakenly think they're buying value when they're really betting on low-quality outperformance."

CP said...

Also talked about the "VIC problem" here and here:

http://www.creditbubblestocks.com/2013/08/what-time-is-it.html

http://www.creditbubblestocks.com/2014/09/young-money-why-value-investing-in-tech.html

CP said...

James, do you subscribe to VIC? I'd like to get someone to archive and send me the MCP thread and maybe some others.

CP said...

Look at the chart of Taxi:

http://stockcharts.com/h-sc/ui?s=TAXI&p=D&yr=3&mn=0&dy=0&id=p25916544598

Longer term:

http://www.barchart.com/chart.php?sym=TAXI&t=BAR&size=M&v=1&g=1&p=MO&d=X&qb=1&style=technical&template=

CP said...

Who is the "Mario Cuomo" who's a director of TAXI??:

http://finance.yahoo.com/q/ir?s=TAXI+Insider+Roster

Stagflationary Mark said...

CP,

Who is the "Mario Cuomo" who's a director of TAXI??:

From my earlier link above:

Former New York governor Mario Cuomo, who sits on Medallion Financial's board of directors...

Unknown said...

James, do you subscribe to VIC? I'd like to get someone to archive and send me the MCP thread and maybe some others.

I'm just a guest at VIC, so a lot of the site isn't visible. In the MCP writeup, 2/3rds of the comments are members-only. The visible ones mostly make fun of a high school kid who wrote the stock up on Seeking Alpha.