John Hempton eyes one tiny spec of good news in the Fed's Beige Book:
...the used car business is holding up surprisingly well. This was mentioned in the Federal Reserve’s Beige Book – but also in the Manheim index of used car prices at auction. This index spiked up last month!
The biggest single determinant of losses in a subprime auto finance book is not loss rate – it is severity – the loss after the car is auctioned. I am not about to buy non distressed auto securitisations or anything – but if you want to play in the distressed stuff this is clearly good news.
Hopefully, this is good news for companies like Nicholas Financial (NASDAQ:NICK). That stock got knocked around hard last week. On successive days, the shares ranged from $1.80 to $2.71.