bertram43

CACC: An Ideal Play on the Consumer, Auto, and Credit Markets

Jackson you missed this one. In theory your commentary makes sense. However if you understood their business model your thesis collapses. First they are a collection company and run a collection model (hence the accounting treatment) as opposed to AmeriCredit or other subprime lenders who are finance companies in the truest sense of the word. The housing crisis has little if no impact on their customer base---they never owned a home. Last and most important if you track the securitization data on all subprime lending companies published by S & P the securitization structures are holding up very well even though delinquencies are rising. The rating agencies and mono-line insurers did not get out ahead of them self in the auto space as they did in the other structured products. As to Wachovia you should understand the structure (credit enhancement levels) of the transaction before you start shooting self serving bullets. The structured auto finance team at Wachovia is incredibly conservative and they structured this transaction in the eye of the storm. My bet would be they got it right.