Some old adages for investing go that ‘nothing goes up in a straight-line’, that ‘you don’t want to be the last one standing when the music stops’ and that ‘bulls and bears make money but pigs get slaughtered’!
Investors in real estate and mortgages learned this lesson the hard way heading into, and then following, the financial crisis from about 10-years ago.
Some are still paying the price while others have capitalized from the pain and made money in markets that tended to over-correct to the downside and have since recovered. Las Vegas and Miami are but two examples and such are tales that markets tell!
New York City Taxi Medallion Market
Peaking at $1.3 million in 2013 as hedge funds got involved, industry disruptors Uber and Lyft have decimated the market for New York City taxi medallions with a recent trade occurring at $241,000.
Like mortgage companies before them that witnessed their collateral for loans decline to a point where, in many cases, the property was worth far less than the outstanding loan balance, so too have lenders that use taxi medallions as collateral for loans!
Using Medallion Financial Corp. (TAXI) as a proxy for the medallion financing industry, it’s little wonder that the stock price has plummeted to about $2.00/share from a November 2013 peak of $17.75.
In fact, April 2015 when TAXI was still trading above $10/share, an article here posited, ‘Because Of Uber, Are Taxi Medallion Lenders A Shorting Opportunity?‘.
‘In other words is the competition from Uber decreasing the demand for taxi medallions causing the price of the medallions to drop thereby damaging the collateral of taxi medallion lenders?
In a word…yes!‘
So the lesson to be learned?
Whether real estate, mortgages, taxi medallions or any other investment, particularly in this age of technological disruptors and outside factors beyond our control contributing to price movement, diligence before and close monitoring of investments after they’ve been made becomes that much more critical!
- Who is your underwriter?
- What is the claims experience of your title insurance provider?
- Do you know whether the non-title insurance premium fees you are paying are fair and reasonable?