Bubblicious used car prices rising faster than bitcoin, Jim Bianco warns
Your car may be more valuable than what’s in your portfolio.
Used auto prices are rising faster than bitcoin and other assets, according to market researcher Jim Bianco.
“If you want to know what the best investment you probably had in 2021, it’s that car sitting in your driveway or in that garage,” the Bianco Research President told CNBC’s “Trading Nation” on Thursday. “It is appreciating faster than the stock market and lately faster than some cryptocurrencies.”
He’s building his analysis based on the Manheim index of used car prices, which is designed to track pricing trends in the market.
“In the last four months, they’ve gone up in price more than 20%. Not only is that more than the S&P, but over the last four months that’s more than bitcoin itself,” he said. “As of December 15, the latest set of data we’ve got, they’re just accelerating higher and higher right now. There’s no peak at least as of now.”
Bitcoin is up about 5% over the past four months based on Thursday’s stock market close. The S&P 500 is up 26% so far this year.
Bianco cites two bullish drivers in the used car market. The first is those getting priced out of new cars due to the semiconductor shortage.
Kelley Blue Book reports auto prices are at record highs. In November, the average price for a new car cost $46,320 and used ones hit $27,569, a 27% increase than the same time last year.
The second: Speculators who want to flip vehicles.
“What we’re seeing in used cars is a rush for people to buy them, and a rush for people to speculate on them,” he noted. “Buy it now because it’s only going to get more expensive.”
‘Tell-tale signs of a bubble’
It’s clearly not your parents’ auto market.
“It has all the tell-tale signs of a bubble,” he said. “Used car prices are supposed to be a depreciating asset. They’re not supposed to go up in price. Yet, this year they’ve gone up in price 49%, call it 50%.”
Bianco suggests auto price sticker shock reflects a bigger problem.
“This is exactly what they [Federal Reserve] don’t want to see happen because this is that self-reinforcing idea about inflation,” he noted.
Last December on “Trading Nation,” Bianco warned 2021 may mark the first inflation comeback in a generation.
He believes inflation will decrease in 2022, but its descent will be a lot slower than most people think. As for a peak in auto prices, Bianco suggests it’s anyone’s guess.
“This could go on for another year. It could go on for two more weeks,” Bianco said. “The activity that you’re seeing is probably bubblicious.”
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