You have likely noticed that some of the subject matter that we like to try to understand and potentially reflect in our investment portfolio includes what we would call outlier data.

This includes data that when one looks at it leads to the natural question, “Does that make sense?” The graph below depicts something that we have all witnessed anecdotally. Where has the “right of passage” car gone – the $2,000 18 year old “beater” that every high school student used to aspire to?

Part of that story can be told in the St. Louis Federal Reserve Bank’s (FRED) graph of Motor Vehicle Loans Owned and Securitized, Outstanding. In the last 20 years these loans outstanding have increased 219%. So one answer to, Where Did All the Jalopies Go?, would be increased access to low cost auto loans allowed us to buy newer more expensive cars.

This may ultimately mean nothing to the economy as most people have to have cars to lead their lives. However, per The Federal Reserve Bank of New York , at the end of the second quarter of 2017 delinquency rates on auto loans amounted to 3.9%. That compares to delinquency rates on student loans at 11.2% on similar aggregate amounts of loans outstanding.

Generally speaking, when we see a large amount of debt added to a given economic ecosystem, we do not trust that the end result will turn out well.