
'We Were Wiped Out’: New Yorkers Preyed on Chicago Cabbies - pseudolus
https://www.nytimes.com/2019/10/04/nyregion/taxi-medallions-chicago.html
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bpatel576
What I don't understand, is why someone would be willing to buy 15 medallions
at an "inflated price." My point being, you should have some basis on the PV
of cashflows you can generate with each medallion. It doesn't seem like an
extremely complicated financial problem in my eyes. At some point, you're
cutting into any investment return you receive through cash flow and you're
now expecting your returns to be generated through the appreciation of the
medallion. That's probably where I would stop and think, I don't need to buy
15 of these things.

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rolltiide
The people that borrowed to get them were greedy speculators too, and they
just aren't talking about it.

They just forgot that “when your taxi driver is talking about investing, its
time to sell” and they were the literal taxi drivers in the adage.

The blunt reason is because they are the bottom/edge of society’s universe of
investors, so there is nobody else to sell an asset to at a higher price.

The same result would have happened eventually, the arrival of Uber & Lyft
exacerbated the outcome much faster.

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darawk
The NYT is such garbage these days. Some speculators lost money to other
speculators. That's how speculation works. Nobody is being 'preyed' upon. This
article is unbelievably disingenuous.

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matdehaast
I keep seeing this statement but not sure what other sources to consume. What
is a good alternative?

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nradov
The Wall Street Journal is generally more accurate and even handed on business
and finance stories. Although they do have some bias on other topics.

~~~
NotSammyHagar
Wsj opinion is irrational crazy town. The news side has managed to be
impartial.

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bko
This article is baffling. It's full of very loaded language (e.g. prey, seized
control, squeezed, etc). And the evidence and explanations they provide is
even more baffling and contradictory.

> Some adopted an especially aggressive approach, according to documents and
> interviews. First, they purchased medallions at bargain rates and
> established big fleets of cabs. Then, they pumped up medallion prices.
> Finally, they sold their medallions to their drivers and to rival fleet
> operators just before the collapse.

Take each claim one by one:

> First, they purchased medallions at bargain rates

How did they get them at bargain rates?

> Then, they pumped up medallion prices.

Again, how? Did they somehow drive the population increase in NYC?

> Finally, they sold their medallions to their drivers and to rival fleet
> operators just before the collapse.

Did they sell the medallions or finance them to drivers, because earlier in
the article it says:

> They inflated medallion prices, provided high-risk loans to buyers and
> collected interest and fees before the bubbles burst and the markets
> collapsed.

If they financed them, the drivers defaulted and the collateral was worth a
lot less than originally valued at.

The whole article is a weird hodge-podge mess of trying to find victimizers
and victims. People who bought medallions between certain years are
victimizers but those that bought them after the peak are victims and New
Yorkers (?) in Chicago are especially bad.

~~~
exhilaration
The article does explain how they inflated the prices, they sold them to each
other at increasingly higher prices, which kept bumping up the recorded last
sale price. At the risk of violating HN rules, I have to say that you didn't
read the article.

~~~
bko
I doubt that would make sense financially. Prior to 2017, there was a 5%
transfer tax on medallion sales [0]. I believe they would also have to pay
either a capital gains tax or treat the gains from the sale as income. It
would be a very expensive strategy to get a paper uptick in the last recorded
sale price that you may or may not benefit from. And there are all sorts of
other regulations that manipulate the market and distort sales. For instance
prior to 2017 owners of single medallions were limited to selling to someone
who doesn’t already own one [0]. The sales from one member to another could
have just been a family business arrangement where one group of individuals
brings in another business partner.

Instead of some bizarre conspiracy theory about unnamed group of individuals
that can manipulate prices, lure just the right speculators at the very peak
and move on, why can't it just be that there are some speculators that did
well and others that entered too late and lost out? Why does everything have
to be viewed as a victim/victimizer paradigm?

[0] [https://www.cbsnews.com/news/how-much-is-a-nyc-taxi-
medallio...](https://www.cbsnews.com/news/how-much-is-a-nyc-taxi-medallion-
worth-these-days/)

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DennisP
Artificially limiting the supply of taxis seems like a silly thing to do in
the first place. It's not surprising that it didn't work out well.

~~~
Wowfunhappy
Well, I can think of at least one good reason for a medallion system: it helps
limit the number of cars on the road. (Let's ignore Uber and Lyft—they are
taxis and _should_ need medallions, but we're not enforcing the law properly.)

Of course, it would help a great deal if the medallion system were combined
with limits on private vehicles...

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lotsofpulp
It’s a terrible way to limit the number of cars. A variable toll would be a
much better way of limiting the number of vehicles.

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ineedasername
I hate the idea of "congestion pricing" tolls. Bridges & tunnels into NYC run
$15. $300/month for daily commuters. I'm sure that's manageable for some
commuters, but poorer folks are disproportionately impacted and it
significantly raised bus fair as well: About $260/month for most routes that
are only 10-15 miles outside of NYC. I think better mass transit options are a
better option to reduce congestion, and therefore the need for congestion
pricing.

~~~
admax88q
Congestion taxes/fees incentivize taking public transit options. I don't think
anyone arguing for congestion tax is along arguing against mass transit, the
two go hand in hand.

~~~
ineedasername
I haven't seen either a decrease in congestion or an increase in mass transit
infrastructure spending in NYC as a result of congestion pricing. And
congestion pricing applies to busses as well, increasing mass transit cost. So
commuting to NYC by car costs about $300 a month, but busses are still about
$240 a month. Really not enough to strongly incentives mass transit.

Maybe what it boils down to for me is that congestion pricing, in theory, may
be a valid option. But in its implementation it accomplishes very little
except increasing bloated budgets for organizations that focus too little on
their actual mission.

~~~
lotsofpulp
Exactly, make the car cost $3,000 and you’ll start seeing some changes.

~~~
ineedasername
That's probably true, but then there needs to be a rapid coinciding ramp up of
public transport like doubling or tripling the fleet of busses. Which could
work! And it would have the added benefit of ever so incrementally reducing
emissions from vehicles.

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jshaqaw
I used to follow the primary public company in this space - MFIN - fairly
closely. This article seems off base and to disclose I have zero investments
in the area. The issue here is that when taxi fleets were a regulatory
rationed monopoly then the medallions were worth a lot. When tech disrupted
hail cabs that collapsed. There really isn’t a private sector “villain” to pin
blame on for this. And yes for many years the big owners of medallion fleets
had excess influence over the regulators due to classic influence wielding.
That blew up when residents of places like NY were vocal that they like Uber-
Lyft versus the old system.

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rconti
This article, as well as many others about the industry, have pointed out that
the collapse was not due to so-called "ride sharing" companies. I think one
analysis said that was less than 50% of what caused the crash. This article,
and others, state that the crash would have happened _regardless_. One of the
pieces of evidence is the massive runup of medallion values. It was a classic
bubble that was not supported by fundamentals.

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ineedasername
It seems like some intermingled flavors of market manipulation and cartel-like
monopoly mixed with a pump-&-dump scam.

