"But then weird things started to happen. Hertz’s stock, which is literally worthless, starts to go up. And up. And up. It gets bid up a whole 500% over a 3-day period last week. What is going on?"
This phenomenon is not unique to the recent RobinHood millennials with extra cash and extra money who are bored. There is a tone of condescension against an entire generation of millennials painting them uniquely as jack-asses (the author even uses Jackass to make the point).
Here are some facts.
If a stock like HTZ plummets from $20 to 50 cents in a matter of days, the volatility is so great that when the stock spends a few days at the bottom, a few cents up can be seen as strange. Except it's not. Very few people have the intution to appreciate that percentage returns are a function of the price. If a stock gets hit by 90%, it requires 10 times its value to recover the loss. That is 1000 percent!
This has happened since the earliest days of stock trading. Here is an example with Enron:
Don't look at the price action; that on its own is not surprising. Shares in near-bankrupt companies trade like options (because they are options - on the potential of recovery), with extreme volatility one would normally see in individual options contracts. The same way as bonds in near-bankrupt companies trade like stocks, largely ignoring remaining maturity, because very likely bonds will soon become stocks (wiping out the previous equity).
Look at the facts. Nobody has done this before:
> Jared Ellias, a law professor at the University of California Hastings College of Law, said he has studied hundreds of bankruptcies and never seen a company try to fund a case with an equity offering at the start of chapter 11.
> “Hertz looks at the market and sees there is a group of irrational traders who are buying the stock, and the response to that is to seek to sell stock to these people in hopes of raising some amounts of money to fund their restructuring,” Mr. Elias said.
> “It is incredibly creative and they get props for that, but I wouldn’t buy those shares,” said Nancy Rapoport, a professor at UNLV’s William S. Boyd School of Law, who said she has never seen a bankruptcy funded this way. “I guess they’re trying to catch whatever the opposite of a falling knife is.”
> There is a tone of condescension against an entire generation of millennials painting them uniquely as jack-asses
This is not unique to millennials. Go back to every retail-participated bubble and you will find this condescension (and deservedly so imo). The stories of strippers in Vegas buying multiple McMansions in 2006 come to mind.
You points about relative return measures (ROI) having large base effect issues miss the point of what's going on: it's not the magnitude of the swings which are notable, but rather the circumstances around which they're occurring.
Enron was a massively complex business, and the true value of its assets was thus a massively complex question. HTZ does not enjoy this same conundrum. Other financially impaired but high name recognition names have had similar behavior (AAL, DAL, to name a few). Robinhood have lowered the bar to trading, that children are now "playing" the markets when they get bored of Minecraft and Fortnite (this is not hyperbole). And then you have one strata above who are likely the real problem and have been active in every bubble in recent memory. Financially unsophisticated adults have indoctrinated with "buy-and-hold" from the likes of Warren Buffett without understanding the edge cases likes bankruptcies (incidentally, Buffett sold all his airlines holdings which are now a retail favorite).
Simply put: people don't understand what they're doing and that's what makes this so amazing. They think "people aren't going to stop renting cars" or "people aren't going to stop flying" and so they buy the stock, cocksure that over the long-run they will be rewarded. The future outcomes of HTZ common shares is pretty certain, and not at all consistent with current retail behaviors.
Stock price changes should be reported on a logarithmic scale, something like a decibel, perhaps finer, a centibel, cB. You go down 90%, that’s 10x less, -100 cB. You go up 900%, that’s 10x more, +100 cB. A 5% decrease is 1.0526x less, -2.2 cB, a 5% increase is 1.05x more, +2.1 cB.
The fact that 5% is roughly 2 cB is because you need 100/2 = 50 of 5% increases (decreases) to give you roughly a 10x increase (decrease)
Uber / Lyft / Snap were never cash flow positive, and don't have any clear way of reaching that, while User is burning 2 billions a quarter and has only two more quarters to go bust.
There are tons of VC unicorns which are burning investors money on unsustainable business models, like food delivery apps that subsidize your orders. WeWork has no chance of avoiding bankrupcy.
The irrational exuberence has been here for quite some time already, and out of everything, a bankrupt company which at least used to have a working business model and existed for 100 years is not nearly the most insane investments going on here.
(The insanity is buying it before the bankruptcy restructuring, tho).
Agreed. The thing that seems especially bonkers to me is that the theory of Uber is that you could turn a low-margin business into a high-margin business by a) shifting most of your risk (opex, capex, labor costs) to low wage workers too desperate to negotiate a fair deal, and b) spending massively to get Google-ish monopoly pricing over a key activity.
Point A is looking more and more false. Uber took on a lot of costs; instead of running a very lean operation, they spent like a tech company. They're having a hard time weathering this downturn. Governments are catching up to them on their labor-isn't-labor regulatory arbitrage, and I expect that come 2021, they'll see national-scale questions about their worker exploitation.
Point B is looking even worse. Once they failed to kill Lyft, extracting monopoly rents went out the window. And now a bunch of well-funded organizations with strong brands are coming after their business with autonomous cars. It won't be easy competing with Google on software. It won't be easy competing with GM on cars. And plenty of companies have brands compatible with becoming a preferred transportation provider. E.g., imagine BMW's autonomous car service. Or even worse from Uber's perspective, Costco. That's something like a quarter of American households.
It's perfectly plausible to me that Uber will never hit breakeven in terms of total profit exceeding total investment. By 2040, they could be in the same bucket as Groupon: an early darling that still exists but people barely remember.
This is silly. Snap's free cash flow is constantly growing and was close to zero the past quarter. Uber & Lyft are generally profitable on rides and with a bit more scale will be GAAP profitable.
Side topic: the rental car industry is a dinosaur walking. Just like Netflix and video-on-demand put Blockbuster out of business, Uber and rideshare companies are slowly putting the kabosh on rental car business.
I can't remember the last time I really needed to rent a car. Maybe for the random site-seeing roadtrip. But vacationers aren't rental company's bread and butter: it's business travelers. And business travelers are seeing much more convenience from rideshare than from rentals. The hassle of renting a car, parking, tolls, gas, dealing with insurance and liability, and just the shenanigans of rental car companies is not worth the hassle.
It took a solid decade before the impact of video on demand was felt on Blockbuster, but it was inevitable.
Just how COVID is bringing the water out of shore on the low tide, all it is doing is exposing already weak companies. Those that fail can't simply blame COVID, altho it's certainly a contributor. For some, the writing was already on the wall.
In 10 years we'll be writing the post-mortem on the rental car industry.
Prior to COVID, I was solid consumer of business rentals.
Rideshare is good for getting to the airport and back, but if I'm spending a few days at the destination (which in my case is usually suburban), a rental car can be both cheaper and more convenient than rideshare in smaller, underserved markets and in the suburbs. Also if you're making multiple stops of indefinite length, catching rideshare each time can be frustrating. Rideshares also have a limited radius while rentals don't. If you need to drive 2-3 hours from the airport to your destination, it's easy on a rental but not really advisable on a rideshare (possible but rideshare drivers hate it).
I wonder if the problem with car rentals maybe isn't the business model, but how modern the operations are.
I'm with National so I get to pick my own car. National has really nice cars so sometimes I end up with nice rides like Audi A3s for the price of a midsize (~$30/day -- I have free executive membership through my credit card). It's really not that much of a hassle with the app -- get off plane, walk to lot, pick a nice car, drive off. Driver's license, credit card + insurance etc. are all electronic. No dealing with any CSR. Only human interaction is at the exit where they check your DL (or QR code on your phone), scan your car's barcode and then open the barrier arm. My avg time to check-out is ~10 minutes, and returns are ~5 mins (excluding gas fill-up). This is with National.
The Hertz experience is much more plodding. Their systems are a little more archaic. You have to check in at the counter if you don't have Hertz Gold, and you can't pick your own car. They're more expensive than other rental companies but their vehicles definitely are not nicer. Hertz has the largest market share but the worst customer experience of the majors.
How are you vacationing without a rental car on a tropical island, like Hawaii? Uber/Lyft might be workable on Oahu, but on any other Hawaii islands rental car is a necessity unless you just stay in your resort all day long.
Or any of the national parks that's far enough you can't drive your own car all the way from your home? After you finished your activities for the days and are ready to go back to your hotel, you might not even have phone signal to call Uber/Lyft in the national park.
I guess you and me just have very different definitions to "vacation".
It will not disappear. If you don't own a car, renting is interesting. In my city we have a few car sharing solutions. My favorite one is non-profit and provide electric jaguars, vans, and family cars. Another one is owned by the state and provides eletric Renault everywhere in the city.
They are very great solution in my opinion and it doesn't have the issues of classic car rentals. It takes seconds to rent one through an app and you don't need to see any human.
Or with self-driving cars the rental industry will become the next uber since they won't need a driver. Everyone would just lease a "car privilege" from a rental company which (or others) would be picking you up whenever you need it following your patterns a fleet of cars will be shared among more people. This would reduce pollution, waste and traffic in large cities.
I disagree, but for personal reasons which I don't know how widespread they apply:
1) I travel frequently, for instance to the SV area which provides a good example. I opt to rent a car 95% of the time for my (US) trips, and the reason is that I prefer to move freely. When you're on the whim of an Uber (and in the States you usually can't walk anywhere), it's psychologically unpleasant having to rely on someone to constantly pick you up from somewhere. So much more liberating to have a car parked and move when you please.
2) When you end up moving, you can joyride, which I often do.
Maybe someone needs to do to rental cars what Uber did to Taxis.
If I could order one on my phone, have it be ready or turn up, and avoid all of that complexity over insurances and tolls then I would probably sell my own car and use that.
I’m sure the rental companies have some digital stuff, but I generally associate rental cars with queuing at an Avis counter for an hour after a long flight, lots of paperwork and getting hit with fees etc. For exactly this reason I tend to stick with Uber on business trips over rental cars.
The one use case that's missing in Uber &c are long-distance (conditionally: one-direction) road trips. My family preferred driving to flying if the destination was only a couple of states away (Chicago, music camps, college, ...) and we didn't want to put miles on our car.
With Hertz & friends, easy to rent a van, take it some where and either leave it there (and fly home) or drive back. It'd probably be a wash when milage depreciation is thrown in?
And driving with a cello is a lot better than flying... :-)
I don't know about that. I live in Alpharetta that is an hour commute from Heartsfield Jackson International airport in Atlanta. In the last year, I had three business trips to the Bay Area - where I flew and took Lyft and Caltrain/Bart. However,I had two business trips that were a 5 hour drive away and in both cases I rented a car with Enterprise in Alpharetta and had them pick me up and drove the entire trip. I had a business trip to Denver and after evaluating ride share vs renting Hertz I took the rental and drove and parked at the hotel near the conference center. It was cheaper to rent than deal with the vagaries of ride share with a long drive from Denver International Airport to the University of Denver and if I would be picked up at 4 AM for my red eye back home the next day.
As someone over 25, renting a car is dead easy and seems to be cheaper than multiple ride shares. When I had business trips in smaller southeast cities, renting a car and actually driving the entire trip was more convenient than air travel because I got to listen to podcasts the whole way instead of dealing with the airport and still needing local transport when I got there.
I think you live in cities and look at everything from those lenses. Car rental is still thriving for business travels. Hertz actually served business customers more than Budget etc. When you go to places like Bay Area, Hawaii, Pudget Sound etc car rental is many time unavoidable. I don’t think Hertz went bankrupt because of ride share as OP suggests. There was another article which states how activist investors took over and loaded it up with debt transferring their assets.
No way. Insurance and hassle are always cheaper than paying labor. My employer can bid down rental cars to $40/day or less, which is less than almost any meaningful Uber round trip. Even for a individual like me, I can get Nissan Altima or whatever for $70-80 in most places.
You also have improved safety and security for employees vs John Doe and his 2010 Odyessy Uber that is falling apart. Uber is a shitshow experience compared to what it used to be.
If you're ditching your car and trying to be more environmentally friendly then car rentals makes sense - have for us in the past at least. Car rental is cheaper for 2 or more people than taking the train; so rental is really useful for longer journeys (and you don't have to do taxi/bus transfers from the train station).
Business demand for rental vehicles doesn't seem to be falling?
You may be right, but only if Uber, Lyft and whatever competitors arise in the coming years actually turn a profit. There is a vast differences between an industry changing due to new business models vs. VC capital footing the bill for the change without solid, profitable transactions at its core.
The ride-sharing model is on the cusp of proving a sustainable business, but they aren't there yet.
Last time I rented a car it was because the hotel and airport were on opposite sides of a big city. Renting a car for 3 days was cheaper than two 40-mile Uber/Lyft trips.
Because airports are often located on the edge of a city, this is a pretty common situation. Convenience matters, but so does cost, so I expect rental car companies will continue to get this sort of business.
The problem with rentals is the rental companies are ing lowlife thieves. The last three times I've rented a car on holiday (Europe) I've been absolutely shafted and by three different companies (EuropCar, Hertz, and a local company).
I read WSB daily for the laughs, but that place is very dangerous for traders as the group think over there is usually very intense and also very wrong. It will warp your view of the market, so you have to approach it as a place for memes and humor only. If I have a trade idea, I usually like to make sure that it's something that most of WSB would disagree with, and those trades almost always work out.
BTW, I had no idea Shkreli was a member. That's really hilarious, and really fitting. I wonder how much of his money he made on options (if any at all).
You might think the smart thing to do is to short the stock, but then the five feet man that tried to cross the four feet river on average yada yada margin call problem.
However, there is exactly one entity that can sell short HTZ without ever being margin called. And it is, amazingly, the same entity that can (and almost certainly will) delete the shares. Yes, the company itself, a debtor-in-possession that since the Ch11 filing has officially zero duty to the shareholders and is supposed to maximize the value to the creditors.
The Big Short for the March'20 trading mania.
While we're here, can we get TSLA to $4000 just like Cathie Wood has predicted? And maybe a second IPO attempt of WeWork? I want a few more cherries on the top and then the re-pricing of risk and the beginning of the recovery.
A meme floating around wsb is that the 1k handout is driving this behaviour, and at first I thought that was kind of ridiculous but actually, it makes some sense:
On one side you have people who are bored and have nothing to lose, the handout was free money, nothing to spend the money on and no entertainment.
On the other side you have people who are desperate for a ticket out of their current situation.
Catalysing this is the low barrier of activation provided by Robinhood and the likes...
>... But you know what kind of public companies have zero earnings for years at a time, and where future earnings are so far away that it’s already understood by everyone to be a day-to-day game of chicken, just like this? Biotech companies. And you know what kind of companies are going to be really interesting in the aftermath of Covid? Biotech companies.
Sounds sorta like Amazon. It's one giant game of expanding P/E multiple. The bulls say tell me what I'm missing is that Amazon could turn on earnings like flipping a switch. They just don't want to. It's more efficient if AMZN holds on to the money. My response is that it's always been that way with this company. Same story in 1999.
Also sounds sorta like Microsoft. Sounds definitely like Tesla. Sounds, in fact, like way too many companies.
There's a bubble here of biblical proportions. The Fed has suspended the inevitable in the name of economic survival. But the signs were everywhere pre-COVID. Now, no severe decline in stocks will be tolerated. It's Powell Puts as far as the eye can see. The returns will be jaw-dropping. The valuations will be lunar.
Still, it would be a terrible thing to be riding in this particular shopping cart when it smacks into the wall.
Reading this made me laugh so hard the tears started to flow. Post Modernism / Post Reality life imitating art. Funniest thing I have read this week.
I just hope that "real" people don't get hurt from this (obviously plenty of people have lost or are about to lose their jobs at Hertz which truly sucks), cashed up get rich quick day trading fools on reddit losing money is one thing, some scammed unsuspecting retiree losing their shirt is another.
All in all it is Jackass humour meets reddit meets online trading. The world is a strange place.
Have you guys come across Dave Portnoy @stoolpresidente on Twitter. This guy embodies everything that is wrong with the retail/millennial/wsb crowd.
But remember that the markets are a beautiful thing. There are millions of inputs into the pricing function. If the price is wrong, then arbitrageurs will come in and bring it in line with where it "should be". There is nothing wrong with that.
Day trading does not appeal to me at all because it feels exactly like gambling, but I can see the appeal and I hear more of my friends talking about it. I can see the alure, but I do believe in the end the "Boglehead" strategy is the best long term low stress investment strategy (low expense mutual funds in tax advantaged accounts).
This type of situation with Hertz definitely feels like a unique combination of events (corona, gig economy, etc) but I won't be surprised if we have more and more weird stock situations occur as weird internet culture leaks into the real world...
> Hertz was in trouble anyway; it’s carrying around a ton of debt to pay for a fleet of cars that no one wants to drive, because we have Uber now.
Do people go on vacation and just Uber everywhere? The times I take an Uber are largely times I’d have taken a taxi, which is to say times I should not be driving.
I still however rent a car on vacation. I like the freedom to just be like “I wonder where that road ends up” and end up exploring 50 miles out of town.
The author has missed a few important points to paint a picture that ultimately misses reality.
First, Hertz isn't worthless because it has restructured. Even if hertz is ultimately wound up because its debts exceed its assets (something very very unlikely historically) its shares today are worth something because there is still the chance thelat may not happen (including the chance the company will be saved by a bailout)
Second, the traders he refers to are speculators. Speculators fulfill a role that is a well understood and widely agreed to be important for both liquidity and price discovery.
Third, if other people are bidding price up (or down), who cares? You're not a share holder in a "worthless" company, so let them run their casino in that little corner of the market and you can invest in the other 99.99%.
Ge should also Google what a "dead cat bounce" is to better understand crashed stocks' behavior...
One of the key why stocks of bankrupt companies like Hertz go up 500% in matter of days is so called “river of money”. Globally, there is massive amount of cash sloshing around through people’s retirement accounts which ends up at places like Robinhood, Blackrock etc. When you sign up for 401K, you are putting money in this river where these gamblers take a dip. The bottom line is that no one is playing with their own money and so gambling, short term profit jacking etc are full on. The principles of value investing, looking at future long term returns is all down the drain. Even the many big tech boards are almost exclusively run by investor suits looking to squeeze out money in short term and walk away. If the situation continues, I think stock market isn’t going to be viable channel for public investment in long run.
My understanding is that retail trading volume is several orders of magnitude too low to be responsible for swings in most stocks (such as airline stocks), and certainly not the market as a whole. Random low volume penny or bankrupt stocks are a whole different story and retail speculation certainly drives the price.
BTW I've been trying to buy a car from Hertz.com, and it's been pretty much impossible. Whenever I call they tell me weird things like "we lost the key for this car" or "we'll call you back". They never call back. They don't answer to my emails either. This is weird.
Can't see why they shouldn't be allowed to raise funds by selling stock. People are free to buy or not to buy, at their discretion. Govt/courts shouldn't be picking winners and they shouldn't be picking losers either.
Can I suggest that it should be legal to create a Pnozi scheme, as long as you are up front and absolutely clear that that is what you are doing.
It seems to me that situations like the current one with Hertz are really just Ponzi schemes played out with stocks.
If we could do this legally, I bet you there would be a lot of these, and the ones playing would know what they are in for. (And there would be less incentive to do it illegally).
If Dave Portnoy and Warren Buffet both started a pyramid, who could grow the larger one before bust? Would you buy?
This is not really surprising to me. When you have a prolonged zero interest rate policy, and “there is no alternative” then the only thing left to do if you want to make money on your money is gamble. To me the Robin Hood traders are not creating this phenomenon, rather they are just making it plainly visible as it goes mainstream.
I've seen this happen to a number of bankrupt companies, this just happens to be a big one. The expectation is that the stock go to zero, but somehow it bounces upwards. Happened with GM back in 2008-2009, happens to a lot of other stocks that are in bankruptcy. The stock becomes unmoored from the actual company and trades like a weird collectible.
[+] [-] ak39|5 years ago|reply
This phenomenon is not unique to the recent RobinHood millennials with extra cash and extra money who are bored. There is a tone of condescension against an entire generation of millennials painting them uniquely as jack-asses (the author even uses Jackass to make the point).
Here are some facts.
If a stock like HTZ plummets from $20 to 50 cents in a matter of days, the volatility is so great that when the stock spends a few days at the bottom, a few cents up can be seen as strange. Except it's not. Very few people have the intution to appreciate that percentage returns are a function of the price. If a stock gets hit by 90%, it requires 10 times its value to recover the loss. That is 1000 percent!
This has happened since the earliest days of stock trading. Here is an example with Enron:
https://famous-trials.com/images/ftrials/Enron/documents/enr...
Notice the daily returns from the 3rd of December 2001. So, really, what has been going on forever?
[+] [-] H8crilA|5 years ago|reply
Look at the facts. Nobody has done this before:
> Jared Ellias, a law professor at the University of California Hastings College of Law, said he has studied hundreds of bankruptcies and never seen a company try to fund a case with an equity offering at the start of chapter 11.
> “Hertz looks at the market and sees there is a group of irrational traders who are buying the stock, and the response to that is to seek to sell stock to these people in hopes of raising some amounts of money to fund their restructuring,” Mr. Elias said.
> “It is incredibly creative and they get props for that, but I wouldn’t buy those shares,” said Nancy Rapoport, a professor at UNLV’s William S. Boyd School of Law, who said she has never seen a bankruptcy funded this way. “I guess they’re trying to catch whatever the opposite of a falling knife is.”
[+] [-] qeternity|5 years ago|reply
This is not unique to millennials. Go back to every retail-participated bubble and you will find this condescension (and deservedly so imo). The stories of strippers in Vegas buying multiple McMansions in 2006 come to mind.
You points about relative return measures (ROI) having large base effect issues miss the point of what's going on: it's not the magnitude of the swings which are notable, but rather the circumstances around which they're occurring.
Enron was a massively complex business, and the true value of its assets was thus a massively complex question. HTZ does not enjoy this same conundrum. Other financially impaired but high name recognition names have had similar behavior (AAL, DAL, to name a few). Robinhood have lowered the bar to trading, that children are now "playing" the markets when they get bored of Minecraft and Fortnite (this is not hyperbole). And then you have one strata above who are likely the real problem and have been active in every bubble in recent memory. Financially unsophisticated adults have indoctrinated with "buy-and-hold" from the likes of Warren Buffett without understanding the edge cases likes bankruptcies (incidentally, Buffett sold all his airlines holdings which are now a retail favorite).
Simply put: people don't understand what they're doing and that's what makes this so amazing. They think "people aren't going to stop renting cars" or "people aren't going to stop flying" and so they buy the stock, cocksure that over the long-run they will be rewarded. The future outcomes of HTZ common shares is pretty certain, and not at all consistent with current retail behaviors.
[+] [-] jhrmnn|5 years ago|reply
The fact that 5% is roughly 2 cB is because you need 100/2 = 50 of 5% increases (decreases) to give you roughly a 10x increase (decrease)
[+] [-] chrisseaton|5 years ago|reply
Clearly wasn't literally worthless, then was it.
'I didn't think it'd go up' does not mean worthless.
You'd have made some money there if you had bought at the end of May! If you don't want your 'worthless' Hertz stock then you can gift it to me.
[+] [-] unknown|5 years ago|reply
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[+] [-] bronzeage|5 years ago|reply
There are tons of VC unicorns which are burning investors money on unsustainable business models, like food delivery apps that subsidize your orders. WeWork has no chance of avoiding bankrupcy.
The irrational exuberence has been here for quite some time already, and out of everything, a bankrupt company which at least used to have a working business model and existed for 100 years is not nearly the most insane investments going on here.
(The insanity is buying it before the bankruptcy restructuring, tho).
[+] [-] wpietri|5 years ago|reply
Point A is looking more and more false. Uber took on a lot of costs; instead of running a very lean operation, they spent like a tech company. They're having a hard time weathering this downturn. Governments are catching up to them on their labor-isn't-labor regulatory arbitrage, and I expect that come 2021, they'll see national-scale questions about their worker exploitation.
Point B is looking even worse. Once they failed to kill Lyft, extracting monopoly rents went out the window. And now a bunch of well-funded organizations with strong brands are coming after their business with autonomous cars. It won't be easy competing with Google on software. It won't be easy competing with GM on cars. And plenty of companies have brands compatible with becoming a preferred transportation provider. E.g., imagine BMW's autonomous car service. Or even worse from Uber's perspective, Costco. That's something like a quarter of American households.
It's perfectly plausible to me that Uber will never hit breakeven in terms of total profit exceeding total investment. By 2040, they could be in the same bucket as Groupon: an early darling that still exists but people barely remember.
[+] [-] theelfismike|5 years ago|reply
https://www.nytimes.com/2018/05/16/technology/moviepass-econ...
[+] [-] unknown|5 years ago|reply
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[+] [-] rreichman|5 years ago|reply
[+] [-] WA|5 years ago|reply
Hertz stock is just like the Bitcoin bubble: trying to find a greater fool.
[+] [-] rexreed|5 years ago|reply
I can't remember the last time I really needed to rent a car. Maybe for the random site-seeing roadtrip. But vacationers aren't rental company's bread and butter: it's business travelers. And business travelers are seeing much more convenience from rideshare than from rentals. The hassle of renting a car, parking, tolls, gas, dealing with insurance and liability, and just the shenanigans of rental car companies is not worth the hassle.
It took a solid decade before the impact of video on demand was felt on Blockbuster, but it was inevitable.
Just how COVID is bringing the water out of shore on the low tide, all it is doing is exposing already weak companies. Those that fail can't simply blame COVID, altho it's certainly a contributor. For some, the writing was already on the wall.
In 10 years we'll be writing the post-mortem on the rental car industry.
[+] [-] wenc|5 years ago|reply
Rideshare is good for getting to the airport and back, but if I'm spending a few days at the destination (which in my case is usually suburban), a rental car can be both cheaper and more convenient than rideshare in smaller, underserved markets and in the suburbs. Also if you're making multiple stops of indefinite length, catching rideshare each time can be frustrating. Rideshares also have a limited radius while rentals don't. If you need to drive 2-3 hours from the airport to your destination, it's easy on a rental but not really advisable on a rideshare (possible but rideshare drivers hate it).
I wonder if the problem with car rentals maybe isn't the business model, but how modern the operations are.
I'm with National so I get to pick my own car. National has really nice cars so sometimes I end up with nice rides like Audi A3s for the price of a midsize (~$30/day -- I have free executive membership through my credit card). It's really not that much of a hassle with the app -- get off plane, walk to lot, pick a nice car, drive off. Driver's license, credit card + insurance etc. are all electronic. No dealing with any CSR. Only human interaction is at the exit where they check your DL (or QR code on your phone), scan your car's barcode and then open the barrier arm. My avg time to check-out is ~10 minutes, and returns are ~5 mins (excluding gas fill-up). This is with National.
The Hertz experience is much more plodding. Their systems are a little more archaic. You have to check in at the counter if you don't have Hertz Gold, and you can't pick your own car. They're more expensive than other rental companies but their vehicles definitely are not nicer. Hertz has the largest market share but the worst customer experience of the majors.
[+] [-] fishywang|5 years ago|reply
Or any of the national parks that's far enough you can't drive your own car all the way from your home? After you finished your activities for the days and are ready to go back to your hotel, you might not even have phone signal to call Uber/Lyft in the national park.
I guess you and me just have very different definitions to "vacation".
[+] [-] speedgoose|5 years ago|reply
They are very great solution in my opinion and it doesn't have the issues of classic car rentals. It takes seconds to rent one through an app and you don't need to see any human.
[+] [-] kyriakos|5 years ago|reply
[+] [-] sol_invictus|5 years ago|reply
1) I travel frequently, for instance to the SV area which provides a good example. I opt to rent a car 95% of the time for my (US) trips, and the reason is that I prefer to move freely. When you're on the whim of an Uber (and in the States you usually can't walk anywhere), it's psychologically unpleasant having to rely on someone to constantly pick you up from somewhere. So much more liberating to have a car parked and move when you please.
2) When you end up moving, you can joyride, which I often do.
[+] [-] benjaminwootton|5 years ago|reply
If I could order one on my phone, have it be ready or turn up, and avoid all of that complexity over insurances and tolls then I would probably sell my own car and use that.
I’m sure the rental companies have some digital stuff, but I generally associate rental cars with queuing at an Avis counter for an hour after a long flight, lots of paperwork and getting hit with fees etc. For exactly this reason I tend to stick with Uber on business trips over rental cars.
[+] [-] cipherboy|5 years ago|reply
With Hertz & friends, easy to rent a van, take it some where and either leave it there (and fly home) or drive back. It'd probably be a wash when milage depreciation is thrown in?
And driving with a cello is a lot better than flying... :-)
[+] [-] rietta|5 years ago|reply
As someone over 25, renting a car is dead easy and seems to be cheaper than multiple ride shares. When I had business trips in smaller southeast cities, renting a car and actually driving the entire trip was more convenient than air travel because I got to listen to podcasts the whole way instead of dealing with the airport and still needing local transport when I got there.
[+] [-] sytelus|5 years ago|reply
[+] [-] unknown|5 years ago|reply
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[+] [-] Spooky23|5 years ago|reply
You also have improved safety and security for employees vs John Doe and his 2010 Odyessy Uber that is falling apart. Uber is a shitshow experience compared to what it used to be.
[+] [-] vagab0nd|5 years ago|reply
[+] [-] pbhjpbhj|5 years ago|reply
Business demand for rental vehicles doesn't seem to be falling?
[+] [-] codingdave|5 years ago|reply
The ride-sharing model is on the cusp of proving a sustainable business, but they aren't there yet.
[+] [-] adrianmonk|5 years ago|reply
Because airports are often located on the edge of a city, this is a pretty common situation. Convenience matters, but so does cost, so I expect rental car companies will continue to get this sort of business.
[+] [-] anonymousDan|5 years ago|reply
[+] [-] reitzensteinm|5 years ago|reply
https://www.reddit.com/r/wallstreetbets/comments/4ox508/yolo...
[+] [-] IAmGraydon|5 years ago|reply
BTW, I had no idea Shkreli was a member. That's really hilarious, and really fitting. I wonder how much of his money he made on options (if any at all).
[+] [-] jdsully|5 years ago|reply
[+] [-] 082349872349872|5 years ago|reply
Going from writing reasoned, informative posts to disrespecting the Wu-Tang Clan must be a pretty tragic arc.
[+] [-] rhaps0dy|5 years ago|reply
Surely this is not the actual Shkreli, but rather an impersonator?
[+] [-] H8crilA|5 years ago|reply
However, there is exactly one entity that can sell short HTZ without ever being margin called. And it is, amazingly, the same entity that can (and almost certainly will) delete the shares. Yes, the company itself, a debtor-in-possession that since the Ch11 filing has officially zero duty to the shareholders and is supposed to maximize the value to the creditors.
The Big Short for the March'20 trading mania.
While we're here, can we get TSLA to $4000 just like Cathie Wood has predicted? And maybe a second IPO attempt of WeWork? I want a few more cherries on the top and then the re-pricing of risk and the beginning of the recovery.
[+] [-] yomly|5 years ago|reply
On one side you have people who are bored and have nothing to lose, the handout was free money, nothing to spend the money on and no entertainment.
On the other side you have people who are desperate for a ticket out of their current situation.
Catalysing this is the low barrier of activation provided by Robinhood and the likes...
[+] [-] aazaa|5 years ago|reply
Sounds sorta like Amazon. It's one giant game of expanding P/E multiple. The bulls say tell me what I'm missing is that Amazon could turn on earnings like flipping a switch. They just don't want to. It's more efficient if AMZN holds on to the money. My response is that it's always been that way with this company. Same story in 1999.
Also sounds sorta like Microsoft. Sounds definitely like Tesla. Sounds, in fact, like way too many companies.
There's a bubble here of biblical proportions. The Fed has suspended the inevitable in the name of economic survival. But the signs were everywhere pre-COVID. Now, no severe decline in stocks will be tolerated. It's Powell Puts as far as the eye can see. The returns will be jaw-dropping. The valuations will be lunar.
Still, it would be a terrible thing to be riding in this particular shopping cart when it smacks into the wall.
[+] [-] tankenmate|5 years ago|reply
I just hope that "real" people don't get hurt from this (obviously plenty of people have lost or are about to lose their jobs at Hertz which truly sucks), cashed up get rich quick day trading fools on reddit losing money is one thing, some scammed unsuspecting retiree losing their shirt is another.
All in all it is Jackass humour meets reddit meets online trading. The world is a strange place.
[+] [-] anonu|5 years ago|reply
But remember that the markets are a beautiful thing. There are millions of inputs into the pricing function. If the price is wrong, then arbitrageurs will come in and bring it in line with where it "should be". There is nothing wrong with that.
[+] [-] roland35|5 years ago|reply
This type of situation with Hertz definitely feels like a unique combination of events (corona, gig economy, etc) but I won't be surprised if we have more and more weird stock situations occur as weird internet culture leaks into the real world...
[+] [-] donatj|5 years ago|reply
Do people go on vacation and just Uber everywhere? The times I take an Uber are largely times I’d have taken a taxi, which is to say times I should not be driving.
I still however rent a car on vacation. I like the freedom to just be like “I wonder where that road ends up” and end up exploring 50 miles out of town.
[+] [-] LatteLazy|5 years ago|reply
First, Hertz isn't worthless because it has restructured. Even if hertz is ultimately wound up because its debts exceed its assets (something very very unlikely historically) its shares today are worth something because there is still the chance thelat may not happen (including the chance the company will be saved by a bailout)
Second, the traders he refers to are speculators. Speculators fulfill a role that is a well understood and widely agreed to be important for both liquidity and price discovery.
Third, if other people are bidding price up (or down), who cares? You're not a share holder in a "worthless" company, so let them run their casino in that little corner of the market and you can invest in the other 99.99%.
Ge should also Google what a "dead cat bounce" is to better understand crashed stocks' behavior...
[+] [-] sytelus|5 years ago|reply
[+] [-] argonaut|5 years ago|reply
[+] [-] baby|5 years ago|reply
[+] [-] idoby|5 years ago|reply
[+] [-] sam_goody|5 years ago|reply
It seems to me that situations like the current one with Hertz are really just Ponzi schemes played out with stocks.
If we could do this legally, I bet you there would be a lot of these, and the ones playing would know what they are in for. (And there would be less incentive to do it illegally).
If Dave Portnoy and Warren Buffet both started a pyramid, who could grow the larger one before bust? Would you buy?
[+] [-] burlesona|5 years ago|reply
[+] [-] tomgp|5 years ago|reply
[+] [-] jimmysong|5 years ago|reply