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New York Cabbies Get Taken for a Ride

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Exorbitantly overpriced, taxi medallions are the last can't-miss investment in town.

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New York City has seen the price of one thing after another plummet in the last year: real estate, stocks, consumer goods. The price of one item, however, keeps rising into the stratosphere.

That item? Taxi medallions.

The medallions -- which license owners to operate yellow cabs -- are small metal disks affixed to a taxi's hood. Those drivers lucky enough to have them are the only ones allowed to pick up passengers on the street (as opposed to those who call a central dispatcher for a car).

There are 2 classes of medallions: individual and corporation. The first, which make up about 33% of all medallions, are sold on a one-off basis, and the cab must be operated by the medallion's owner; the second, often known as mini-fleet medallions, are sold in pairs.

The price of medallions is set by supply and demand on the open market, and their prices easily rival that of Manhattan apartments. Individual ones currently go for around $570,000; the corporation ones average $750,000. Since the latter are sold in pairs, they routinely fetch $1.5 million when sold.

In 2001, the price for individual and corporation medallions was $180,000 and $199,000, respectively. Their prices have tripled since then, untroubled by the fate of New York's broader economy. They're the last can't-miss investment in town.

"The price historically appreciates," says Gary Kanterman, a broker with Jericho Taxi Brokers, located in Queens's Long Island City. "It is only affected when there is legislation that will affect the market." It therefore isn't affected by such things as the state of the economy or fuel prices: The last legislation to have an effect on the market was 1990's Taxi Commission Law, which required cabs bearing individual medallions to be operated by the owner. The price dropped significantly, but then soon rose again.

There are 13,300 medallions in existence, and the total number has remained relatively fixed for the last 8 decades, Kanterman said. This is why the price has maintained its steep upward trajectory. Though Mayors Giuliani and Bloomberg auctioned off about 1,500 medallions, it's been 2 years since any new medallions were issued.

"I believe we probably have the same irrational exuberance that Greenspan once said existed in the overall market," Kanterman said. But, he added, "There is no economic model that tells us what we can value medallions at versus where they are now. It defies formulas."
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No positions in stocks mentioned.

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