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It has become common knowledge that certain classes of consumer goods such as electronics and cars depreciate in price exponentially over time because of a larger supply of newer, upgraded, models being in the market.

Are there financial instruments which simply track the retail value of something like a brand new car over time, or allows you to speculate on the future values of these items? Could this be used by companies which hold large inventories to hedge some of the depreciation risk?

Satoshi
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  • What's the financial benefit to the counter party who takes the other side of the trade in this hypothetical 'financial asset" ? – Bob Baerker Dec 23 '19 at 00:09
  • @BobBaerker As nanoman pointed out, imagine that you have a manufacturer of laptops M and a retailer R. R wants to sell M 100 laptops in 6 months at the market rate. But M wants to mitigate some of the risk with the price of laptops reducing beyond the expected depreciation rate and R wants to reduce the risk of the price not falling as fast. So they agree that M sells to R 100 laptops for ₿150 in 6 months. If you think that the laptops will be more than ₿150, then you can 'buy' R's end of the contract for ₿150. If the laptops are worth ₿200 in six months, then you can profit ₿50. – Satoshi Dec 23 '19 at 08:59

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While an index could be defined for the price of a depreciating consumer good, no market-traded instrument could directly track such an index, because there would be only sellers and no buyers. The closest thing to people who "buy" the index are actual consumers who get some use from the product in exchange for the depreciation.

Shorting requires a lender who is happy to provide the product now and receive the same product back later, which in reality would only be agreed to with a large fee that would compensate the depreciation and wipe out the short trader's profit.

What can exist is a futures contract for a depreciating good, which is priced to account for the expected depreciation. The market would always be in backwardation, and shorting a future would effectively incur the "fee" mentioned above. This would strictly accomplish what you asked, "hedge some of the depreciation risk", which is only the unexpected part of the depreciation (fluctuation from the mean). The expected (mean) depreciation is not a pure risk and cannot be hedged away.

The only real solution for the companies you mention is to minimize inventory.

See this answer for similar cases where an index can only be traded as a futures contract, not directly, because it has predictable trends.

nanoman
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You can find people that own those assets, ask to borrow them, immediatelly selling them on ebay, waiting, buying the same product at a lower price, giving it back to the person you borrowed from, but pocketing the cash remaining for yourself.

CQM
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    The exact same item. After all, the guy who's car you borrow is going to notice that you didn't return his car... – RonJohn Dec 22 '19 at 23:19
  • @RoinJohn Right.. and even if you did return the exact same car to the lender, I doubt anyone would accept an arbitrarily run down vehicle as 'returning' it. – Satoshi Dec 22 '19 at 23:27
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    If the asset owner doesn't need the asset, why would he loan it out rather then selling it while it still has value? Apart from noticing that 'you didn't return his car', walking or taking mass transportation everywhere doesn't cut it. – Bob Baerker Dec 23 '19 at 00:08