Subprime Should Have Been the First Clue
by Big Dog on Mar 10, 2007 at 18:49 Uncategorized
The mortgage business seems to be in a bad way much like the dot com and tech businesses were a few years ago when people lost loads of money because they did not get out of the market in time. A lot of mortgage companies are on the cusp of failure and many others have already gone belly up because they made questionable loans to people of limited or no means. People invested in these companies because their brokers told them it was a good idea.
I can not understand the mentality of people who will buy something with junk or sub prime in the name. No one would buy a junk car (unless of course they specifically needed a junk car) or a sub prime smoke detector. People do go to GROJ (Get Rid Of Junk) sales on weekends but that is a little different. In everyday life people do not decide that they want to buy junk or sub prime items. And yet, these very people will invest tons of money into junk bonds and sub prime mortgages. I can not figure out the mentality that invests in items with such names and then acts mystified when the items fail.
There is going to be a major correction in the near future and there will be a flood of repossessed homes on the market. There will be a number of mortgage holders who go out of business because the sub prime people they made loans to are unable to pay them. I hold the people who bought the home partly responsible because they are living above their means and should know what they can afford. The bulk of the blame goes to the companies that made the loans. They are in the business to make money and should have the experience to know what risks are acceptable and which ones are not.
Any company that made these loans needs to go out of business. The market will take a hit but it will be back. If these folks are not smart enough to make good loans then they should be out of business. As for people who bought stocks in these companies, you get what you pay for and your return on investment was, shall we say, sub prime.
People with extra cash or with good credit worthiness can pick up repossessed homes for a song and have an investment or two. Just don’t take out a sub prime loan on your new property, it might come back to haunt you. For you investors; buy good stocks that have a good history. They cost more but they are worth it in the long run. Perhaps you should consider buying what your elected representatives own. Halliburton and oil companies are the ones that make them money (Democrats and Republicans) so they should be good for you. And have no fear. George Soros just bought 2 million shares of Halliburton and Michael Moore owns some as well so they are now a good company.
For those of you who still insist on buying junk, use my contact form because I have a garage full of stuff that I will give you at a sub prime price.
Source:
NYT
Tags: Commentary