Breaking Down The Financial Breakdown
Keywords: mortgage, interest rates, economy, housing, personal finance
The stock market is gyrating like a yoyo, and with each down stroke it’s heading lower. What’s an investor to do? Let’s start by dissecting the cause-it’s not as simple as a slowdown in housing or defaults in the subprime market, and these are unrelated (for the most part) events.
The housing market was headed for a correction regardless of the events taking place in the subprime market. New home starts were running at twice the historical average during 2003-2006. Granted, some of this was fueled by a relaxation (or abandoning) of underwriting standards in the subprime market but it also was the culmination of aging baby boomers buying second homes, low interest rates, and a strong economy. Speculators in areas such as southern Florida and easy credit just pushed it over the edge. We would be in a housing slowdown regardless of the subprime problem, although this will exacerbate it, and a weak housing market will continue at least through 2008. Investors: avoid homebuilders.
Mortgage lenders and financial companies in related businesses generally are leveraged and, in many cases, rely on short term debt to finance their operation. The concerns over the creditworthiness of their businesses, not the level of defaults in the subprime market, have caused much of their funding to disappear. This is the biggest risk for many finance companies.
All finance companies are paying the piper for problems in the subprime market-lax underwriting standards and mortgage obligations that borrowers can’t meet. This problem was not caused by rising interest rates. Interest rates have gone up very little over the past year. The problem was artificially low teaser rates, the ability to skip payments, interest-only payments for a period of time and other contractual mechanisms which induced (or seduced) buyers to take on a bigger mortgage than they could afford. Do your homework in this sector to determine which companies have funding problems, subprime and related mortgage exposure, and which don’t.
It’s not obvious. These problems will take a good year to sort out and companies will be destroyed or seriously damaged in the process. Investors: Avoid originators, servicers, buyers/holders of paper, fixed income funds, and mortgage REITs which are highly leveraged or focus on the subprime mortgage market.
Banks generally hold some, but not a significant amount of, subprime mortgages relative to their total portfolio. The bigger risk for certain money center banks is their exposure to bridge loans and take-out financing guarantees for the many billions of dollars of private equity deals that are pending. The hit the banks took on the Chrysler deal is a good example.
This problem will work itself out by the end of the year. Banks with private equity financing exposure could have one or two bad quarters. Banks without this exposure will do fine. Investors: Buy banks without big private equity exposure now. Wait one or two quarters to buy banks with exposure to private equity.
Brokerage houses generally have subprime and private equity exposure, as discussed above. Investors: Give them one or two quarters to sort out their problems before you buy.
Mutual fund managers, investment advisors, and REITs that own income producing have little or no subprime exposure (again, do your homework on the specific investment to make sure). These stocks have taken a hit. Investors: Buy now.
Bill Byrnes is a co-founder of MUTUALdecision (www.mutualdecision.com) A former investment banker and finance professor, he has been CEO, chairman and served on the boards of a number of public companies. Bill is a CFA with over 30 years investment experience.
Previous Articles Highlighter:
Home Makeovers Lead To Higher Value (1)
It is okay to go in for an unsecured loan. However, if you have a house to act as collateral, a secured loan would be more advisable. Then ask yourself the question: How do you finance home improvements?
Types Of Health Insurance Plans (2)
If you are insured under this plan you will have to choose a doctor or a hospital from the list of approved health care providers. Similar to the HMOs you can choose to be treated by a medical institution or a doctor outside their network and still get some coverage.
Buying A Car With Bad Credit: Get A 0 APR Card And Rebuild Your Credit History (3)
There is absolutely no point in taking another card if you think you will be unable to make the repayments as this will just swallow you deeper into the debt mud.
Retired Britons Owe 'Thousands In Mortgage Debt' (4)
Overall, up to 25 per cent of consumers were revealed to be not making use of such entitlements, which guarantees a set weekly income. Tom Dawson writes for Essentially Home Loans where visitors can apply for secured loans online, we also specialise in bad credit loans for UK residents.
Debt Problems Can Leave 'Lasting Impact' On Ability To Get Credit (5)
Anyone in Jessica's situation should apply for a copy of their credit report to gain a clear picture of their financial situation and start taking control of their finances." As a result, Mr Munroe suggested that those who continually struggle with their finances and consequently damage their credit rating while at university may find themselves with little option but to opt for a bad credit loan should they look to borrow money in later life.
Savings Shortfall 'Remains Crucial Problem' (6)
Meanwhile, a MoneyMood Survey carried out by Legal & General earlier this year indicated an increasing desire among Britons to save money. After paying off bills and servicing credit cards, personal loans and other forms of debt, just less than two-thirds (62 per cent) of consumers at the end of May were in the mood to put cash away.
Credit History 'Can Improve Access To Cheaper Borrowing' (7)
Tom Dawson writes for Essentially Home Loans where visitors can apply for secured personal loans online, we also specialise in bad credit secured loans for UK residents. Visit Today: news.essentiallyhomeloans.co.uk
Consumers Need To Be 'Wiser' With Debt Difficulties (8)
"You've just got to be totally sensible. Debt in this country is completely out of hand. At some point you've got to start clawing back and be sensible with your spending," Ms Hannums added.
Assortments Of Mortgage Loans (9)
In the traditional mortgage, the borrower has to pay the interest amount and part of the principle. However, this tends to be not too inexpensive in the long run.
Unwise Student Spending Can Leave Brits With 'Debt Mountain' (10)
"If you do decide to borrow money be aware of the amount you are borrowing and think about how you will repay it. Our experience has shown that taking on credit needn't be a problem if you manage your finances well and ensure you keep up your repayments." Consequently, those considering taking out a loan or making an application for a credit card were advised to "think" before taking such action.
Deferred Student Loans - What You Must Know!! (11)
Closure might well be more difficult, with other responsibilities requiring financing as your life and career progresses. Keeping Up With Payments Clearly, for a standard type of loan, making regular payments is important and falling behind is probably not too clever an idea.
Property Buyers 'Prepared To Pay Out For A Garden' (12)
Tom Dawson writes for Essentially Home Loans. Our visitors can apply for secured home loans online, for whatever reason with whatever credit history. Visit us today for the best rate loans available.
'Shopping Around' Recommended For Financing Car Purchase (13)
The findings revealed that such borrowing makes up more than half of the debts run up by 18 to 24-year-olds. As 28.5 per cent of respondents owe money via credit cards, people in this age group are said to be some 12,790 pounds in the red.
Borrowers Believe Base Rate Has 'Peaked' (14)
The news comes as figures released by Spicerhaart Financial Services revealed a growth in the number of consumers opting to take out a variable-rate mortgage over the course of last month.
10 Questions To Assess Your Succeess In Property Investing (15)
- Who do you know who is a landlord now? I was amazed to find out how many people in my church and how many of my friends' parents had rental property.
A Guide To Buying Your First Rental Property And Becoming A Landlord (16)
And unless it is painfully needed, do not raise the rent, especially if the tenant is someone who pays on time and is easy to deal with. We offer a $500 re-signing bonus each year with rents at $800.
Commodity Trading - Trading Uranium (17)
A broker can provide advice and direction on this trading maneuver. Visit www.123onlinetrading.com to find more great information about commodity trading. Besides a large selection of free educational articles you can also find powerful books about online trading in general.
Repayment Plans For Student Loan Debts (18)
If you need to then set up an automatic debt payment plan to help you remember month after month. You will continue receiving delinquent letters after the first bill statement for a while.
Personal Credit Report Via The Internet (19)
Make sure your credit report is correct and up to date before you start investing. Mika Hamilton runs a website offering free investment tips and strategies for people looking to get started in the investment world.
Commodity Trading Strategies - The Spread (20)
Keywords: commodity trading, trading strategy, commodity trading strategy, spread, commodities, commodity Many of the more common commodity trading strategies actually serve two purposes. The turn of a profit is but one.
Newer Articles Highlighter:
Your Guide To Stock Trading Online (1)
You have a choice of thousands of different stocks with different values and potential. If you are interested in one particular stock then you may want to watch it for a couple of weeks at least before you dive in and start trading yourself.
When Not To Cancel Credit Cards (2)
This fractional number is one way they use to judge your credit worthiness. The lower this fraction is the better. To help you better understand this, if the resultant number was exactly 1, then that would mean that your outstanding debt is equal to your available credit and you would be at the maximum level, or maxed out for credit.
Student Health Insurance (3)
This is in two directions if you are traveling abroad and if you are traveling within the country. In many cases if you will be traveling abroad you will need an additional health insurance.
How To Use The Credit Card Wisely (4)
So be intelligent in purchasing your items. Stick to your budget when you market your goods. The advantage of a card is that you can avail of the discounts right when they are offered, unlike when you have to pay cash, you wait until your compensation arrives.
The Benefits Of Shopping Around For Credit Card Deals (5)
Take some time and figure out what will bring you the most benefit. The most popular benefit is points of one sort or another. These can go towards travel, cash back, gas or other things, depending on the kind of program you join.
How To Travel Around The World On A Budget (6)
Sometimes, in a pinch, it can be free. Pick up a book on air courier travel, and you are off. The downside is that you usually don't get to choose how long you can stay abroad, and bringing the kids along is impossible.
Forex Trading - How Should You Choose Your Forex Broker? (7)
If you are a small investor, you'll need a broker that won't require a large balance to open an account. Most brokers today will let you open a small account with as little as $300.
When Do You Need A Debt Consolidation Loan? (8)
Don't worry about totals - just look at percentages. That 23.5% interest rate on your MasterCard needs to be the first thing you lose. The 19% on the Visa, that's your next bet.
Forex Trading - What Is Fundamental Analysis? (9)
However, if they were expecting interest rates to remain steady and there actually was an increase, this may in fact have a large impact on currency prices. There is a disadvantage to fundamental analysis, which is that it can be a little too broad-based.
Debt Consolidation Options: What Form Is Right For You? (10)
1. GETA BANK CONSOLIDATION LOAN Banks love it when their customers decide to get smart with their debt burden, and they love it even more when they do so with that bank.
Forex Trading, Or The Stock Market? (11)
Because of this, you have more control than you do in the stock market, where the market has a "mind of its own" in a lot of cases. Visit www.123onlinetrading.com to find more great information about online forex trading.
House Pricing Basics When Selling A Home As Is (12)
For example, in a buyers market, if the gross value of your home is around 150,000 dollars based on prices of other similar homes in the neighborhood, you can quote your price somewhere around 145,000 dollars.
The Hidden Cost Of Selling Your Home Yourself (13)
Just like real estate lawyers, market analyst do not come cheap but are a must for anyone looking to sell their home themselves especially those without experience in the industry.
Updating The Traditional Way Of Selling Your Home (14)
And if the price you want is not hit, you have got a bill to pay for the auctioneers time. THE SALE BY OWNER: Sure, this will save you realtor fees, but are you really confident that you can do all the paperwork yourself and not screw something up at a high price to your bank account?
For Sale By Owner, Does It Really Work (15)
They will guide you through the sales process, tell you what the weaknesses in your property are, they will run ads for you online and in print, they will handle the paperwork, negotiate a price there is a reason they take as much cash for their time, and that is that they are good at what you are not the inside info.
Making Money From Real Estate (16)
It is important that you carry out the necessary repairs and improvements, as it is very difficult to find buyers for properties in dilapidated condition. Focus your improvements on projects that will raise the value several times more than they cost you.
Importance Of Getting Your House Valued When Selling A House As Is (17)
If your home sale is taking much longer than the average time, then the problem could be the price, which would undoubtedly be higher than the market value. In order to increase the value of your house, compare it to other properties in the vicinity and alter the price if necessary.
Where To Find The Best Commercial Real Estate (18)
For finding the best deals, you can approach reputed commercial brokers, as they are the ones who actually have the properties listed. After noting down your requirements, you can go to these brokers for getting information about the availability of properties that you intend to buy.
How To Negotiate Real Estate Commissions When Selling A House As Is (19)
In reality, the commission rates are never fixed and most of the states forbid the Real Estate Commissions from doing so. This means that the agents can quote any price they like as long as the customers are willing to comply with the demands.
Getting Your Home Ready For The Home Inspector (20)
Keywords: Homebuyer, Real Estate, FSBO, For Sale by Owner, Sell Your Home Fast, Brokerage, Foreclosure Home cleaning is a routine activity for many. However, special effort has to be put in when preparing a place for a home inspector visit, in order to make it as appealing as possible.