RECENT NEWS
MarketWatch  Dec 19  Comment 
Shares of Ally Financial Inc. rose 3.7% in premarket trade Friday, after the lender announced late Thursday that the Treasury Department launched an offering to sell its remaining shares in Ally. Once the shares are sold, Ally will exit the...
Clusterstock  Dec 15  Comment 
When Josh Birnbaum was at Goldman Sachs in 2007, he  made a huge bet  against subprime mortgages.   Now he's betting against something else: high-yield bonds. From The Wall Street Journal: Joshua Birnbaum, the ex-Goldman Sachs Group...
Reuters  Nov 25  Comment 
NEW YORK, Nov 25 (IFR) - Jim Landy, chief executive officer of subprime auto lender CarFinance Capital, has left the company after it merged with another firm, two sources familiar with the situation...
Yahoo  Nov 24  Comment 
Subprime loans are increasingly fueling growth in the auto sector, in a move that's eerily reminiscent of the housing market in the early 2000s. Here's how investors can capitalize on the trend.
MarketWatch  Nov 20  Comment 
The deadline for bids for Citi’s OneMain Financial is today.
Forbes  Nov 18  Comment 
What if Wall Street had been more diverse in 2007? Would there have been a giant housing bubble and subsequent sub-prime mortgage crisis that nearly crippled the US economy? A new study by six academics including professors at Columbia and MIT’s...




 

What happened blaicasly was because of assuming that a trend was permanent. In the financial world, this is a form of mental disorder. Trends are why anyone could be a day-trader and make money, for a while. Their impermanence is why anyone that didn't get out of that in time lost their shirts. The subprime loans were designed to churn the loans. You had loans that were fixed for usually two years, then would become variable. The whole intent was for the borrower to refinance in two years, again generating all of the bank's new-loan fees. The trend for real estate to appreciate rapidly was counted on to continue to keep this attractive for the borrower. Borrow 100 with 5k in costs to pay off a loan of 95, wait two years, borrow 105k with 5k in costs to pay off a loan of 100, wait two years, borrow 110k with 5k in costs to pay off a loan of 105 but then the trend didn't cooperate by giving a home value of 110k, and the balloon broke. People still had the same house they did, but now a loan for more than they originally paid for it, and they can't get refinancing, and can't sell it for what they owe. Trends are temporary. People that think otherwise will eventually lose money. Now, how do you know when a trend is coming to an end? There's a story about the Crash of '29 about a broker who was getting a shoe shine, and the shoe shiner gave him a hot tip on a stock. He realized that when shoe shine boys were giving stock tips, the market was about to crash and he got out. During the day-trader era, there were stories about bus drivers and janitors making huge money in day-trading, just before that went south. How many times have YOU seen people offering to help people get loans in their answers right here on Yahoo, offers totally unconnected to the question being asked? It was a trend. Now it's not.

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