Sub-prime Lenders Down Again
Sub-prime lenders LEND, NFI,NEW were down again today, dropping between 3 and 17%. Wish I had shorted some of the sub-prime lenders instead of WCI!
I think this is just the tip of the iceberg, just like in the good old dot-bomb days when there was some initial weakening before the entire sector crashed. I think banks like HSBC will be negatively affected, more than they’re willing to admit. I think even regular prime lenders will be affected too. CountryWide (CFC) is flat for the past 1 year as opposed to New Century, which is down 70%. I think CFC will eventually drop another 30-40%.
I closed out the rest of my inverse S&P500 trade (URPIX) for a small profit. I did work out as a good hedge against losses in my other stocks.
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March 10th, 2007 at 8:31 am
Hey,
Just a quick question. I’ve been eyeing some of those sub-prime lenders. There is likely to be a shake out, but some of them are so beaten down, that they might be good buys at this point. This is assuming of course that you can get ones whose business is still sound.
Best,
James
March 10th, 2007 at 11:15 am
Thats a valid point. my wife mentioned the same thing.
For questions like these, always turn to the insiders for guidance. Insiders sell their stock for a variety of reasons, but they buy for only one – they think the stock is over valued.
So far none of the insiders have been buying. And neither should you.