Auto Loan Deliquencies On The Rise
Thinking of bargain hunting on some financial stocks? This may not yet be a good time to jump in.
According to Thursday's Wall Street Journal, auto loan delinquencies are starting to creep up, similar to the increase in foreclosures and late payments that has been frequently noted in the financial press.
Similarly, student loans and credit cards are also showing signs of strain.
If you these problems continue to increase, the problems will be widespread across the financial industry, not just confined to the companies that originate these loans.
The reason for this contagion, and the reason why the subprime mess is such a cause for concern, is that all of these types of loans have been packaged into securities called "asset backed securities (ABS)" and sold to insurance companies, pension plans, mutual funds, etc.
Wall Street firms and banks will start reporting their quarterly earnings in coming weeks. What will be closely watched is the amount of writedowns (i.e. reductions in book value) in their accounting statements. Stay tuned, as I doubt that all of the skeletons are out of the closet.
According to Thursday's Wall Street Journal, auto loan delinquencies are starting to creep up, similar to the increase in foreclosures and late payments that has been frequently noted in the financial press.
Similarly, student loans and credit cards are also showing signs of strain.
If you these problems continue to increase, the problems will be widespread across the financial industry, not just confined to the companies that originate these loans.
The reason for this contagion, and the reason why the subprime mess is such a cause for concern, is that all of these types of loans have been packaged into securities called "asset backed securities (ABS)" and sold to insurance companies, pension plans, mutual funds, etc.
Wall Street firms and banks will start reporting their quarterly earnings in coming weeks. What will be closely watched is the amount of writedowns (i.e. reductions in book value) in their accounting statements. Stay tuned, as I doubt that all of the skeletons are out of the closet.
Powered by ScribeFire.
Comments