There are some winners from sub-prime too!
Written by A Forex View From Afar on Wednesday, February 06, 2008Back to www.thelfb.com
Since the beginning, we have heard only bad things about sub-prime, but there are some positive aspects too.
First of all, if it wasn't for sub-prime, Mr. Bernanke would still have a fight with wage inflation. Now he has abandoned that objective and he just wants to see the economy running like it did in the old days, and for that to happen he had to cut rates.
Interest rates are now real negative (or very close) which actually means the lender pays to the borrower. Odd situation...
If you have a good credit score you can access credit with much lower interest rates than a year ago and until inflation rises and interest rates drop, you are the real winner in this deal.
The rate cut sent the Dollar Libor and Bonds Yield much lower. Many existing ARM's are set by these two, so it basically means existing loans are, or will, become easier to pay, by adjusting the interest rate.
The Sub-prime crisis has sent in some areas house price's down, way down, creating new opportunities for getting your long dreamed of10.000 sq. ft house. Maybe you'll appear on MTV Cribs someday. Who knows?
If you don't like real estate but still want to make some investments, look at the stock market. Every stock analyst is screaming stocks are cheap now. Apparently nobody listens to them, since they are more red then green. If you're looking for a very long term investment it appears to be a good call.
The best thing about sub-prime and a recession is the fact the biggest growth in U.S. history came after such periods and this may very well happen again.
It may destroy financial institutions, drag down your house value, increase your credit card interest rate, bring the US one step closer to a recession, make almost impossible your trip to Europe or Asia because of the expense and make some people never able to afford a loan again, but we should see the other side too...
PS. Sub-prime has helped destroy the myth that Big Guys can't lose. They can, and they do.
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