Doomsday for Sub-Prime Consumers!

Discussion in 'Credit Talk' started by Calmest_LA, Aug 4, 2002.

  1. Calmest_LA

    Calmest_LA Well-Known Member

    Hi to All,

    This article tells how the days of issuing credit to sub-prime consumers are gone. I'm wondering how people will rebuild their credit in the future. Here's a link to the article:

    http://cardweb.com/cardtrak/pastissues/aug02.html


    Calmest_LA
     
  2. breeze

    breeze Well-Known Member

    The article also states that consumers with shaky credit or no credit will have to get secured cards - that's what we usually recommend anyway.
     
  3. jrjr35

    jrjr35 Well-Known Member

    Oh my....you mean sub-primer's won't have the priveledge of paying 100's of dollars of set up fees, outrageous interest, and lousy customer service...what will they ever do. Seriously i know it's a legit way to restore your credit....but there are other ways.
     
  4. voodochild

    voodochild Well-Known Member

    Now, if they could just get rid of those paycheck advance loan places. That is another case of the man keeping the little people down
     
  5. jrjr35

    jrjr35 Well-Known Member

    Car title loans should be outlawed also....nothing but bottom feeders preying on desperate people.
     
  6. GEORGE

    GEORGE Well-Known Member

    Does that mean they will take PRIME CUSTOMERS 650+...or GO OUT OF BUSINESS???

    Couldn't they make money off people who pay their bills also???

    9.99% MAX
    NO ANNUAL FEE
    0.00%-5.99% BT RATE

    MANY OTHER BANKS DO WELL (FINANCIALLY) AT THESE TERMS!!!
     
  7. Butch

    Butch Well-Known Member

    Deletd
     
  8. Butch

    Butch Well-Known Member

    Don't worry! Subprime is here to stay.


    These stories reprinted from the pages of Specialty Lenders Weekly for the Week of March 11, 2002.

    Subprime outperforms the market

    Consumer finance stocks with exposure to the subprime sector have outperformed other financial companies and the broader markets over the past week and a half. Analysts say the movement is due to recent better-than-expected company fundamentals and a wealth of positive economic news, starting with Federal Reserve Chairman Alan Greenspanâ??s comments on Feb. 27. A short squeeze in shares of Metris Cos. (MXT) and AmeriCredit Corp. (ACF) has helped to propel those stocks even higher than those of their peers.

    Shares of Metris led the subprime pack, rising 44.3% over the past seven trading days, while AmeriCredit was close behind adding on 44.2%. Capital One Financial Corp. (COF) and Household Financial Inc. (HI) tacked 19.6% and 15.0%, respectively.

    The SNL Subprime Lenders Index, which is heavily weighted toward AmeriCredit, has risen 22.6% since Greenspan pointed to an economic recovery that may very well be already under way. The SNL Monoline Credit Card Index rose 15.4% during the same period. â??Weâ??ve had better-than-expected company fundamentals followed by a string of good economic news that finally wasnâ??t buried under accounting issues or other types of nefarious activities,â? Fulcrum Global Partners analyst Sean Ryan told SNL Financial.

    â??Secondly, if you look at the way financial stocks have performed in the past few sessions, itâ??s like a hyperbolic curve in terms of stock performance vs. perceived risk.â?

    The analyst pointed out that a relative safe haven like Fannie Mae (FNM) was down over the past couple of days, while Wells Fargo & Co. (WFC) treaded water; at the same time Capital One was up significantly, while Metris and AmeriCredit were up dramatically.

    On Feb. 27, Greenspan hinted that the economy had begun to turn and indicated he was willing to leave interest rates steady for shares may have already beensome time to come. Also in the past week came the news that personal incomes grew in January, unemployment declined in the first two months of the year and consumer spending increased in the fourth quarter.

    The effect was an upturn in credit card stocks, with the card companies that had suffered the most over the past year outperforming the pack.

    Credit Suisse First Boston analyst Moshe Orenbuch said the rebound in stock prices for the subprime finance companies was inevitable; it was just a matter of timing.

    â??A year ago we didnâ??t know how deep the recession was going to be or how the consumer was going to behave,â? Orenbuch said. â??Now we know the recession wasnâ??t that deep and effectively the consumer has behaved quite well and at the same time the earnings, except for the companies that blew up,â? NextCard Inc. (NXCD) and Providian Financial Inc. (PVN), â??way outpaced the performance of the S&P 500. You would expect these stocks to be up absolute and relative to the S&P, but neither was true.â?

    Orenbuch added that the subprime sector has traded inconsistent to its underlying fundamentals, as investors have been weary of what company might turn out to be the next Providian or NextCard, not to mention the fears created by the downfall of Enron Corp. (ENRNQ).

    On March 4 alone, Metris was up 22.4% on almost 4x average daily volume, a movement that analysts who recommend the stock say was undoubtedly the short squeeze they had been waiting for. â??Metris and AmeriCredit have between a quarter and a third of their float sold short, so all of the [economic and company-specific] factors just feed on each other,â? Ryan said. â??People look at AmeriCredit and Metris as virtually interchangeable. AmeriCredit is Metris with cars.â?

    Ryan still has his â??buyâ? rating on Metris, but said the stock is clearly at a resistance point after its phenomenal gains of the past few days. The analyst doesnâ??t cover AmeriCredit.

    â??You really have the potential for strength to just feed on itself, particularly with Metris and AmeriCredit, because you get this hydraulic effect with the stocks sucking in all of the short positions,â? he added. â??Things were bad and perceptions were worse, and now things seem like theyâ??re getting better and perceptions are finally improving.â?

    But a perception doesnâ??t make for reality, William Blair & Co. analyst Joel Gomberg warned.

    The credit card analyst said that even though the stock prices of these companies can make a significant movement in one trading day, changes in the economy take time.

    â??Things donâ??t happen all of a sudden,â? Gomberg said. â??The stocks move all of a sudden, but itâ??s not like the environment has changed dramatically.â?

    The perception is that the economy is not as bad as some people thought, Gomberg said. He rates Capital One at â??buy.â?

    â??If the economy improves, businesses will do better and start hiring again, thus improving consumer confidence and consumer credit quality,â? but itâ??s a little early to start making that call, he concluded.
     
  9. voodochild

    voodochild Well-Known Member

    Hey Butch,
    I have noticed you post this before. I am unfamilar with you strange Deletd posting rituals. Please school me so I can understand.
     
  10. GEORGE

    GEORGE Well-Known Member

    Deleted???
     
  11. Butch

    Butch Well-Known Member

    I'm also an admistrator who can delete YOUR post if I want.

    :)
     
  12. Butch

    Butch Well-Known Member

    ROFL,

    Just kiddin VooDoo,

    Once you post you have 15 minutes to edit it. Just try your "edit" button at the bottom.

    no mor scuses fer misspelt werds.

    :)
     
  13. rblues

    rblues Well-Known Member

    Hey Butch!

    I just sent you an e-mail ;-) Check it out.
     
  14. voodochild

    voodochild Well-Known Member

    deleted!! too


    thanks Butch
     
  15. Quixote

    Quixote Well-Known Member

    You mean like admistrator? ;)
     
  16. Quixote

    Quixote Well-Known Member

    Oh, BTW, as re the topic at hand; I have tremendous faith in the free enterprise system and darwin's theory. As long as there are bottom dwellers, there will be bottom feeders. So don't worry, there will always be somebody willing to charge exorbitant fees to people who have few other options.
     

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