The payday loans business, sometimes referred to as bad credit loans, is an obvious counter-cyclical that thrives in difficult economic times. But to say that bad credit loans are thriving simply because the unemployment numbers remain stuck at high levels overlooks some key changes in how the industry works. This suggests the industry may remain robust even after an economic recovery.
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A new program from the Obama Administration is hoping to boost the housing market. Mortgage companies that work with the Federal Housing Administration are now required to offer up to 12 months of forebearance for homeowners who cannot pay their mortgage.
Qualifying for the program is as simple as being out of work—unemployed.
The program isn’t entirely new, but an extension of an old framework that allowed for 4 months of protection should homeowners lose their jobs.
Asset backed loans are quickly becoming the only way to borrow. While on the personal side there are personal loans on car titles and home equity loans, businesses are also finding that asset backed loans are the way to go. Previously, we discussed how small business credit cards are virtually non-existent.
It is our job as analysts to see how changes in lending trends grow or shrink the prospects for economic recovery. Recently, banks have taken to “riskier loans,” but only in the context that they are backed by hard assets—accounts receivables for businesses and real property for individuals and companies.
Just yesterday we posted about how banks run on net interest margin, the difference between their cost of acquiring capital and their net interest earnings on the capital they lend to borrowers. Now that we’ve covered how banks make money, let’s cover why they don’t: banks can’t make loans to small business owners.
In a recent appearance before the Federal Reserve, Jamie Dimon, CEO of JP Morgan, explained his biggest fear to Fed Chairman Ben Bernanke. In his short speech, Dimon said that he worried new regulations would prevent capital from flowing to the people who need it, stifling any economic recovery.
Net interest margin is one of the most basic concepts in all of finance, but it is easily one of the most important. The calculation for net interest margin is, put simply, the earnings on capital minus the cost of the same amount of debt.
When banks go to make a loan of any type—mortgage loans, credit cards, student loans, etc.—banks want to know how much money they’ll make on the loan. They look for their “net interest margin.”
With the US financial markets worried about several key economic matters—oil price, OPEC decision, Fed policy, and whether or not the debt ceiling will be raised—there seems to be a new trade emerging: buy puts.
In recent days, put activity on the S&P 500 ETF (SPY) has been through the roof. A full hour after market open, investors have taken an interest in September dated options. Of the most popular are the 90, 94, and $95 strikes. These strike prices correspond with an S&P500 value of 900, 940, and 950, respectively.
Groupon’s IPO is a hot topic on Wall Street. After being titled as the “fastest growing company” by Forbes magazine, some investors are getting ready to pile in big. But we have to wonder: why isn’t Groupon profitable yet, and is there any chance that this company will ever deliver value to its shareholders?
I’m not so sure.
There have been many complaints of a consumer credit crunch, especially coming from those in the market for a new home. While the money isn’t always easily found, there are more than a few opportunities for borrowers to get into the real estate market cheap.
Charles Schwab (SCHW), one of the leading brokerage firms in the United States, today announced that it would take on exchange-traded funds for its asset management business. The recent pivot would mean that investors would be able to buy and sell exchange-traded funds through their 401ks, reducing their overall annual fees.
Never has a company been so aggressive with exchange-traded funds.
