Friday, April 27, 2007

Immediate collapse

Now, I am not necessarily predicting an immediate collapse of brokerage shares and that all our readers should short them (although I think that the group is extremely vulnerable), but the point is that the risk reward ratio is no longer particularly favorable. First of all it is quite likely that it is not only the pure sub prime lenders that are in trouble. Because lending to people with a poor credit record - or better said to people who never had the intention to repay their loans - was so profitable and in an environment of rising asset prices a low risk proposition, that practically all financial institutions including banks, brokers and financial institutions.

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