Stocks Tumble on Subprime Lender Worries

[soothsayer]

NEW YORK (AP) — Stocks fell sharply in early trading Tuesday as investors grew more unnerved that troubles for subprime lenders would reverberate in other parts of the economy.

Already heightened concerns increased after the New York Stock Exchange said shortly before the opening bell Tuesday it would immediately suspend trading in shares of New Century Financial Corp. and move to delist the stock. The company, which saw trading in its shares halted throughout Monday's session, on Tuesday disclosed more details on the raft of financial hurdles it faces.

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The difficulty of subprime mortgage lenders, who make loans to those with poor credit, overshadowed a profit report from Goldman Sachs Group Inc. that came in well above Wall Street's forecast.

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more here

http://money.iwon.com/jsp/nw/nwdt_rt_top.jsp?news_id=ap-d8nrak080&.html

[quiet.american]

1. Thanks for posting. n/t

[HereSince1628]

2. I heard some dude on TV say that another round of losses like a week ago

and then everything will be looking better...well, I guess if we get knocked back that far, we'll spend a lot of time looking up.

[Chimichurri]

3. Watching the mortgage stocks plunge reminds me of when the tech

bubble burst. It's exactly the same. Yesterday New Century lost over 50% of its value. To give you an idea of what that means...6 months ago, New Century was at 40/share. 1 Month ago it was at 20 and yesterday they stopped the trading at $1.66/share.

Accredited Home Lenders is another stock imploding in the same way.

[Systematic Chaos]

4. I think this may be far worse than the tech bubble.

A lot of people lost their jobs -- and definitely some their homes -- when that bubble popped.

But in this case we're talking about people losing their homes and credit first, and then being set up to lose their jobs and everything else afterwards. For instance, here in Vegas there are people who have been casino dealers in the "good" casinos (making between $60k and $80k a year) who were sailing along just fine, but then ended up with hundreds of thousands in bad debt from medical bills because their spouse became seriously ill. And as soon as those employees' next credit audit was done as a condition of employment and it was seen that they were in a bind, there went the job.

Also (and someone correct me if I'm wrong please), it seems to me that IT was more self-contained than housing, in that there are so many peripheral industries that are dependent on housing remaining strong. But that's just me and I'm no "surprised economist". :)

[Chimichurri]

7. the tech bubble was monumental but we didn't feel it for long

because Greenspan came and dropped the intereste rates to something like 1%. This allowed for a ton of easy money to flood the markets thus fueling the housing mania. Those young tech people (like me and my friends)who were sol after the dotcom burst, jumped into the housing industry. They became realtors, mortgage brokers, contractors and even hedge fund managers. The question now is...what will save our collective asses now?

[Zynx]

5. As ugly for the stocks. Worse for the economy. Most tech stocks didn't *do* anything.

That was part of the reason they were such stupid investments. They weren't real companies, didn't really sell anything and never made money. No real economic impact from most of them.

Sub-prime lenders blowing up - and their stocks dropping because of it, since no one wants to own bankrupt company stock - is bad because it means a credit crunch. No credit, no buying new homes, which means housing falls further.

[The Cleaner]

6. The subprime sub-bubble is clearly bursting

and will no doubt impact the larger housing bubble. This is a huge concern. If we see housing prices fall, more people will want to sell. Who wants to hold onto a home that is falling into NEGATIVE EQUITY? More will just have to walk away from their homes in that case.

Just a few years ago people considered their homes ATM machines as they saw their equity skyrocket. But now if you purchase a home in some cases, get ready to actually OWE the bank money as equity decreases as a result of falling home prices.

It's been a wild ride with prices clearly skyrocketing way beyond rational valuations. This is precisely what happens in any stock market bubble.

Bubble or no bubble? You be the judge.

[soothsayer]

8. as a renter of course I'd love to see a correction in favor of rational

housing prices, but i feel for the folks who got all house happy and were willing to shell out $$$$$ for houses that imho just weren't worth it.