Tuesday, January 15, 2008

Subprime hurts us all

A friend of mine had to sell his townhouse due to a rising subprime mortgage payment. I don't know the exact numbers but I think his rate went from around 3-4% to 9-10%. His house was a bit of stretch financially to begin with so when the rates when up, he was forced to sell.

When he told me I didn't think much of it. I figured the only affect this had on me was that he may not buy me a beer that night. As this issue has magnified though, the subprime losses are affecting us all.

Citibank announced today it's posting a $9.83 billion loss in the fourth quarter. Primarily due to a write-down of mortgage backed securities. We'll see what this does to the market, but in early trading the Dow is down over a 100 points (1%). The Nasdaq and S&P 500 are down even more.

I don't own any individual Citibank stock, but indirectly I have them in a number of my mutual funds. I'm guessing most of you do too. My point in this is, while the subprime does not directly affect most of us (i.e. we're not losing our house), indirectly we're taking a hit in our investments.

No comments: