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Economy

Sub-prime credit crisis unfold

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sub prime loan pic
(source: www.stride.co.uk)

Last Monday was one year anniversary of sub-prime (and subsequent credit crisis), here is an interesting time line I found at BBC. Quote:

8 March (2007)
Biggest US house builder DR Horton warns of huge losses from sub-prime fall-out.

12 March (2007)
Shares in New Century Financial, one of the biggest sub-prime lenders in the US, were suspended amid fears it might be heading for bankruptcy. See the New Century entry at Wiki here.

A year later (lots of bad things happened in the past year):

14 March (2008)
Investment fund Carlyle Capital fails as the credit crisis spreads from sub-prime related products to other mortgage-backed investments.

14 March (2008)
Bear Stearns receives emergency funding, after its exposure to mortgage-backed investments undermined confidence in the bank.

It appears the Bush Administration (Fed Reserve, Treasury Dept.) started to react to the crisis Last August. I think it may help the situation if they have acted earlier. But it’s also a tricky problem for goverment and regulators, they seem always do things behind curve. On other hand, if they act too early, they could jump the gun and shoot their own foot.

Anticipate, not react: my lesson learned
That’s why I don’t want to be a politician or economist. To me this is just too hard. I think being investing in stock market is hard enough for me. I am sure many investors will share my view for the past year.

In hindsight I felt nervous about my stocks (especially Crocs) on August 16. The Crocs stock recovered, went back up after the big drop, and I lost my alertness. The Oct 31 Q3 earning was another warning sign, but I still have some false hope. Did I sound like the Bush administration? Note the great investor Warren Buffett already sold his PetroChina position on last August, while I am still hope for “one more bubble”.

Fortunately, or unfortunately (depends on how you look at it), I decided to sell my specalative stocks since early Jan. 08, and built a solid porfolio since then. Don’t know the result yet as I am still under water, but one thing I am sure is I can get better sleep at night, without Crocs and Longtop.

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