This just in from the Mortgage Desk
BJ’s CEO talked about how so many companies, including his, decided to commit a lot of resources to Florida because it had been, historically, one of the great growth states in the nation. Not any more. It didn’t grow this year. Why? Because Northerners who want to retire there can’t sell their homes. Stark. True.
Mort Zuckerman is one of the country’s smartest businessmen and investors. He just gave a very telling interview on the sub-prime market and the issues facing the financial markets. Two things he said really grabbed me.
The real problem is that no one knows how to value these securities.
No one knew what they were buying and selling
Here’s the scary thing. On point #1, he’s referring to the nation’s financial experts.
We’ve all been in class but were afraid to ask the question. So, you’re in a social situation and someone is talking about problems in the sub-prime market and you want to ask, “What’s a sub-prime mortgage?”
Sub-prime mortgages are simply mortages that are written to creditors with less than good or poor credit.
When Warren Buffet invests in companies such as Geico who only deal with low risk customers, your brokerage firm may be creating funds in which they buy mortgages in a fund from sub-prime creditors.
Do you understand the problem?
