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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Ilaine who wrote (116225)8/9/2001 5:25:55 AM
From: Wyätt Gwyön  Read Replies (2) of 436258
 
the thing about those net worth numbers is that turning an aggregate figure into a per capita one as you've done hides the ugly imbalance that exists. some people have much more net worth, others have negative net worth. 500K net worth guy and -200K negative net worth guy average out to 150K net worth per capita. but 500K guy is no help to -200K guy (or the creditors) when the latter stops installment payments. i think that's important to look at because it is weakness on the margins that results in massive failures, as hinted at by the WSJ article on subprime lenders posted here a few posts back (1BB writedown by Amex).

also, i wonder if your debt numbers include leases on vehicles, which are a big drain on installment cash flows but often don't show up in debt numbers.

from that article:

That subprime has been deteriorating is clear. In May, the latest month for which data are available, the percentage of subprime mortgages nationwide that were seriously delinquent rose to 6.37% from 5.55% at the end of last year, according to Mortgage Information Corp., a San Francisco research and data firm that tracks the majority of all subprime mortgages. That compares with a 4.64% delinquency rate at the end of 1999. A mortgage is defined as seriously delinquent when the borrower is three or more payments late.

The rising delinquency rate could be an early sign that broader consumer-credit problems are just around the corner, much as rising junk-bond defaults two years ago proved a harbinger of deep problems in corporate lending. Some analysts and regulators already see signs of wider trouble as layoffs mount up and the nation's consumers, already dripping in debt, start to feel the pinch of a slowing economy.

Indeed, "prime" mortgages issued in 2000 have a higher serious delinquency rate for this point in their life cycles than the mortgage loans made in any other year since at least 1993, according to Mortgage Information. The serious delinquency rate for last year's prime mortgages -- the ones for customers with good credit histories -- stood at 0.16% at the end of last year, up from 0.07% for loans made in 1999.
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