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Non-Tech : SPIN-OFFS "secret hiding places of stock market profits"
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To: Jurgis Bekepuris who wrote (1130)1/4/2008 12:17:53 AM
From: Spekulatius  Read Replies (1) of 1185
 
DFS - yes opportunities abound in the financial sector but lot's of pitfalls too. I decided to avoid US banks with mortgage exposure for a while, the reason being that i believe home prices will fall in the high single digits percentagewise. this will trigger lot's of mortgage defaults beyond just subprime, IMO.

I think we will see a 2nd leg down once subprime is done, Alt A and also some prime mortgages are going to show problems, mostly as a function of vintage years. i sort of believe that many folks who see themselves deep underwater will default even if they could muddle through.

DFS has not an easy had to play, credit card delinquency will probably rise from 3.5% to 5% this year. a 1.5% jump equates into 750M$ for a 50B$ credit card portfolio (owned and managed). Some of this will towards to owner of the credit card trust but one way or another DFS will be impacted, as i expect that securitization will be more difficult going forward (expensive). However they do have a high grade customer base, based on scores (equivalent to AXP), the debit (Pulse network) and the VISA and Mastercard litigation payments.

I think there is a big chance that 5 years from now they will be bought out.
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