Bosco,
The subprime companies are the lenders of last resort (ignoring Motley Fool's "joke" about loan sharks). So if interest rates rise, people who are now marginally eligible for a loan from a conventional lender will be forced to turn to a subprime lender.
I don't understand macroeconomics well enough to explain the correlation between interest rates and the Hong Kong crash. The news reports mention a hike in rates is corelated to this, but I don't know which came first. It seems that traders feel that the Hong Kong currency is overvalued, and have been selling it and buying dollars. (Perhaps that demand for dollars is causing higher interest rates, via supply and demand?) It is supposed to be difficult to sell or short the Hong Kong currency for technical reasons, so the traders are instead doing it indirectly by shorting the Hong Kong stock market.
CTYS has certainly been hit by several pieces of bad news, but we really don't know the score on any of them. We have now been told earnings will be lower, but we don't know how low. We have been told that the British regulators are upset over CTYS' practices (at least they don't go after people with baseball bats), but we don't know what the outcome will be. The floorless convertible preferred stock is a big concern, but even there, we don't know what the scope is. Why did the company issue the second S-3 at this time? If the second tranche of preferred stock is convertible now at 2.5, the dilution certainly would be bad for everyone else. But that preferred stock wasn't supposed to be convertible until next March through May. Did something happen to make it convertible now; or did the company just issue the second S-3 now because it's managed by a bunch of stupid bumbling fools? I don't know, because the company isn't talking.
- Charles |
