Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Victor Lazlo who wrote (128580)	7/19/2001 12:37:33 AM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 164684

Sure, a perfect example. They're certainly benefitting from lower rates, especially with respect to mortgage lending (as have a whole slew of finance cos, banks and mortgage initiation cos) and securitization of loans (represented on the income statement as "net gains on sales" under non-interest income). HOWEVER, their C&I lending hardly expanded AT ALL. What does this tell us? 1) Most of the "liquidity" being funnelled into the "system" is being used to finance additional real estate building...at a time when many would say we are overbuilt (in residential) and rapidly approaching a bubble (in commercial RE). 2) A great deal of their income appears to be from securitizing loans. Good for them, instead of being cautious bankers carefully scrutinizing lending (generally for real estate), they securitize it and offload it into a money fund. Essentially they are a giant ATM that takes a cut of all their MBS lending. Unfortunately that has two big drawbacks down the road a) when loan demand slows, their income goes away b) for the economy the extension of loans via securitization insures that someone (the end borrower) is paying too LOW a price for his loan, and that increased default risk is steadily accumulating. 2) Despite their (massively) increased balance sheet, basically NONE of the increase is represented by business lending outside of real estate. So an increasingly narrow section of the economy (ie banks and homebuilders) is getting the juice...and none for manufacturing, none for tech (good riddance), none for most small businesses (where most job growth comes from in the US). And so we stagnate...like Japan (except for the builders...for a short while longer).