Good Management
Sub prime is a buzzword at the moment, and the way things are going it will soon earn an entry into the Oxford dictionary.
The meaning could be twofold: (n.) loans given with little or no security from the borrower, or (adj.) the description given to an economy suffering from poor management and slack lending standards.
Sub-prime the adjective is headlining the business pages at the moment.
It was used by BBC recently when reporting another write-down by Swiss financial group UBS.
UBS also announced that the chairman Marcel Ospel has stepped down in light of these latest write-offs.
There are financial companies out there with falling stock prices due to the “sub-prime crisis”, but have strong management and well-maintained balance sheets.
These companies will be the market darlings after the dust settles and the crisis is over.
But, now could be the right time to re-enter the market and pick up some of the stock on the cheap.
A word of warning however, it is important for any investor to do their homework, ask questions and make educated decisions.
Analysts and investors are concerned that, despite financial institutions writing off billions of pounds in the last quarter 2007 and this latest quarter, there is still billions unaccounted for as more borrowers struggle with their loans.
There may be a few more big institutions to fall yet, but you can be sure there are many companies out there with the right checks and balances in place to weather the storm.
