Subprime Crisis Bottom?

Delinquency Rates Argue Otherwise

What started out as a clever way to exploit an untapped credit market has and will continue to plague overextended consumers and economy for many years to come. Subprime lenders are thirsty for capital and delinquency rates are rising at a much quicker pace than at any time during this decade, leaving many investors wondering when a bottom will form.

 The chart above shows just how quickly the rate of defaults has become since 2000. As the economy drowns in subprime quicksand and keels over into a recession, there is already evidence of a spillover effect occurring with those qualified as prime borrowers. Clearly the ship will not turn around overnight.

The flight to quality has already begun. Institutional investors are beginning to shift assets away from exposed banks toward entities in the industry that have clean balance sheets and are well prepared to weather the storm.

Wainwright Bank & Trust (WAIN:NASDAQ) is one such company to be on the lookout for. It has done nothing but rise in the face of our current market meltdown. In fact, it has been trading in a sideways consolidation pattern for the better part of a year and is due for another rally very soon.

Good investing,Stanley Barnes
Editor, Charts of the Week