Saturday, August 18, 2007

Nervous financial markets

The international financial markets are very jittery these days, and I am not going to tell you that things will be OK, even though that is what I think. There are some very unnerving situations, including an irrational fear of the mortgage industry. A certain portion of that segment is in deep trouble, banks and companies that wrote proper loans will be just fine.

I am thinking of Franklin Roosevelt. At a difficult moment he said that all we have to fear is fear itself. I don’t recall that personally, but I do read. My old pal, the late radio analyst Lowell Ruffcorn, used to say that there are only three reasons people make an investment: ignorance, fear or greed. This is all psychological.

Investors are looking for justifications for the decisions they have already made. All it takes is a little push. We will make it through this, although it might be a good idea, in the future, not to give any more loans to folks that do not have an income of a good history of debt payment.

Bankers have all but ignored an old standard known as the “3 “C”’s”. They are character, capacity and collateral. That does not necessarily cut out the small borrower, especially from a hometown bank that understands the person and the local situation.

(Broadcast August 17, 2007)

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