Kunal was spot on with his assertion, so I had to share some link love. He said this in response to my Dow Jones Stock Sale post:
From a technical standpoint, we are still in a correction/pullback mode. Usually during bearish conditions, things can be very erratic.
Sub-Prime Defaults worried the bigs on Wall Street
The effect of sub-prime loan defaults took a massive bite out of any short term stock market gains for early March. Like a domino effect, the Dow Jones crash spurred downturns in equity markets across the globe.
So what does this mean for the long term?
US mortgage companies need to discontinue the practice of giving out these ridiculous sub-prime loans that borrowers cannot pay back. Mortgage companies like New Century Financial brought woes upon themselves by investing heavily in these unstable sources of revenue. Now, they must deal with the threat of bankruptcy. It just goes to show that what goes around, comes around.
Not All Sub-Prime Loans Were Created Equal
Sub-prime loans are great wealth building tools when used properly. Since 2000, sub-prime loans gave many current home-owners the ability to purchase their first home. I think they are warranted as long as mortgage companies (and communities like Prosper) do not abuse the well-being of the sub-prime borrowers.