Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Debt Default Boom Has Begun, How to Profit From Corporate Thievery

Companies / Investing 2010 Feb 21, 2010 - 05:52 AM GMT

By: Investment_U

Companies

Best Financial Markets Analysis ArticleDavid Fessler writes: It was a crisp, cold night. 8:30 PM. I was dressed in black, as was my friend and partner-in-crime. (He asked that I not use his real name, so I’ll call him Pete.)

As Pete has done hundreds of times before, he was directing a covert night-time operation and I was tagging along with him in his specialized tow truck.


Pete’s very good at what he does. He has to be – he steals cars for a living…

The Debt Default Boom Has Begun

However, unlike regular car thieves, Pete never ends up in jail. That’s because his business is totally legal.

He’s known as a “Repo Man” – a guy hired by local banks and other loan agencies who want the asset back because the owners have stopped making their payments.

And as America struggles under its heaviest debt load in history, it’s no wonder that Pete’s business is booming. Weighed down by huge mortgages, car loans, and high credit card balances, consumers are defaulting in droves. Just look at these grim statistics:

  • One in five homeowners are underwater on their mortgage payments.
  • Credit card delinquency rates are at 4.54% – an all-time high.
  • Auto delinquency rates continue to rise. The rate is now almost 1% of all auto loans.
  • The Department of Education estimates that student loan default rates hit 6.7% in 2009 – a 29% jump over 2008. The number is expected to rise further.

The Thievery Corporation

On the night I joined Pete, we were looking for a BMW whose owner had stopped paying for it. Pete’s two assistants were in a separate vehicle, responsible for locating the car. The radio cut into our conversation: “We’ve got it. In the side lot at the ABC Pizza Place… blue 528i BMW… license number XYZ-123 right?”

“That’s it – we’ll be there in under a minute. Keep an eye out,” Pete replied. What happened next was impressive. As we pulled in to the parking lot, Pete quickly backed the truck up to the car and deftly maneuvered a special hydraulic clamp under the BMW’s front wheels. He then lifted the front of the car and we headed out. Total elapsed time? About 15 seconds.

After a mile or so, Pete pulled over and properly secured the car’s wheels for the 20-minute drive back to his impound yard. “That one went down just the way you want them to,” he smiled.

Finding vehicles is tricky sometimes. Owners can switch plates, hide the cars, or put them in storage facilities. But Pete’s quite resourceful, too. I asked him about the methods he uses to locate missing vehicles. He smiled: “Magicians never reveal their secrets.”

Once a vehicle is repossessed, the bank usually allows a grace period of three weeks, where the owner can pay up – usually in cash – to get their asset back. If he/she doesn’t, it’s typically sold at auction.

And Pete’s business is humming to the point where he’s now doubling the size of his impound yard and is even thinking of running a second repo crew. “We’re having a hard time keeping up with the demand from the banks,” he told me.

Three Ways to Profit from the Debt Default Boom

While you can’t invest in Pete’s operation directly, there are ways to profit from the debt default boom. Here are three of them…

  • Encore Capital Group, Inc. (Nasdaq: ECPG)

The firm purchases and manages consumer receivables that banks have already charged-off. This includes credit card debt, deficient auto loans and unpaid telephone bills.

Encore buys these for pennies on the dollar and gets to keep the bulk of what it collects.

And business is booming. Fourth quarter results exceeded analysts’ expectations and current projections have Encore outperforming its peers in the credit services industry for the next five years. As for the stock… it’s rocketed 591% higher since hitting a low of $2.62 on March 13, 2009.

  • Asta Funding, Inc. (Nasdaq: ASFI)

Asta purchases its receivables through privately negotiated direct sales, brokered transactions and auctions.

Consisting primarily of MasterCard, VISA and private label credit card accounts, Asta also provides repossession services.

Boasting a market cap of just over $100 million, Asta’s stock isn’t widely covered on Wall Street. However, just because Asta is a small firm doesn’t mean the gains are. Its shares are up 366% over the past year and it just notched up its first quarterly profit since 2008.

  • Portfolio Recovery Associates, Inc. (Nasdaq: PRAA)

The company’s business model within the credit services industry is similar to Encore’s. It purchases, collects and manages defaulted consumer receivables. It also provides collateral location services (”Repo Men”) for banks and other credit originators.

And like Encore, Portfolio Recovery’s shares have surged since hitting lows last March – up around 179%.

Investing in the debt default boom isn’t for everyone. But with the situation likely to get worse before it gets better, now is an excellent time to profit from America’s increasing debt levels. And investing in shares of the three companies above is a good starting place.

Good investing,

Dave Fessler

Editor’s Note: You can follow all of Dave’s latest investment research and stock recommendations in the pages of The Oxford Club’s Communiqué. Together with Alexander Green, Louis Basenese and a panel of other top experts, they dig deeper than the “one-size-fits-all” fodder from the mainstream financial press. You’ll get investment recommendations that are loaded with profit power, along with strategies and techniques that reduce your risk. Speaking of which, it’s also risk-free to give it a try. Find out more here.

Source: http://www.investmentu.com/IUEL/2010/February/the-debt-default-boom.html

http://www.investmentu.com

Copyright © 1999 - 2009 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Pam Michaels
22 Feb 10, 07:33
debt thievery

You are a ghoul.


Paul
22 Feb 10, 16:28
debt thievery 2

Ghouls profit on the folly of fools. The people of earth became dumb enough to believe debt was the money itself. let them relearn the hard way.


Pam Michaels
23 Feb 10, 23:40
Debt Default Boom

Maybe you're right, Paul. I mean "Are there no prisons? Are there no workhouses?


Post Comment

Only logged in users are allowed to post comments. Register/ Log in