Household HSBC Watch

Subprime issues hit HSBC very hard in the United States, but an interview with Warren Buffets shows that HSBC’s problems are mounting at a rapid rate. Losing millions per day is one thing, but to watch losses rise rapidly is quite another. What HSBC once failed to realize is that their niche market is subject to unemployement, market swings, and season work. Thus as the United States begins a recession HSBC’s customers will begin to default on more loans.

That is exactly what we are seeing as the US reported a record number of job losses, a record number of foreclosures, and borrowers have nowhere to turn for help. Home prices are falling rapidly. Credit card accounts are being closed, or the available balance reduced. Second mortgage loans are hard to find, equity is hard to tap, and it is hard ot make payments. Many of HSBC’s customers in the blue collar work force will see companies scale back on remodeling or expansion plans. There simply is no money. But isn’t that what customers are telling HSBC collection agents? What goes around comes back around sooner or later.

High risk can bring high rewards, but one must know when to quit the game.