Time and time again over the years I've seen fast-growing sub-prime lenders get clobbered by somewhat predictable downswings in the business cycle. Not always, but often. In inflationary times the pressures on sub-prime borrowers grow exponentially with interest rates, and down goes their financial ecosystem. So, I've learned not to salivate over potential outsized returns, but rather to accept a possibly lower but safer long-term return. I agree that COF is one of the better-run sub-prime lenders, but over most of at least the last 14 years during which COF grew nicely, conditions couldn't have been much sweeter. Those stable low-rate disinflationary days are gone. The 42 years of disinflation since 1981 are gone. Don't mean to sugar-coat things, but what we have now is imbedded cost-push inflation combined with dysfunctional political polarization, war, the evolution of trade as an economic weapon, bigger and more frequent climate disasters, and an old dog who's finally willing to resist the rise of a group of ruthlessly immoral expansionist dictators backed by powerful, low-debt economies who collectively are threatening the very existence of the free world. It's a cinch that inflationary pressure will remain high. The possibility of a return to stable growth any time soon is as vanishingly small as the possibility of our two political parties abandoning their divisive media propaganda bubbles and working together for the common good. Good luck with sub-prime lender stocks.$JPMorgan Chase(JPM)$
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