In my article series about Broke,USA, journalist Gary Rivlin’s book on the alternative finance industry, I have written about the competitive advantages of an industry that lends money to those with few alternatives. However, I have also written about the risks of investing in such an industry, such as regulation, corporate misbehavior, and competition.
In doing so, some themes have come up again and again. Such themes have been, in my mind, valuable not only for alternative finance investors, but also for investors in general. They include the importance of pricing power and the threat of competition. They also include the strength of the pawnbroking model as well as the value of analyzing a company through its relationships with its lenders.
That said, one area of the alternative finance business which I have not discussed but which Rivlin goes into in much detail is the subprime mortgage business. I have intentionally not discussed that business, since much has already been written about it and its effects on the global economy in the past few years. That said, Rivlin’s book does have some interesting insights on subprime mortgage lending and how it relates to the broader alternative finance business, insights which I feel are useful for investors. (Read More)