Option ARM Analogue from the Tech Bubble
Fascinating article from Market Ticker about an Option ARM Analogue from the Tech Bubble:
"So Lucent came up with an innovative plan - they sold you the gear on a long-term capital lease, and allowed you to pay only the interest on the lease, or in some cases, even less than the actual interest! The deal was that when your cash flow improved, and you became profitable, you could pay off the principle on the lease and/or just buy the gear outright."
"Doesn't this sound suspiciously similar to what's going on right now? It should. It's exactly the same deal that has been offered to all these homeowners - pay less than the interest cost and/or the fully amortized cost of the hardware now, and when your economic situation improves, which we're sure it will in a few years - you'll have less debt, you'll have a better job, whatever - you can pay off the principle or roll it over into some other form of financing."
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