Ally financial not in S&P indices

[Gigaloo]

@Matt_Likes_Analysis

gigaloo, the S&P 500 is market cap weighted so the top heavy financial sector results in fewer financial stocks than say retail stocks relative to the sector’s % of the S&P.

clarifications on Ally, Ally IS junk rated. this is because ~70% of their assets consist of subprime and near subprime auto debt. this compares to 10%-20% for real banks. you want an example of the greatest single large stock at risk this cycle - Ally Financial. it holds the debt that investors are most concerned about, and rightfully so, and it IS the debt that investors are most concerned about, and rightfully so. talk about convexity risk. when investors start to demand a higher yield on subprime auto debt, they will also be demanding a much higher yield on high yield bonds, at which time you have a company this is taking large losses and cannot find financing in the public markets. also, their net liquid capital consists of not very sticky online deposits, a decent amount of which are above $250,000 in a single account so this poses bank run risk. did i mention that Ally has nearly failed twice, and this was outside of a subprime auto loan bubble.

Thank you for this.

[Black_Swan]

Your logic is just terrible.

[Gigaloo]

I know my logic isn’t very strong, but that’s why I am asking for help here. The problem is ALLY isn’t included in the S&P 400 either. None of the S&P indices. I am not concerned about the company, just trying to figure out why is this so.

[Black_Swan]

The S&P market cap requirement is $1.4-$6B versus $12B for Ally. Simple google.

[rawraw]

I’d say 10 to 20 percent of loans being to similar borrowers as Ally would be a very aggressive guess. My guess would be sub 5 percent. Ally is very different