While all investors should be painfully aware of incredible risks in subprime exposure in the current market, the ramifications of this sector's blow-up for other mortgage markets remains rather unknown.

An insightful New York Times piece that ran today broke the story which many investors, including myself, didn't truly understand -- the growing costs of borrowing money for large home purchases. As a result of much greater difficulty in re-selling private mortgage securities (basically a basket of mortgages grouped together and sold to a buyer), even low-risk borrowers are having trouble borrowing capital at reasonable rates of return because there is much less demand for these mortgage-backed securities.

This information is devastating for homebuilders in high-priced markets. Understandably, the already out-of-demand expensive homes are going to become even less in-demand as a result of potential buyers no longer being able to borrow the money needed to complete the purchase at reasonable rates. Due to this factor, among others, pricing is probably going to continue its decline.

Refinancing will also become much more difficult for very similar reasons. Because second-market mortgage buyers have been devastated by the subprime implosion, they won't have the ability to purchase nearly the same amount of refinanced mortgages that they once had.

In today's day and age it seems like everything is intricately connected to one another due to derivatives, leverage, and so on. Gone are the days when simple cause-and-effect analysis could be used to understand a piece of breaking news.

You would have to have been hiding out in a cave over the past few days not to know that subprime fears have turned into mass panic on Wall Street. The newest company adding to the growing fears is Countrywide Financial Corp. (NYSE: CFC), the biggest mortgage lender in the U.S.

The company says it's now facing "unprecedented disruptions" that may very well impact the company's future profits. This will only give Wall Street's bears more reason to come out and drive down prices, fearing that the subprime effects are going to spread into additional areas of the market.

Shares of Countrywide are getting pounded in European trading, and you can be sure that the same will be true once New York traders get down to business this morning. As of 7:20 AM EDT the stock is down 16% in premarket trading. Yes... it's going to be an ugly one out there today for this stock (and probably the whole market, truth be told).

Dealbook reports that the subprime meltdown does not just hurt the poor. It also hurts those who profit from helping put the poor into debt over their heads. Take the case of John Devaney.

Devaney's sour bets on subprime have forced him to put his second home and his yacht -- Positive Carry (a reference to an arbitrage-like trading technique) -- on the market.

Devaney's remarks on subprime remind me of the adage "Be careful what you wish for..." Here's what he had to say back in January: "I personally hate subprime and I'm kind of hoping the whole thing explodes.''

Meanwhile, Dealbook suggested these possible names for the new owner of Devaney's yacht:

• Margin Call
• Sinking Ship
• No Doc Dinghy
• Sub-Merged
• Not so FICO

Feel free to comment with a better one.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.

Investment ideas were aplenty, following up on our Ira W. Sohn Investment Research Conference blog earlier. Some ideas worth noting are:

• Bill Miller, despite being wrong on this investment since 1999, believes Eastman Kodak Company (NYSE: EK) will turnaround and is worth $45 per. As we have blogged in the past, the new CEO is very close to getting this business model to work, meaning this company could turn into a free cash flow machine.
• Steve Mandel, formerly of Tiger Management and now running a fund at Lone Pine Capital, likes EMC Corporation (NYSE: EMC), which was up big last week. In addition, he likes other large cap stocks such as General Electric Company (NYSE: GE) and Goldman Sachs Group Inc (NYSE: GS). He also has has postive comments on Google Inc (NASDAQ: GOOG).
• Wilbur Ross is still pushing his commodities turnaround plays, in particular International Coal Group Inc (NYSE: ICO). Ross's thinking is as follows: Coal pricing should reach healthy levels as excess inventory is burned off. Coal will account for 57% of U.S. electricity generation, up from 50% today, in the next twenty five years. Appalachian coal, in which ICO is rich, has considerable pricing power since East Coast supply is limited and demand is strong.

The ideas were aplenty with some negative views on MBIA Incorporated (NYSE: MBI), betting against subprime mortgage exposure, and The St. Joe Company (NYSE: JOE), the northwestern Florida real estate company, which is running into some difficulty as the housing market slowdown continues.

After the recent pounding that the subprime mortgage sector has been taking, you're probably not thinking about its investment opportunities. But that's what I'll be talking about on CNBC at 11 a.m. with Becky Quick and Tom Gardner of Motley Fool.

There are two reasons for thinking there might be opportunities here:

• Investment banking put - Investment banks are putting a floor under the stock price of many subprime lenders. For example, Goldman Sachs Group Inc. (NYSE: GS), Lehman Brothers Holdings, Inc. (NYSE: LEH) and Bear Stearns Companies, Inc. (NYSE: BSC) have all said they may commit more funds to subprime. Yesterday, Accredited Home Lenders Holding Co. (NYSE: LEND) added $3.39, or 56%, to $9.43, helped by apparent takeover speculation in the wake of its statement Tuesday that it would explore "strategic options." On the pink sheets, New Century Financial rose 68 cents to $1.35, more than doubling its share price from a day earlier. NovaStar Financial Inc. (NYSE: NFI) is also up 50% since it bottomed out at $3.43 on Tuesday.
• Picking the long term survivors - Not every industry participant will be wiped out. For example, Countrywide Financial Corp. (NYSE: CFC) -- which only has 7% of its loans in subprime -- added $376 million in cash for a total of $1.4 billion in 2006. Nevertheless, it is far from being out of the woods: it recently reported a rise in bad loans across the board -- i.e., payments were 30 days late at the end of 2006 on 2.9% of prime home-equity loans serviced by CFC, up from 1.6% a year earlier and payments were late on 19% of subprime mortgage loans [subscription required], up from 15.2% at the end of 2005. If it reports worse than expected damage in future quarters, CFC will drop further, which could represent buying opportunities that lower an investor's cost basis. Despite the medium term pain of such a strategy, if CFC survives until the next housing upturn, investors will profit.

This morning's Wall Street Journal [subscription required] leads with a discussion of the unexpectedly severe deterioration of the subprime mortgage industry. And the process that led to the subprime decline is happening now in private equity. This suggests the potential for an unpleasant surprise in the business of lending money to private equity firms.

Subprime mortgages are loans made to borrowers who are considered to be higher credit risks because of past payment problems. Since these loans are so profitable, the market has grown at a 39% annual rate from $120 billion in 2001 to $625 billion in 2005.

But if a borrower can't pay back the loan, the costs of this rapid growth become apparent. Up until 2005, if a borrower could not pay back the mortgage, the borrower could sell the house and use the proceeds to pay the mortgage company. But with prices falling, this strategy does not work anymore. In October, borrowers were 60 days or more behind in payments on 3.9% of the subprime home loans packaged into mortgage securities this year -- nearly twice the delinquency rate on new subprime loans recorded in 2005. And UBS expects 2006 to be "one of the worst ever for subprime loans" with 80,000 subprime borrowers behind on their payments.