[quote="Wombaticus Rex"]....The next round of problems is ARM jumps -- all those adjustable rate mortgages are about to get a lot more expensive and it will be a definite tipping point for millions of people who are just barely making it now...quote]
I don't know anything about Doug Hornig, but I saved something he wrote almost a year ago:
"It's not until May of 2010 that the next wave really hits. From there to October of 2011, the resets will be coming fast and furious. That's 18 months of further turmoil in the housing market, and the beginning is still nearly a year away! (Although the months in between are likely to be no picnic, either.)"
http://www.321gold.com/editorials/casey ... 52909.html From Link:
Casey Files:
The Second Crash -
On the Way and Unstoppable
Doug Hornig
Editor, BIG GOLD
"May 29, 2009
Tuesday, October 9, 2007 started as a nice day in New York City. A lovely early fall day, with the temperature still a balmy 80° at 2:00 in the morning. By evening, though, the temperature had dropped twenty degrees, the clouds had rolled in, there was thunder and rain.
As with the weather, there were some hints of trouble here and there on Wall Street. But all in all, things could not have seemed better. Little did we know, the stormy end of 10/9/07 signaled a very large bubble that had just popped.
That was the day when the Dow Jones Industrial Average hit its historic peak. From there, it was all downhill - slowly but steadily at first, and then violently after last August - until the Dow bottomed (for now) on March 9 of this year. Over that span, the index lost 54% of its value.
It's been a crushing blow to just about everyone. But it's already being referred to as the crash. As if the unpleasantness were now all behind us. More likely, in the future it will be seen as, simply, the first crash.
Don't believe it? In a moment you will, when you see the scariest graph of the year.
But let's quickly recall what's already happened. During the late, great housing boom, interest rates were at microscopic levels, while bankers were encouraged to grant home loans on little more than a wink and a nudge. In order to inflate their balance sheets, those bankers resorted to all sorts of gimmicky, adjustable rate mortgages (ARMs), whose common feature was an interest rate that would eventually reset. That is, it would balloon somewhere down the road. And those most likely to come quickly to grief were the riskiest borrowers, who held loans known as "subprime."
"But not to worry," borrowers were told. "Betting on ever-rising home prices is the safest wager in the whole wide world. If you have problems with cash flow when the ARM resets, your house will be worth a lot more, so you can simply sell it and walk away with a nice chunk of change in your pocket." Uh-huh.
The bankers themselves were a little more concerned about the deterioration of their portfolios. They took out insurance in the form of credit default swaps (CDSs). These were a brand-new invention in world financial history, allowing mortgages to be sold and resold until they were leveraged 20 times over. They became the shakiest part of a huge global derivatives market, with a nominal value in the tens of trillions of dollars.
For a while, this Ponzi scheme even worked. But then, as they had to, the ARMs began resetting, and there were defaults. Then more of them. Because at the same time, the housing market was cooling off and the economy was stalling out. More and more people were trapped in a situation where they owed more on their home than they could sell it for. Many simply mailed their keys to the bank and moved on.
All of this wreaked havoc in the derivatives market. Sellers of these exotic packages could no longer establish what they were worth. Buyers couldn't determine a fair price and so stopped buying. As the ripples spread through the world financial system, trust disappeared and liquidity dried up.
Now consider that the base cause for all that dislocation was the subprime sector. And how big is that? Not very. Subprime mortgages account for only about 15% of all home loans. Their influence has been way out of proportion to their numbers, because of derivatives. Here's the good news: the subprime meltdown has about run its course. These loans were resetting en masse in 2007 and the first eight months of '08. Now they're pretty much done.
And the bad news? No one in the mainstream media seems to be asking what should be a pretty obvious question: What about loans other than subprime? Truth is, the banks didn't just trick up their subprime loans. ARMs were the order of the day - across the board.
Now, here's that frightening graph we referred to earlier."..........
The greatest sin is to be unconscious. ~ Carl Jung
We may not choose the parameters of our destiny. But we give it its content. ~ Dag Hammarskjold 'Waymarks'
