December 15, 2008

Think the "Sub-Prime" mess is bad? Wait for "Round 2"

Since at least September, we've all been hearing about the "sub-Prime" mortgage crisis; where people who were unqualified to get mortgages, got them and defaulted. This mess destroyed several banks, several stock brokerages and several investment companies and has already caused the US Government to plan on injecting almost $8.5 TRILLION to get the economy moving again.

Well folks, I have bad news for y'all: The worst is yet to come.

Prepare yourselves for "Round 2."

Round 2 consists of exotic mortgage instruments known as "Alt-A" and "ARM's." Long story short, these are mortgages where QUALIFIED buyers took adjustable rate loans and/or "balloon" loans that are now beginning to "reset" to higher interest rates.

Guess what? They're defaulting at record levels. . . . . 70% !!!

When "Round 2" hits on December 31, the defaults will utterly destroy whatever is left of the banking industry. It will wipe out countless banks and countless investment houses.

The wreckage will be so severe and so far reaching that it will make the Great Depression of the 1930's look like child's play.

Round 2 is what will collapse the government itself. Probably by the end of February, 2009. Undoubtedly not later than June 2009.