Quote:
Originally posted by Moses
The mortgage industry has adopted the business model of the Rent-to-Own stores that feed on the poor.
They sell an overpriced but highly desirable product with nothing down and "affordable" payments that cannot sustain a long term commitment to buy. This whole thing is gonna get ugly. As the housing market get softer, I expect we'll see more and more folks walk away from "interest only" and "negative am" loans. The default rates will be extraordinary.
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Agreed, but the thing that would prevent me from taking any short position on the banks -- is the fiat money/Federal Reserve banking/monetary system we have.
I'm expecting, that before things get too bad, the government (through the Fed -- the Fed is really
not a private entity as some would try to make you believe) will turn on the printing-press full blast and bail out the banks -- and
voters holding mortgages they can't afford.
From the politician's perspective it is much better to have hyper-inflation -- which they can blame on "evil corporations raising prices on goods and services" -- rather than have large numbers of people being put out of their homes because they have defaulted on their poorly constructed loans.
There is probably going to be some severe implosions in the banking industry (I suspect there is a good chance Wayne will make money on his short positions), but I expect there will be a "government bailout" of the industry before things get too bad.
If I were holding a short position on the bankers, I wouldn't get too greedy expecting a complete collapse of the industry. The government will bail it out, which will trigger massive inflation, which is one of the reasons I'm so bullish on
gold.