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XMFSinchiruna (26.56)

Are You Ready for Round II of the Mortgage Meltdown?



June 01, 2009 – Comments (6)

Fools, give me a minute of your time, if you please.

Long-time Fools will recall that Top Fool goldminingXpert and I have differed most vehemently on a range of topics from investment time horizons to the dynamics of inflation, etc. Like any Fools with strong viewpoints on timely macroeconomc topics, we've even locked horns a fair number of times.

This post is all about the things we agree upon, and man-oh-man ... lately his views and mine have been overlapping to a surprising degree. :) Since we are very different personalities, viewing the world each through our own lenses, I suggest that our agreement on these issues in particular might suggest that this warrants a second look from Fools who are presuming that the worst is behind us. I know there are many consistent voices on CAPS that would agree with these perspectives, I highlight gmX because he's been on a tear lately ... following his conscience by seeking to alert Fools about the pitfalls ahead for the unsuspecting investor. He has, of course, caught some flack for expressing these sour notes in the midst of such a frenzied rally, but I wanted to thank him for sticking to his convictions regardless. I think history will show that his warnings were very much warranted.

The Looming Mortgage Meltdown

If that soulds to you like a regurgitated headline from 2008, Good ... cause it's about to be 2008 all over again! As the dominoes fall, it could make 2008 look like child's play. Unlike the last time around, however, this time we've received a warning shot across the bow from one of the ratings agencies. An Earth-shattering report came out of Fitch Ratings last week that received very little press ... and where it was covered I believe its implications were significantly understated by a financial press that's equally enamored of the ongoing equity rally. Based upon this report, another report out the same day regarding commercial loans, and the historic action on the mortgage-backed securities market as explained by gmX on his blog, I set out to paint a picture for Fools of the range of macroeconomic ramifications of such a renewed mortgage crisis as was signalled last week. Please take a moment to read my article, entitled "Are You Ready for Round II of the Mortgage Meltdown?".

When you're done, please come back here and strike up a discussion. I believe these developments on the mortgage front will dominate the attention of investors for the remainder of 2009 ... although the issue faces steep competition from a mounting currency crisis, inflation, etc.


Finally, let me clarify that gmX and I still have wildly opposing views on a host of topics. :) He thinks China is heading into a deep depression, and I think he's 180-degrees wrong on that one. In fact, I see China in a position of undeniable relative strength compared to any other nations in the G20. In times like these, it's relative strength that matters most, and China has that in spades. Besides, gmX cites Krugman to support his views on China, and the more I read/hear of Krugman the more I'm convinced he's completely off-base. I suspect we'll always have very different investing styles and near-term outlooks with respect to precious metals as well, but maybe he'll come around eventually (just kidding, gmX).

The take-away here is, I believe, that disagreement in a context of mutual respect such as we've come to know and love here on CAPS is the fertilizer for some of the most thought-provoking investment ideas I've ever encountered. I am so proud of this great community, and I embrace the wide arc of perspectives that make it such a vibrant setting for collective investigation.


6 Comments – Post Your Own

#1) On June 01, 2009 at 5:30 PM, goldminingXpert (28.81) wrote:

Loved your article and loved this post. Nice blog post as well. I'm sorry about the stuff that went down last year. The locking horns was 90% my fault. While it takes two to tango, I was instigating the vast majority of the time. Again, I apologize.

About China, who knows? I think they are tied too closely to the US and to socialism but I definitely could be wrong. I certainly don't always agree with Krugman--he isn't as high a quality an economist as you might expect for the level of reputation he has in society.

I'm not short a single thing related to commodities now and I'm long Northgate and Jaguar Mining so I am, reluctantly, aligned with your camp. I've owned the NXG for 2 years (tripled down at .98 a few months ago) so I'm not even trading around my position either. You may win me over yet.

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#2) On June 01, 2009 at 5:33 PM, goldminingXpert (28.81) wrote:

I just realized that article I praised was a blog not by you but by SkepticalOx. Anyway, nice link and nice work SkepticalOx.

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#3) On June 01, 2009 at 6:07 PM, XMFSinchiruna (26.56) wrote:


No apologies necessary, my man ... we buried that hatchet long ago. :)

I'm glad to see your skepticism towards Krugman. I think his theory about desired savings outweighing the scale of these fiscal interventions is a load of Nobel-winning crap! :P

"You may win me over yet". Whatever it takes to help fellow Fools to consider the possibility that gold could find $1,000 a new multi-year floor sooner than most could imagine. Gold is an accelerating train, so the voyage from there to $2,000 ... while fraught with wild twists and turns, will be far shorter than the voyage to this point. far shorter indeed.That being said, I feel that a re-test of $900 is still within the realm of possibility.  

Anyway gmX, thanks for standing by your unique perspective on the market even in the face of opposition. If the oppposition turns personal, feel free to remind people: "Please Don't Shoot the Messenger".


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#4) On June 02, 2009 at 11:38 AM, Rehydrogenated (33.35) wrote:

I liked you two better when you were fighting...Reading all this lovey-dovey stuff makes me feel nauseous.

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#5) On June 02, 2009 at 12:17 PM, XMFSinchiruna (26.56) wrote:



Don't worry, I can't seem to escape contentious discussions for long. :) Report this comment
#6) On June 02, 2009 at 7:12 PM, goldminingXpert (28.81) wrote:

My latest thoughts on this subject.

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