WARNING! Brace yourself for the most shocking money implosion of the last 76 years, as a second wave of housing hurt crashes down...
THE "SUBPRIME"
TIME BOMB TICKING
UNDER WALL STREET
Thought you were "done" with the property bust?
Think again -- then get ready as a deadly subprime lending time bomb ticking under Wall Street sparks the worst property-led recession of the last 76 years!
This triple-edged "housing hedge" strategy could shelter both you and your money against the fallout IF you let me rush it to you FREE, as soon as possible...
Dear Friend,
A tidal wave of hurt is heading for your money.
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Pay close attention.
When one major investment brokerage company's chief strategist put this chart together, she was so worried she was afraid to show it to investors.
You can see why.
The NAHB index -- or National Association of Home Builders index -- measures the confidence level the NAHB's 220,000 members have in the future of the property market.
With every spike and bust of that same index... the S&P 500 has followed suit, almost one year to the day behind the move. Right now, NAHB confidence level is down 54%.
What does that mean for Wall Street?
- The New York Times,
Stocks right now are soaring.
"Those who think that
the worst may be over
for the housing market
should take another
look at the data... "
January 7, 2007
But get this...
Right now is the 11th sharp drop in the housing market since World War II. And eight out of the last 10 of those drops have been followed by a recession.
Right now, the builders think we're headed for another mega-bust in property. And, possibly, a property-led recession, bigger than any we've suffered in the last 76 years.
What is it the builders know that we don't?
In this special report below, I'll show you the TIME BOMB home-builders and other insiders hear ticking right now under the 2007-2011 stock market. The gears are already in motion. The devastation that will follow is almost guaranteed.
I know that sounds dire.
But in the next four minutes, I'll give you all the proof you need.
If the S&P 500 alone follows the historical trend of plunging housing market confidence, it will hit as low as 700 by this time next year -- less than half of where it is today!
Fortunately, There Are Steps You Can Take
There are still some little-known steps you can take.
I'll show you three of them right here, over the next four minutes. Each of these strategic steps gives you a solid, simple layer of protection against the coming bust.
And I'll send all three of them to you FREE, the moment you're ready...
- One of these protective steps offers you government-backed gains against what my team sees as the inevitable economy-wide U.S. recession ahead. The faster things come unraveled, the faster your "safe-haven" gains in this one opportunity -- a little-known fund -- go up
- The second "hedge" is another simple, single move. And a sandbag for your financial fortress, specifically designed to protect you as the collapse of the credit market crushes U.S. bonds -- especially junk bonds
- The third move gives you a clever way to leverage a whole basketful of falling housing and home improvement stocks with a single, money-multiplying trade. You'll find this very easy to do. And very lucrative, especially during the fallout ahead
I urge you to send for it. And I'll show you how in just a second. First, let me show you what has builders -- and Wall Street -- so convinced we're in for some very hard times ahead...
Deadly Domino #1:
Starting This Year, The Ticking Time
Bomb of Some VERY Dangerous
Loans Will Finally Go off
When Jennifer and Eric H. traded in their fixed 5.25% mortgage in June 2005, they felt pretty smart. The adjustable-rate mortgage (ARM) they got in return would cut their monthly mortgage in half. What Eric and Jennifer didn't get was the fine print.
See, rates on ARMs can adjust UP as well as down.
Now Eric and Jennifer's debt compounds at 7.68% -- and climbing. Worse, it turns out the half payments they were making were just a minimum, covering only interest, not principal. So each year they thought they were "saving" money, they were actually slapping an extra $7,200 on the back of their original debt!
Here's the triple kicker...
The loan Jennifer and Eric have is a special kind of loan where, once you've piled on a certain amount of unpaid interest debt, the loan payment schedule "resets" and you end up having to pay the full amount due each month, regardless.
Depending on the kind of loan, this could happen in as little as two years.
So for Jennifer and Eric, who are near the end of their two-year window, Ground Zero is right about now, sometime in 2007. They would love to refinance again but they can't afford another $15,000 in fees.
Besides, their mortgage broker will no longer take their calls.
Here's the thing: Jennifer and Eric are not alone...
Up to 80% of These Exotic Loans
Now Headed For Potential Default!
This is the dirty little secret of the property boom.
It was just cheap interest rates that spurred the property boom. It was the easy access to all these "exotic" -- and extremely dangerous -- loans. Brokers, in fact, were paid extra to push these contracts on new and lower-income buyers.
There's the rub.
See, when property prices are soaring, even a bad loan looks like a good risk. So banks gave them away like candy... to homebuyers who had no business borrowing as much or spending what they did on homes. That's why these loans are called "subprime."
But what happens when millions of "subprime" borrowers start defaulting on loans they can no longer afford to pay? Already, an unbelievable 80% of all option ARM borrowers can afford to pay only the minimum on their loans.
What happens when a tremor of "resets" sends these borrowers reeling?
Over $1.8 trillion in loans are headed for "reset" this year alone. Millions of borrowers just like Jennifer and Eric will fall behind. Many will give up. And an epidemic of foreclosures will spread across the marketplace.
I don't have to tell you what that will mean for banks, their investors, and Wall Street...
Is This 1989 All Over Again?
I told you earlier how at least one expert is predicting how nearly 2% of the U.S. GDP -- over $250 billion -- could vaporize from the U.S. economy, as property builders go bust.
Do you remember 1989?
Over 1,000 banks were in trouble. They had made some very bad loans. George Bush Sr. gave them over $125 billion just to keep them from closing their doors. That's less than HALF what we stand to lose in the next cycle of this bust today. Yet even that $125 billion was enough to swell the U.S. budget deficit, choke off a recovery on Wall Street, and send the entire U.S. economy into recession for the next two years!
- The Wall Street Journal
What could losing double that amount do?
"A little over a year ago, buyers couldn't wait to sign contracts to purchase homes. Now, many can't wait to get out of them... buyers are backing away from deals in droves."
Before you answer, remember that even then, we weren't looking at nearly as ugly a lending picture as we are today. For instance, only a handful of American borrowers had even heard of what we call today the option adjustable rate mortgage, or ARM.
Also known as pay-option loans or negative amortization loans, these deadly lending schemes lure in borrowers with very low rates at the start (you've seen the ads).
Up front, you get the promise of "cutting your payments in half"... "rates as low as 2%"... and more. What the ads don't tell you, however, is how all that money you're "saving" up front gets quietly tacked on to the end of your loan. The less you pay at the start, the faster the extra costs pile on at the back.
Worse, there's a limit. When the swelling costs of the easier loan get too high, it "resets" -- and you get a letter from the lending company demanding a new payment, this time as much as twice what you paid every month in the past. For most of these borrowers -- once this happens -- it's pretty much the end of the line...
- Bill and Carolyn S., both in their 60s, took a $50,000 home equity loan on their house. Their fixed income will be $2000 per month when Bill's disability insurance runs out. They're already paying only the minimum, $1,413 per month. What happens when their ARM resets?
- Harold C. gets $1,600 per month from Social Security. His refinanced, ARM loan payment is $899 per month. If it resets, he could be forced to pay as much as $1,454. He's disabled and can't work. Where does that money come from?
- Gordon B. is a California cop. He makes good money and pays his bills. When he refinanced his mortgage into an option ARM, he also felt pretty smart -- until he found out his new loan was adding an extra deferred interest cost of $1,000 per month o the amount he owed the bank
- When Jim and Darci R. took on their ARM, it cost $829 per month. But now the rate is "adjusting" every six months, currently at 14.75% interest and counting -- or $1,162 a month. Last year, Jim lost his job... and had to file for bankruptcy
- William H. is 56. He can only swing the minimum on his option ARM. The extra gets tacked onto his debt total. When it hits 115%, it "resets" -- and his option to pay the minimum ends. Payments will double. And it happens, for Will, less than two years from right now.
How many homebuyers from the last three-four years are in this bind?
Tens of thousands of first-time buyers... home-equity borrowers... house flippers... and more... also piled into these risky loans over the last three-five years, more than in any other real estate boom since the option ARM was invented in 1981.
Add to this the fact that many of these borrowers weren't even buying new homes... they were refinancing their current ones... treating what little equity they had in their houses like an endless supply of cash.
As long as house values went up, they felt rich. That invisible "value" looked like a pot of gold. With the help of extra borrowing, at these adjustable rates, they tapped into that. And used the cash to buy SUVs... flat-screen TVs... even stocks on Wall Street.
Now that value in the house is disappearing. The loans are resetting. And these "subprime" borrowers are truly caught in a trap. They can't sell because there's nobody willing to buy. But they can't afford to refinance, either. Or pay off huge chunks of the original debt.
Foreclosures are already soaring, hitting record levels across the country.
Can you feel the ground shaking yet?
The Housing "Nightmare " That Will Haunt
America for the Next 5-10 Years...
As recently as 2003, only .5% of all loans written were these dangerous option ARMs. In California, for instance, that was 1 in every 100 people who borrowed money to buy a home.
Not so anymore.
Today, in the same market, more than 23% of borrowers -- nearly one out of every four borrowers -- has one of these volatile loans... in some places in California, those numbers run as high as 80%!
Take a look at this...
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I don't have to tell you what this could mean. Every one of these loans faces a "reset" period that's about two years out from when the borrower first took out the loan.
You can do the math. More than 1.3 million borrowers took out over $389 billion worth of pay-option adjustable mortgages in 2004 and 2005. Many of these started to reset in 2006, just as the property market started to tank. Many more are set to reset this year, in 2007.
As much, in fact, as $1 trillion in pay-option loans and other creative ARMs over the next 12 months alone -- sending an atomic shockwave across the U.S. economy between now and January 2008!
It doesn't end there.
Over $100 billion more of these loans were written in 2006. That means more resets in 2008. With years of financial "healing" to follow.
It's no wonder George McCarthy, a Ford Foundation economist, calls the option ARM boom "a neutron bomb." Because, he says, "It's going to kill all the people but leave the houses standing."
London's massive bank and subprime lender, HSBC, has already taken a huge public hit for making exactly these kinds of loans. And now the head of HSBC has gone public, calling this whole subprime lending business a big "mistake" for the bank. He's even promised shareholders, "It won't happen again."
But he apologized too late. On Feb. 8, 2007, HSBC's shareholders dumped the stock. And this is just one lender out of many headed for collapse.
California's New Century Financial Corp. -- another mega-lender of these risky loans -- also took a 36% hit. That's its biggest in plunge in eight years. So did H&R Block, who just cut loose its subprime lending unit, Option One.
You can see where this is going.
So far, 23 different subprime lenders have gone bust, just since December 2006.And these aren't rinky-dink local savings & loans. Some of these are major multi-billion dollar institutions.
Even if You're Not One of the
Subprime Borrowers, Watch Out
If you're carrying one of these loans yourself, I urge you to do anything you can to get rid of it. Refinance. Pay it off. Whatever you can do.
But even if you're not one of these millions of risky borrowers... watch out!
Because, you see, you don't have to be foolish about your borrowing to get punished for the mistakes other people make with their money.
For instance, after years of reckless lending, guess who gets to pick up the tab? You do!
That's right.
See, as a stock investor... with any money at all on Wall Street... you get even more exposure to all these bad loans than the banks do, thanks to a secret banking loophole that lets them pass on all the risk... to YOU!
How so?
A Secret "Legal" Banking Scandal
Worse Than WorldCom or Enron
When Enron executives faked revenue, they went to jail. Same with WorldCom.
Not so with the banks.
It's all thanks to a special loophole that's supposed to be "good" for the mortgage market.
See, when a loan at the bank starts to smell potentially rotten... like so many of these ARM loans headed for reset do right now... the loophole strategy, created by the government itself, encourages the bank to take that bad loan and move it to what's called the "held for sale" account.
This account is just a dark corner on an accounting spreadsheet... where the bad loan sits... and waits... and festers... until it can be repackaged with other risky loans and sold off to Wall Street investors.
- Business Week
Here's what the banks love best about this secret strategy...
"For cash-strapped homeowners, it was a pitch they couldn't refuse: Refinance your mortgage at a bargain rate and cut your payments in half... but those who took the bait are in for a nasty surprise: payments are about to skyrocket."
For one thing, they get to make many times more stupid loans... without worrying about the level of risk involved. But even better, for them, is the fact that -- thanks to the loophole -- they know get to count the full face value of the loan as an asset on their books!
That's right.
They shed the risk... while artificially inflating the value of their own bottom line!
Meanwhile, the shoddy loan packages get spit-shined and slipped into other kinds of investments on Wall Street. For instance, you might not realize it, but from 2004 to the end of 2006, more than $265 billion in repackaged risky ARMs were tucked into Wall Street funds as "mortgage-backed securities."
And that's jus the tip of the iceberg. Even more of these repackaged loans were sold, in undisclosed amounts, directly to hedge funds and other risk-loving investors.
But even the sneakiest players can't cover their tracks forever.
Banks like HSBC... and respectable firms like Merrill Lynch... are getting called on their spending spree in mortgage instruments, in both 2005 and early 2006. It won't be long before an industry-wide pandemic of this kind of risky buying is exposed.
Meanwhile, be warned.
Because, if you own any shares in just about any mutual fund on Wall Street, or any major bank or financial institution, there's a good chance you're already investing in these repackaged "bad" loans... without suspecting a thing!
It's criminal, if you ask me.
But it's perfectly legal, for now, in the world of banking. In fact, just about every major bank, lender, and mortgage broker has gotten away with it on a grand scale over the last five years, just the same.
What happens when the house of cards falls down? Try imagining the impact of 1,000 Enrons, all happening at once... only this time, you'll be the one left holding the bag.
Luckily, here's something more you can do...