Walking away from Mortgages

It seems now almost acceptable that Americans can walk away from their mortgages. Why not? So many are upside down, owing more money on a house than the house is actually worth.
Many Americans are just walking away and renting virtually the same homes for half or a third of their previous mortgage payment.

What does this mean for the banking industry? How healthy can these banks really be with non performing loans both on the residential side and commercial side? How real is this stock market rally? My proverbial questionג€¦ what has really been solved? Has everything been delayed for a further down turn? Trend followers and commodity traders that have much experience do not try to predict the future.. but it seems very evident. There are bearish signs percolating in the stock market such as the CBOE put call ratio looks toppyג€¦there was a huge uptick reading over 1500+ which is usually sign of a top as well as there are less and less bearsג€¦ except Jim Chanos and calling China a bubble ready to burst ( 1,000 times greater than Dubai). Jim Chanos has not been wrong all the much… He has become a billionaire by calling tops in the housing market, Enron and many others.

The NY times reported on this the other day. They stated the housing collapse has left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go. Can you imagine how much money the banks can be losing on thisג€¦ To me it is mind boggling. What I do not understand instead of bailing out the banksג€¦ why didnג€™t the administration do what FDR did in the great depression. The govt bought up the loans from the banksג€¦and restructured them in order that people could live in their homes. This worked and they stemmed the tide of foreclosures and broken families.

What does this mean for the markets? No one has a crystal ballג€¦but I would suspect we are headed for turbulent times. The best way to protect assets is real assets. With all the money that was printed..I can not see how inflation will not raise itג€™s ugly head.

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Andrew Abraham
A.Abraham@AngusJackson.com
www.AJpartnersinc.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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