I think it'll double dip because the rhetoric is so shrill, that people are more concerned about debts than the extremely serious case of the second wave of mortgage resets about to hit.
What do you think? Is this graph below rosy or bleak? I say extremely bleak.
Here's the problem: US banks might meet current adequate capital leverage limits (we can't even begin to discuss the dangers facing European banks here), but as these mortgages reset, I'm betting most people will end up walking away from their homes, because they will most certainly ALL be under water. At that point, they will have to mark down the value of the assets they're holding if they sell (through foreclosure sales). We will see a repeat of 2008.
This time however, voter mood will prevent Democrats from saving the banks, or if they try to save the banks the second time around, they will be voted out of office. Caught between a rock and a hard place, Democrats will sit on the sidelines. This will set off a cascade of bank failures - again because they own each other's debt - and as their stock prices fall and shareholder equity plummets. The FDIC and Treasury, armed with new weapons, will try to unload banks in a timely fashion, but it won't work, because NO ONE will want to buy the toxic assets as they look at that chart of resets.
I hope this doesn't happen, but I read the news every day and I don't see many people talking about this second wave coming, but instead about national debt. Well, watch what happens when this second wave hits at its peak.
Now, I know there are LOTS of people who honestly believe the worst is behind us. To those people, I strongly urge them to buy retail stocks to back up their bravado. Nothing says you believe in what you say, than actually placing a stock market bet on it.
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