Short Term Trading Member Forum

[techcharter]

ABX Value

Mortgages debt was supposed to be a very safe investment until the housing bubble inflated. Historically it was based on fundamentals, more screening of the borrower was performed, an much less on speculation as in equities. This time is actually different. The speculative portion of the deal dominates fundamentals. The bubble popping is the price catching up with the fundaments. The subprime mortgage debt is signaling a severe downturn. The initial impact can already be seen in homebuilders, then suppliers, financial institutes, and now finally retail. The larger markets are still lagging due to the extreme complacency, denial, and a little FED pixie dust. Eventually equities will catch up with the subprime fundamentals. Funds will be forced to liquidate stocks or anything that can be sold to meet margin calls or redemptions on their illiquid subprime investments. I just don't know the exact time the equity markets will crash.

The sudden drop in the ABX indexes is screaming, "A catastrophe worse that the bank failures in the 1930's is about to happen." Debt is the foundation of the economy. When the credit stops flowing, the economy slows down. When you invest with the trend, you could still lose if you can't withdraw funds from the broker or bank that is insolvent.