Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.
“All is well,” the White House once told us.
We’re in a continued recovery that just “won’t feel terrific,” Bernanke explained.
And now they tell us that foreclosure fraud shows no risk of systemic fallout.
The Obama Administration can say they haven’t found fault with loans, but examples beg to differ.
USA Today reported the story of a Wells Fargo employee from South Carolina who said she signed 300 to 500 foreclosure documents in a single day…
That her only other responsibility “was to make sure her name and title were written correctly… Shown a foreclosure affidavit that she had signed in 2009, she said she did not know if the information was accurate. ‘My knowledge of this affidavit is very minimal,’ she said in the deposition.”
And there’s overwhelming “spin” that these are merely paperwork problems.
The funny thing is that those claiming it’ll “work itself out” have no clue regarding the liabilities associated with this stuff. A Washington Post article explained:
“If the basic principles of property law have been violated here… it may be extremely difficult to fix,” said a source involved in government oversight of financial institutions, who spoke on condition of anonymity because of the uncertainties involved. “There is a chain of questions that no one seems to know the answer to.”
Even the Financial Times tell us:
This scandal is a mirror image of the lax and often improper lending practices that grew up in the years before the 2008 financial crisis as Wall Street raced to extend mortgages in order to have fodder for asset-backed securities. They never took seriously the importance of lending soundly and thoughtfully to homeowners.
Sham documentation and clerical gaffes aside, the systemic risk here is troubling.
No one knows how many fraudulent mortgages and proceedings are out there…
Some banks are acknowledging there’s a multi-billion dollar disaster on the books, not just a paperwork headache.
Other banks — like Bank of America and GMAC — are getting back to the business of foreclosure.
And why not?
These banks need these homes off their books. With more than two million homes in foreclosure and another 2.3 million delinquent, the banks can’t go on making no money.
But that doesn’t mean the problem is just going away…
The last thing we need is a million homeowners losing faith in homeownership — or falling values.
Leave it to banks to spin
According to JP Morgan’s Ed Reardon, “In our view, many of the mortgage foreclosure problems highlighted in the past few weeks are process oriented and can be fixed in the near term.”
But they said the same thing about “manageability” during the subprime crisis…
Ever the optimist, the bank even projects a total of $55 billion to $120 billion in losses will hit the entire industry. But it’s nothing more than a guess; and it seems those figures assume that a small fraction of foreclosure losses will actually hit the banks.
Higher fractions, though, could get far worse for Wall Street and its precious banks.
Of course, the banks will say that borrowers are also at fault —that not all of them should be in homes they couldn’t afford in the first place.
But who was it that loaned the money to the borrowers who bought homes they couldn’t afford?
Who relied on mortgage brokers for loans, while knowing that the broker didn’t get paid unless the loan was issued?
Who allowed banks to put borrowers into income brackets they shouldn’t have been in?
It’s like leaving your college kid at home alone for the weekend, pretending to be shocked when the cops call you and tell you there’s an underage keg party at your house…
Truth is, the banks have dug themselves a nice little grave.
I recommend shorting the banks or title companies. They’re all coming down.
That is… until Bernanke bails them out with our money again.
Unfortunately, he’ll never learn that banks are basically run by mental midget con men who keep thinking up new ways to cheat Americans out of their money — most likely because he’s one of them.
But it’s not all gloom and doom… Below are profit ideas from this week’s top stories in Wealth Daily and Energy and Capital.
Stay Ahead of the Curve,
Ian L. Cooper
Wealth Daily
Friedman Was Right, The World Really is Flat: Creating Jobs in a Global Economy
Editor Steve Christ takes a look at the global economy and how to create jobs here at home.
I Think I’m Turning Japanese: When Ninjas Riot
Editor Christian DeHaemer tells readers why the Japanese yen is overvalued, the Bank of Japan is set to destroy it, and how you can make money as a result.
Banana Republic Chronicles – Mozilo Gets a Slap on the Wrist: Crime Pays if You’re in this Club
Editor Steve Christ looks at the state of the banana republic as folks like Angelo Mozilo laugh all the way to the bank.
Avoid Banks Like the Plague, Buy Tech: Mystery Meat Balance Sheets Cloud Banks’ Future
Analyst Adam Sharp is steering clear of financial stocks, and sticking with solid tech and commodity plays.
China’s Rare Earth Lie will Cost You: China’s Horns of a Dilemma… and You
Editor Ian Cooper argues China’s startling rare earth claims in the latest Bloomberg report.
Gold Fever: How Nevada Just Changed the Future of Gold Mining
One Nevada-based mining exploration company rewrites the rules on gold mining — just as the global economy gears up for what may be the biggest gold rush in history — setting the stage for blockbuster gains for in-the-know investors.
Behind the Battery Stocks: The Only Thing Hotter than China
Editor Nick Hodge discusses the battery market and the effect rare earths will have on battery technology and investments.
Solar Market Developments: How to Land Big Gains in Solar Stocks
Editor Jeff Siegel discusses new developments in the solar market.
Five Trends for Q4: Climb the Wall of Worry
Editor Christian DeHaemer gives readers five trends for Q4 this year and tells investors how to profit from the Wall of Worry.
A Cold War Blunder: How to Bank 180 Times Your Money
This Mongolian oil stock has been flying ever since we recommended it. This is just the beginning of what could turn out to be a HUGE run. We’re talking thousands of percent gains here. Read the full report now, before this outfit’s share price hits the ceiling.
The Definitive Guide to Gold Dividend Stocks: Top 3 Highest-Yield Gold Dividend Stocks on the Market Today
Analyst Luke Burgess gives investors a current perspective of gold dividend stocks and reveals the top three highest-yield gold dividend stocks on the market today.
