A Second Mortgage Disaster On The Horizon - Maybe

Recent CBS 60 Minutes: New Wave Of Mortgage Rate Adjustments Could Force More Homeowners To Default. The video provides overview on the possibility of housing market and credit market to potentially get worse in 2009 and beyond. Further blows to the financial system could keep coming...maybe.

My take:

• Stock market is partially a forward looking mechanism. Hence the main question is not what will happen in 2009, but what will likely happen in 2010 and beyond (5-10 years timeframe). If the answer is leaning toward stagnation, then the equity market likely is going to be stagnant as well.
• US housing market decline is likely to continue at least as long as (if not longer) the US economy is still in recession as people do not have ample net saving and do not have easy access to credit market due to on-going multi-years deleveraging process affecting almost all financial institutions. This is not a market for easy gain especially in the short-term.
• In any markets, people shall never forget the following timeless definitions of value and risk from Warren Buffett:
  • "Price is what you pay. Value is what you get."
    
  • "Risk comes from not knowing what you're doing."