The Wall Street Two-Step

Wall Street is going through another "adjustment".

But not to worry folks, it's just another one of it's predictable and cyclic maneuvers where excess cash is funneled away to disappear forever from the accounts of millions of investors who think they are financially astute.

You gotta understand that all those millions and millions of working Americans who have been pouring trillions of real dollars into their "retirement" accounts are providing unheard of amounts to money to plunder.

If you listen to the talking heads and bimbos on TV, all that money is just "vanishing". Righto... straight into the pockets of people you will never - ever- hear... or know of.

And yes... all this has been caused by us. We've been buying houses we can't afford. Somehow - with our bad credit and low-paying jobs - we have foolishly overextended ourselves on housing, and those totally innocent banks and mortgage institutions are the actual victims in all this.

Right.

Consider...

One million homes are sold and one million mortgages are created. Those mortgages are then sold to holding companies. Real money changes hands, a lot of it. Then, those one million home owners find themselves behind the eight ball and get foreclosed on. One million mortgages are now worthless paper. Those institutions that bought all that paper collapse, and their stock holders are hammered, possibly destroyed. Somebody else steps in, buys the now worthless mortgages, actually the titles to those one million homes, for pennies on the dollar.

Vast amounts of money was made when those mortgages were originally sold. Where is that money now? Gone. Or "vanished, as the TV bimbos like to say.

The new owners of those one million foreclosed homes now own vast amounts of real property which they bought for next to nothing. They will make obscene amounts of money when they eventually re-sell. And the 401K crowd? They're left wondering whether they will actually have enough left to retire on.

Short answer? No.

Because this cycle will repeat again and again, just as it has in the past, but not with housing as the mechanism. It'll be something else, but it will happen.