Must Read Posts This Week…

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This past week offered a bumper crop of high quality, educational reading so our list is a little longer and a little earlier in the week than usual, but it is all great stuff so let’s dig right in with our “best of the web” links…

Barry Ritholz over at the Big Picture provides us with some insight explaining why all those delinquent homeowners that should be foreclosed remain in their homes. This brief post includes a fascinating chart showing just how much inventory the banks have yet to realize losses on (and the real estate market has yet to absorb).

If that wasn’t enough bad news on housing, here is one from MoneyNews.com pointing out how foreclosure rates are still accelerating. I’ve said it before but it bears repeating… between so-called “strategic defaults”, rising unemployment, and all the funny money loans like Alt-A that are resetting this year, the housing market (and consequently the banks) should be in for a rough time. Buyer beware…

Also, in my January 24 post discussing the risk of a bear market in equities I pointed out the importance of watching widening credit spreads as a confirming indication of increasing downside risk. Well, this post from Mike Shedlock brings you up to date. Sneak peek – spreads are widening – not a good sign.

I find it almost laughable that the markets breathed a huge sigh of relief and rallied strongly on verbal assurances from EU leaders last week regarding Greek debt problems. This issue is huge with no good solution. I’ve read much on the subject and I believe John Mauldin provides one of the more complete and balanced overviews. This is a longer read but it is an important issue that will be haunting the markets for months. You will find it is time well spent to develop a decent background knowledge on this very important subject.

As a personal sidenote, I can’t help but wonder if the sovereign debt issue growing in Europe is a distracting sideshow to the mortgage and debt problems here at home. The numbers I’m seeing for the mortgage/real estate crisis are mind numbing yet the media and markets are completely focused on what is going on across the Atlantic. Nobody is talking about the accelerating default rates, rising shadow foreclosure inventory that is getting released into the markets this year, Alt A and Option Arm resets that will accelerate that rising inventory, or the myriad of other issues that dwarf the subprime crisis.

What I’m seeing is 2010 shaping up to be a year where a lot of deeply entrenched debt problems on a variety of fronts are all showing their ugly heads at the same time. Make sure you learn what you can from these posts I’m linking you to because mainstream media is not showing you the whole picture.

Finally, I read a fascinating post by Michael Pettis connecting phenomenal run-ups in foreign reserves with fundamental economic imbalances that lead to Great Depressions. China is the obvious current example, but did you know the previous two examples were the United States in the 1920′s and Japan in the 1980′s? Both resulted in massive deflationary depressions and stock market collapses. Fascinating insights and well worth a read.

I hope you enjoy these educational posts designed to help you grow your investment and financial intelligence to the next level. As always, feedback and comments are welcome below…