Jim Cramer's advice for US home owners facing interest rate resets + negative equity - walk away...

2/28 that Cramer refers to, is when a 30 years mortgage, the first 2 years have low or no interest payment, then the "interest rate adjusts" for the remaining 28 years. Hence called Adjustable rate mortgages.

He is saying that the ARMs will ALL go bust when the crest of it arrives in Oct 07 to Feb 08. ALL... 100%... He said that the bears (that includes me?) expects 50% only... he expects 100%. Let me find out how bad it is. I last remembered it be about a many of billions.

Anyhow, Geoghegan has said that they don't do fancy mortgages such as ARMs (Adjustable rate mortgages). So he is implying that HSBC will be immune.

But when house prices drop 20%, he will realize that the US ain't HK where people will heroically keep on their house payments. Also, when it drops 20%, even prime turns into subprime.

And I will, like Cramer, also stop using the word "subprime" and 次按 to describe the US housing problem. It is now simply a "mortgage" 按揭 problem.

Anyhow, some of you have criticize me to focus only on mortgage lending in the US.

My friend, watch the UK. That's the next shoe to drop. When it does, I will pounce.

I am contrite on my timing. But I stand by my call.

This is the world famous graph prepared earlier this year by the good people over at Credit Suisse.

We are in month number 8