The title of Kevin Costner’s $175 million post-apocalyptic stinker from 1995, and also where almost two out of five U.S. home mortgages are going to be on a negative equity slide if we head into recession. So says a grim analysis from Motley Fool, against the backdrop of yet another crappy day on Wall Street. One can only hope the Fed does not whip inflation into an unheralded economic conflagration.

Right now, the housing market is only 8.4% of its peak. My favorite info source, Goldman Sachs, predicts that if there no recession, the housing market will probably collapse by 15%. But if there is a recession, Goldman pegs the fall at 30%, which would put some 39% of American mortgages fathoms deep.

To think that mortgages were once such secure paper, really having no down days all the way back to World War II. Ah, how ominous Alan Greenspan’s practically free one percent post 9-11 credit rate now looks. Hey, all that financial engineering of different types of risks and maturities and credit market investments with and without collateral was what asset managers are supposed to do, right? Diversify!

Only now, all that structured paper is getting eaten alive from the junior tranches up, and all principal and interest flows in the higher tranches are collapsing, and all those tests of cash flow and liquidity are failing, and if you’re getting forty cents out on the dollar you’re damned lucky.

Damn, the torpedoes are in the water, full speed…ahead?

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