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Big Banks May Be Forced to Buy Back Bad Mortgage Loans

Major U.S. banks are under pressure from government officials, as well as groups of investors and insurers, to repurchase or modify bad mortgage loans they pooled into securities and sold to unwitting buyers.

In the latest effort, a group of investors with roughly $500 billion invested in 2,300 mortgage securities is trying to force the large banks that originated or are now servicing faulty subprime-mortgage loans to repurchase or modify them, The Wall Street Journal reported.

Some investors "had no idea that their money was being invested in mortgage-backed securities," Dallas-based attorney Talcott Franklin told The Journal. "And yet somehow these people are now the ones being punished, and that's just not right."

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The Headline You Never Expected: Foreign Growth Could Bail Out the U.S. Economy

During a period of increasingly worrisome headlines about the U.S. economy, there is one bright spot.

The rest of the world appears to be doing much better than we are.

In the long run, that's good news for the United States. Rapid world growth will eventually rekindle the economic fires here, producing a growth that is more balanced than the bubbles of 1995-2008.

Still, getting to that point will be a challenge, since - economically speaking - the home fires don't appear to be burning all that brightly.

To see how foreign growth could bail out the U.S. economy, please read on...


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Money Morning Mid-Year Forecast: Why China's Economy Will Exceed Expectations in the Second Half of 2010

The rapid growth China's economy experienced in the first half of the year was a blessing and a curse. It helped propel the world out of a disastrous recession, but it forced policymakers into action to prevent overheating - which scared off many investors.

But the fact is that while most of the world was struggling to keep the engine of economic recovery from sputtering to a halt, China spent the first half of 2010 with its foot on the brake. And now that the Red Dragon has reigned in growth, the second half of 2010 will likely look very different from the first.

Money Morning Chief Investment Strategist Keith Fitz-Gerald says nearly everyone felt the first quarter's 11.9% growth in Chinese gross domestic product (GDP) was "too hot." But the 10.3% growth China saw in the second quarter will likely be topped in the second half.

The reasons for that are simple:

"From an investment perspective, the single biggest concern right now is how hard and for how long the Chinese government will keep tapping on the brakes," says Fitz-Gerald. "I personally don't think it's going to be too much longer - an easing sometime in the third quarter now seems realistic."

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Why the Eurozone Debt Contagion is Telling Us That It's Time to Buy Dividend Stocks, REITS and MLPs

With the escalating Eurozone-debt-contagion fears of recent weeks, a significant shift is taking place in the global stock-and-bond markets.

The powerful bull cycle that grew out of the early March 2009 market lows - the quickest and strongest stock-market rebound of the past 50 years - has been losing some of its youthful verve as it matures. That means we can expect the pace of gains to moderate as asset classes (stocks, bonds, currencies, commodities) begin to differentiate themselves.

But that doesn't mean the profit opportunities are gone. As that differentiation plays out, such income-oriented plays as high-yielding dividend stocks, real estate investment trusts (REITS) and master-limited partnerships (MLPs) will prove to be major beneficiaries, experiencing a handsome run-up in price. Shrewd investors will move into those investments before their prices increase.



To see what stock-market sectors hold the most promise, please read on...

Chinese Real Estate: Four Ways to Profit From the Biggest Urban Migration in History

SHANGHAI, The People's Republic of China - Given what you may have heard about Chinese property values in recent months, it may surprise you to learn that Chinese real estate investors are extremely value oriented.

And so are the institutional investors I've run into during my latest investment-research visit to this country. These institutional players want to lock up some valuable land parcels before 2020. That's the date by which 500 million Chinese citizens are expected to have moved into China's cities as part of the greatest urban migration ever recorded.

You can do the math: We're talking about a group that's 1.6 times the entire U.S. population ... moving from China's countryside to its cities in the next 10 years.



To discover four ways to profit from this massive migration, read on...

China Draws Plan to Reduce Risk While Continuing Economic Growth

Chinese Premier Wen Jiabao on Friday pledged to maintain economic growth of at least 8% in 2010, while gradually drawing down government spending and taking measures to guard against inflation and potentially devastating asset bubbles.

The remarks came during Wen's annual report to the National People's Congress in Beijing - which is the equivalent of the United States' State of the Union speech - and they highlight the central government's determination to promote responsible levels of growth.

The call for 8% annual economic growth is the same goal that has been maintained since 2005 - and one that was easily passed last year with the implementation of a sprawling $586 billion stimulus package.

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Mortgage Markets Show Increased Stability, But Limited Opportunity

[Editor's Note: This analysis of the U.S. mortgage market is part of a two-story package that appears in today's issue of Money Morning. To read a related story on the outlook for adjustable-rate mortgages (ARMs), please click here.]

It doesn't have four letters, but "mortgage" has definitely been a dirty word in the financial world the past few years. That's especially true when the word "mortgage" is paired up with such other terms as "subprime," "delinquent," and "foreclosures."

Little wonder that mortgages - along with the derivative securities backed by them and the often-unseemly practices of the people pushing them - have gotten much of the blame for precipitating the economic meltdown from which the American economy is now struggling to recover.

There's still plenty of woe in the mortgage world. But in recent months there have also been some signs that the real-estate-financing markets are at least regaining some semblance of stability, with foundations being poured for a rebuilding phase that might not be too far down the road.

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Plans to Hide Commercial Real Estate Losses Won't Avert a Double-Dip Downturn

Sooner or later, mounting losses on commercial real estate could crash through the market's 2009 optimism and send the economy and stocks into a double-dip downturn.

The major problem is that lawmakers and regulators are setting up investors into believing that commercial real estate (CRE) losses are being effectively addressed. The truth is that escalating losses are being hidden as part of a campaign of optimism in a desperate gamble that a robustly reviving economy will save the day.

To protect yourself from another investment beating, here's what you need to know.



To find out how to avoid the commercial-real-estate implosion, please read on...

Ignore the Crowd … It's Time to Invest in Commercial Real Estate

Of all the independent institutional research that I receive, some of my favorite comes from Justin Mamis, a veteran of all the financial wars we've seen over the past five decades.

Although he's steadfastly bearish, no matter the climate - like those codgers you see wearing heavy coats on sunny days in Florida - the Canadian analyst has lasted so long because he's quick with colorful phrases, and his research is amusing and insightful.

Just last week, Mamis recounted a conversation he had enjoyed years ago at the table of his new boss, the legendary analyst/historian/portfolio manager Don Coxe: "At dinner, [Coxe] would lean back in his chair in that professorial manner of his and "remind" the guests that the Sanhedrin, the Hebrew Court of Law, had a rule that if every member voted the same way, the decision went the other way," Mamis wrote. "Unanimity had to be misguided."

That story got me thinking: What is one investment theme that the public and/or pros could agree on today?

For more insight on the investment move to make now, read on ...