By Dan Ferris in Extreme Value:

For months now, I've kept up a steady drumbeat regarding the risks to life insurance companies due to their large commercial real estate holdings. Even if the big stock indexes bottomed out last March, I might still be bearish on those life insurers holding large portfolios of commercial real estate loans and commercial mortgage-backed securities. The stock market can crash in a matter of minutes. But real estate takes a little longer.

Also, last week, it was reported that FDIC chairman Sheila Bair told a Congressman there would be at least 500 more bank failures 10 times as many as have already occurred this year.

Recall, too, that Whitney Tilson and Glenn Tongue, authors of More Mortgage Meltdown, called the recent good news in housing data "the mother of all headfakes," due to seasonal trends and the fact that the housing supply is dramatically understated because so many homes in the foreclosure process aren't counted in the official housing supply.

The U.S. mortgage market is the biggest debt market in the world. And the worst is yet to come.

Crux note: Dan Ferris has recommended shorting two financial stocks in Extreme Value that will get absolutely crushed from the fallout in commercial real estate. To learn more about Extreme Value, click here...

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