Last week, I told my 12% Letter readers to invest in mortgage bonds. I can just imagine their reaction when they read my advice… “Tom, you want me to invest in mortgages?! Are you crazy? Aren’t they the terrible investments that have been causing problems for banks and the economy in general?” Well… Yes, that’s true. Between 2002 and 2008, Wall Street’s real estate machine cranked out $5trn of these mortgage bonds and sold them to investors all around the world. (For perspective, the total market cap of the S and P 500 is only $10trn.) Wall Street firms thought these mortgage bonds were excellent investments too. Firms like AIG, Bear Stearns, Lehman, and Fannie Mae kept billions for themselves. Then the housing bubble popped, homeowners stopped making their mortgage payments, mortgage values collapsed, these bonds crashed, and it wiped out Wall Street.