Mid August greetings, and Happy Hurricane Season! Tropical Storm Erin just soaked South Texas, and Hurricane Dean is chugging across the Carribean as the southern states wait for the music to stop.

Meanwhile, another type of storm rages in the financial markets. Though I stand by my assertion that the subprime mortgage market is [way] overly blamed in general, that is not to say that the mortgage industry as a whole is not a factor in the turmoil – especially in light of Countrywide’s announcment that they borrowed $12 billion to finance their operational expenses. (As a side note, it sounds a little ironic that a megalender has to do so much borrowing. However, that is just part of the business).

The market is up one day, and down the next – perhaps with a range of 400 points on the DOW. That might be a lot in terms of absolute numbers. But when you consider it as a percentage, it’s really not any more extreme than times in the past with lower absolute numbers.

It is my belief that what does make the ride all the more wild these days is the fact that the media is reporting on it like crazy. And, with international markets tied together more than ever, there are more parties to react. More reporting, more reacting. More reacting, more reporting. People are “sense”-ational (as in affected by feelings), and the media thrives on sensationalism. The problem is that the situation lends itself to being self perpetuating. That’s what fear and paranoia do.

Don’t mistake my skepticism of the reported causes of the market problems for denial that there are problems. There are indeed problems, to be sure. And I would agree to a great extent that credit has a lot to do with it. There are lots of people now who cannot pay back loans – the highest mortgage default rate in 30 years! Among some of those borrowers I would imagine are plenty of home builders who borrowed on speculation. In fast growth areas in Texas, Nevada, and Arizona, home buyers would bypass pre-owned homes to buy new ones across the highway for the same price. This hurt the sellers of those existing homes, who in their own credit crunch, realized they needed to downsize but instead got caught in foreclosure. At the same time builders were encouraged to build away. Naturally, this is sustainable for only so long.

To me it is reminiscent of the Internet bubble of 2000 and the following years. Greed and investing excitement led to inflating values and increased investing activity. Now, like then, we are seeing the waiter bring the bill. And, this time, like last time, we will see the market correct itself. Most fans and players will emerge stronger. And, some will be injured severely or will be ejected from the game. Same story, different characters.

Oh, and by the way, you are hearing this from one of those “severely injured” in the Internet bubble.

Be of good cheer!