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Hussman: We Haven't Fixed the Mortgage Problem

Although they've been obscured by bailout money, banks still have plenty of bad loans on their balance sheets.

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Ryan Leggio: We've definitely been hearing and reading in the popular press some of the issues that you're alluding to, the debt situation in the United States, the deficit situation in the United States, obviously the European issues that are going on right now. And so maybe, the one glimmer of hope is long-term treasuries and that relates to one concern you've had, which is mortgage resets and the huge wave that really is starting about now and is going through 2012.

And I guess my question is, isn't the deflationary concerns and the flight to quality going to really help the situation over the next coming quarters as the resets work their way through the system?

Ryan Leggio has a position in the following securities mentioned above: HSTRX. Find out about Morningstar’s editorial policies.