UH OH - EVEN "PRIME" MORTGAGES AREN'T SAFE

According to JP Morgan, the rot is spreading to prime mortgages:

JP Morgan’s Dimon: Prime Mortgages Look “Terrible”
By: PAUL JACKSON
July 17, 2008

JP Morgan’s no-nonsense CEO Jamie Dimon was clearly trying to temper investors’ newfound enthusiasm with a dose of market reality.

“Our expectation is for the economic environment to continue to be weak – and to likely get weaker – and for the capital markets to remain under stress,” he said in a press statement. “We remain conscious that since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer.”

Part of that weak economic outlook can clearly be attributed to mortgages. In a surprisingly short conference call with analysts, Dimon suggested that losses in JP Morgan’s prime mortgage book could triple in the foreseeable future as the credit mess moves out of subprime and into Alt-A and jumbo loans.

“Prime looks terrible,” he told analysts on the call. “And we’re sorry, and there’s nothing else we can say.”