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It is now clear that the delusional hope that the severe credit and liquidity crunch that hit US and global financial markets would ease has been shattered by the events of the last few weeks. This credit crunch is getting much worse and its financial and real fallout will be severe.
The amount of losses that financial institutions have already recognized - $20 billion – is just the very tip of the iceberg of much larger losses that will end up in the hundreds of billions of dollars. At stake – in subprime alone – is about a trillion of sub-prime related RMBS and hundreds of billions of mortgage related CDOs. But calling this crisis a sub-prime meltdown is ludicrous as by now the contagion has seriously spread to near prime and prime mortgages. And it is spreading to subprime and near prime credit cards and auto loans where deliquencies are rising and will sharply rise further in the year ahead. And it is spreading to every corner of the securitized financial system that is either frozen or on the way to freeze: CDOs issuance is near dead; the LBO market – and the related leveraged loans market – is piling deals that have been postponed, restructured or cancelled; the liquidity squeeze in the interbank market – especially at the one month to three months maturities - is continuing; the losses that banks and investment banks will experience in the next few quarters will erode their Tier 1 capital ratio; the ABCP and related SIV sectors are near dead and unraveling; and since the Super-conduit will flop the only options are those of bringing those SIV assets on balance sheet (with significant capital and liquidity effects) or sell them at a large loss; similar problems and crunches are emerging in the CLO, CMO and CMBS markets; junk bonds spreads are widening and corporate default rates will soon start to rise. Every corner of the securitization world is now under severe stress, including so called highly rated and “safe” (AAA and AA) securities.
Originally posted by Crakeur
reply to post by welivefortheson
I think they were looking into the long term when they started hedging their bets with the sub prime markets.
Originally posted by cpdaman
the credit insurance companies are now going to be insolvent soon
[edit on 15-11-2007 by cpdaman]
Originally posted by traderonwallst
Anyone notice the strengthening of the US$, the falling price of gold and the falling price of Oil? All are related, but not yet sure if this is the beginning of a trend or just profit taking. I still feel the US$ correction does not take place until the begiing of the new year.
Alternative, hard-money investment manager Peter Schiff recently asked everyone on his 60,000 email list to support small-government, hard-money candidate Ron Paul with maximum donations.
Lawrence Lepard, is purchasing a $100,000-plus ad in USA Today on November 21st or Nov 22, as reported by FMNN yesterday