Question (I've stopped numbering them)
I told no_slappz that I would hold my market view neutral until the end of the year at which point I would change it to negative. He criticized that this was a reactive view and was not forward looking. I never did figure out what he meant by that.
What we've seen since the beginning of the year has certainly been negative. The sub-prime liabilities that we were assured would be "well contained" have begun to affect nearly every major financial institution. My theory all along has been that one can't have it both ways. On the one hand we were told that the "risk has been spread" so that no one person or institution would get hurt too bad, while on the other hand the problems associated with sub-prime mortgages were "well contained." Well, the former has turned out to be true. Everyone will feel the effects of this problem before it is over.
So here is the question: are we closer to the beginning or the end of the current problems in the credit markets? Have we nearly hit bottom, or is the worse yet to come?
Labels: credit markets