One thing I think we forget on this board (not pointed at you, but in generaL): Just as wealth is not actually created with layers upon layers of financial complexity, neither is it destroyed. It is true that there was a lot of risky lending going on and that defaults are going to get worse. That said, the losses are really only as big as the defaults and expenses to process defaults (think REO) and the folks ultimately owning those losses.
All the leverage piled on top is really a “this hedge fund wins, that one loses scenario”. I’m a huge housing bear, but I really do believe much of this is a liquidity issue as anything else.
I’d say bears and bulls are both correct. Bears are right in pointing out that this is much bigger than people think. Bulls are correct in that this isn’t an economy shattering event.
Where things really go south is there you add the housing market to the LBO craze to the madness going on in emerging markets investments to the unsustainable consumer spending in this country, and all the other derivatives of these problems…That is a crisis, but it takes a much broader perspective than the impact of SIV losses to get there.
