I read a real good article today juxtaposing the LBO frenzy of the 1980s with the nonsense happening in the CDO/CDS markets. The essence of the article was the massive creation of unserviceable debt, the enrichment of a few key players and the lasting fallout following the crash.
Another article talked about the faltering stock price of Blackstone following their IPO and that investors are suddenly more wary than they were even a few months before.
It appears we are on the cusp of a credit squeeze, if not an outright credit crunch. Bernanke is doing his level best to stay away from rate hikes, but at some point it appears that interest rates will rise again. Combined with upcoming rate resets this summer and next, this might be the final nail in the coffin.
I am certainly not an alarmist, but admittedly bearish by nature, and this all has the hallmarks of a true blowout. NODs, NOTs and foreclosures are all up by several hundred percent and I don’t think we have even seen the worst yet.
