Some more quotes:
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“Investors are now starting to question economic projections, stock market projections and public officials,” said Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research. “They are questioning American consumers’ continuing ability to spend beyond their means.”
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As they have been for much of the last four weeks, stocks were driven by grim news from the credit markets.
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KKR Financial said it lost $40 million on the sale of $5.1 billion in mortgage securities and had another $5.8 billion in bonds to try to sell, which could result in the loss of another $250 million. Shares in KKR Financial, which went public in June 2005, fell 31 percent, to $10.52; the stock is down more than 60 percent for the year.
The company restructured from a real estate investment trust to a limited liability company in May. It finances most of those securities through asset-backed commercial paper vehicles that were downgraded last night by the rating agency Fitch from its highest level to junk grade because of the decline in value of the underlying assets.
The company said it would no longer invest in residential real estate and must decide what to do with the remaining portfolio of mortgage-backed securities.
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He said he had been through numerous financial crises “and this is the most disturbing liquidity crisis, with real impact throughout the economy if it does not rectify.”
One analyst suggested that the market would not recover until more funds and banks detailed their exposures to mortgage securities and other debt acquired during the recent credit boom.
“The more funds that come to confession the better it is,” said Douglas M. Peta, chief market strategist at J. W. Seligman & Company. “Once all this stuff is out, all the analysts and the people with the sharp pencils can figure out how bad it is and they can put prices to it.”
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Investors are saying, “I want only the highest credit quality, where the principal is guaranteed by the Treasury,” said Brian J. Carlin, head of fixed-income trading at JPMorgan Private Bank.
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