I agree on all counts. However, what is missing from your equation is the possibility of a severe credit contraction occurring within the short-term. If you have been following the volatility indexes, they have been curiously out of whack for quite some time (even puzzling the august Alan Greenspan).
We are essentially awash in cheap, easy money, fueled in no small part by Chinese central banks. If you look at the rash of over-priced LBOs and buyouts taking place across all industry sectors and juxtapose this with the same easy money that pushed air into the housing bubble, and then factor in the definite funkiness of the bond markets, a more serious picture starts to emerge.
Add to this the overall level of concern on the parts of the big investment houses, and this concern is not solely limited to the nonsense taking place in the sub-prime CDO market.
As I said earlier, I don’t think we are looking at a collapse, but rather a severe correction. However, if you are sitting up in Temecula in a $500k house that you put a HELOC and a 2nd on, and your 1st is about to reset to a significantly higher rate, well, your idea of collapse and mine might be considerably different.
Mr. JG, I will endeavor to find a spelling of “tranch” that I can pass along or will consider myself the gutted sturgeon in this instance. Sir.
