28/06: Sub Prime Mess
What will happen next in the market for sub prime loans? These mortgages, that have been packaged and sold to hedge fund and other investors, are experiencing very high default and delinquency rates. The result is that the liquidity of this market has been seriously diminished.
The practical result is a rush to reduce risk on the part of many investors worldwide. Should this continue, a global credit crunch might result thereby removing the major prop of recent economic expansion. Recent plentiful liquidity in many global markets helps explain rising stock markets including the US market despite an economy that is weak.
Given these very serious risks how is it that the markets continue on their merry ride? What am I missing?
OSF
June 28 2007
The practical result is a rush to reduce risk on the part of many investors worldwide. Should this continue, a global credit crunch might result thereby removing the major prop of recent economic expansion. Recent plentiful liquidity in many global markets helps explain rising stock markets including the US market despite an economy that is weak.
Given these very serious risks how is it that the markets continue on their merry ride? What am I missing?
OSF
June 28 2007
