As the headlines yesterday echoed, even the Fed has started to backtrack from its previous “well contained” dialogue to acknowledge that the credit crunch in the mortgage market is spreading. The Fed chief says subprime losses could hit $100bn, but if history is any judge the estimates they make are likely conservative

The place where the most obvious signs of the spreading is taking place, as noted here yesterday, is in the next step up on credit quality from subprime, to Alt-A, which is explained here: The Alt-A Word

That the ripple effects of deteriorating credit are having a large impact was exemplified by the blow up of Bear’s large subprime focused hedge funds, and investors who now are facing massive losses are not happy with that result.

As the trajectory of the contagion remains somewhat unclear, signs that the challenges will not only spread to higher quality assets here, but also to investors abroad hit the headlines today:
Australian investors hit by US subprime crisis
“An Australian investment fund is teetering on the brink of a billion-dollar collapse after being exposed to the subprime mortgage crisis in the United States.”

This is why I often prefer daydreaming about the future over thinking about the present…