Although it is hard to think we are nearing a bottom in the credit crisis when Bridgewater comes out with estimates that losses will reach $1.6T (topping Mr. John Paulson’s estimates of $1.2T this Spring), there are emerging signs that the “crisis” has become consensus and that perhaps we are nearing some kind of bottom or inflection point.
One such sign is that the following comprehensive report from Wharton details much of what has been discussed here and on other blogs over the last year:
In other words, now that the knowledge and details of the various components of the fall-out in the credit markets is being understood and discussed, it seems logical to conclude that the collective masses can now start to address and stop the underlying cause. One such cause – the lack of understanding itself – is clearly mitigated by discussions like this.
Another sign, on the absurd front, was this article yesterday on Bloomberg:
In the “a rose by any other name would smell as sweet” category, it appears that Wall Street may have found a way to resurrect the securitization market:
Collateralized debt obligations that helped drive banks to $400 billion of writedowns and credit losses are finding buyers under a different name: Re-Remics
The aburdity of the Re-Remics’ name underscores the challenges the credit markets are facing and at the same time it highlights the innovative spirit of capitalism.
And it is this spirit that brings optimism…the thousands of brilliant (yes – these dudes are mad-smart) men and women on Wall Street are not going to roll over and play dead as the markets grind to a halt. Instead, they will and have been doing the opposite. They will fight tooth and nail to find a way to jump start the machine of credit.
Given that Uncle Ben has made it clear that he is going to continue to reach out a welcoming hand to pull the crew along, I can begin to see a scenario where the losses from residential mortgage lending and buy-out finance don’t spread to consumer loans, commercial real estate, and corporate credit en masse…
But then again, I am somewhat of a dreamer.