Although they are laggards, the credit rating agencies, as a following indicator, give us a peak into what we can expect to materialize over the coming six months to a year. When the rating agencies first started to downgrade CDO’s and other asset backed securities this summer, it portended the beginning of a volatile and dark period in the credit markets generally.

Now, as they have publicly recognized that 2007 vintage subprime mortgages are the worst of any to date, the markets will likely not be as surprised with this new wave of downgrades, although it may suggest that there is more carnage yet to be uncovered as the older vintages “mature” and the wave of ARM’s on the right side of this page start to have a greater impact on homeowners.

This article discusses the not-so-pretty rating’s outlook: Subprime Delinquencies Accelerating, Moody’s Says