HSBC as a Bellweather Indicator

Implications: HSBC's indications do not necessarily indicate the extent of change in the market. Since HSBC is very forthcoming with their news, they do not capture some lenders who have not been in the past. These other lenders, some of whom are significantly larger than HSBC, have been deferring some wirte offs and will take larger positions of loss going forward. HSBC does indicate the trend but not the severity.

Analysis: The analysis of HSBC as an indicator of coming trends in the worsening mortgage crisis is correct but does not include the impact of some larger lenders who have not recognized their losses and exposure as readily as HSBC. An example would be Citigroup and its continued announcements of loss each month. Citigroup took $4B then announced potential losses of another $11 B. Yet Citi still has an exposure of over $50 B in CDO's alone. Given the loss rates and downgrades on CDO's this should translate to loss exposures in the $25 B to $30 B range.
 
So, while HSBC has done a good job of reporting and staying on top of its losses, others have not. There will come a time when HSBC will bottom out on their exposure and losses and some significantly larger players will still be increasing their losses and continuing to swing the market to a greater extent than HSBC's impact.