Summary
Write-downs for high-risk, high-yield corporate debt will indeed dwarf losses in the mortgage mess! The actions taken to counter the effects of the bubbles bursting may prove (long-term) more lethal than the lack of confidence they've tried to fend off! Increadibly, people still want to believe in magic!
Analysis
Write-downs for high-risk, high-yield corporate debt will indeed dwarf losses in the mortgage mess. Unfortunately, opposite to what Jim's expectations are, that's when this financial crisis will actually start to unravel and show its full dimension which, until now, has been covered relatively well (remember Northern Rock?). But don't get me wrong, I'm a natural skeptical optimist, in deed, I'm an optimist by nature!
I cannot help but be realistic when I see the financial markets going to hell in a hand basket!
But hey, it's no surprise, after all, what else can one expect when the actions taken to counter the effects of the bubbles bursting have partially proven how lethal they can be. Increadibly though, people still want to believe in magic!
Jubak is right on the money about his real concern: Credit-default swaps, valued well over $400 trillion. Once this concern reaches a critical mass, investors will no longer be walking towards the exits but flying through the windows. If you are one of them, please make sure you carry a parachute.
So, what new insight(s) could I bring to the fore? Although it may be more common sense than an insight, here it goes: fasten your seat belt but be ready to jump! (just in case of fire). Other than that, take advantage of every opportunity to hone your proactive-adaptive skills. In this world of increasingly relevant uncertainties you are going to need them all!
