Nadine, Most of it is just a squeeze. When less credit becomes available, the less credit-worthy will not get their loans. If the govt. is borrowing bigtime, which it looks like they will be under the new Bush deficit, it will even squeeze out some pretty decent credits. Rates will rise and the low margin firms and individuals get hit first. Cos. try to compensate by issuing more equity, which they can only do at ever-lower prices.
Those who depend upon masses of easy money, both lenders and borrowers, will be most hurt. Among sectors, look for banks, especially regionals, mortgage lenders, real estate, and venture capital to get tapped out right away. Benefitting will be insurance cos., who will still get their premiums, which they can invest at higher rates. Cash rich firms will gain market share in every industry. |
