Don't worry, they manage to sell the mortgage junk to Japanese
housewives, packaged with some yielding loans, and they have a
nice cozy relationship with Moody,
SP, etc. They don't downgrade - the derivative junk can
be "valued" like it has value. To models, of course, not to
market. The question is who blinks first. I like Clint
Eastwood. "Do you feel lucky, punk?" -g-
But I agree with you, as soon as enough junk stops paying the
principal amount (already happening, of course),
the credit derivative pyramid supporting
these markets becomes inherently unstable. Low VIX is part
of it all, kind of like low spreads on junk - they will blow
up together. But I guess they can always hide it for a while
longer, or can they? -g- I expect a spectacular BK when it
comes, who knows when -g- The 87 BK model says 55D top to
crash. It is now reduced to 7, and the crash itself will be
a lot faster. At least it will be over in 1 minute -ggg- |
