Even before starting her eponymously named firm, Meredith
Whitney had won the role of Queen of the Damned in the drama that
has played out on Broad Street (not Broadway) these past few years
as a bank and finance analyst for Oppenheimer & Co. The golden
haired siren has co-starred opposite the dark and brooding Nouriel
Roubini, a.k.a. Dr. Doom, using a script adapted from the Swiss
investor Marc Faber's GloomBoomDoom report.
The show has been a barn burner, almost literally, and has kept
audiences glued to their screens, both television with hopes of
hearing the next tidbit of news from these prophets of the
apocalypse, as well as their computers watching heretofore
AAA-rated investments morph into CCC-rated toxic blobs.
As is generally the case with media, bad news sells much better
than good so with things no longer falling at terminal velocity the
cast has noticed a few empty seats in the house and while not a
trend yet, is still worrisome for Meredith et. al.
The solution has been getting published on the Op/Ed pages of
various newspapers including the WSJ, and that Chronicler of the
Crisis posted a piece by Meredith on October 2nd, discussing the
continuation of the Credit Crunch and most specifically how it has
now filtered down to the backbone of the economy, small
I have a lot of respect for Meredith and Nouriel and Marc so any
comments here seemingly otherwise are in jest and only put forth to
lighten up your hump day a bit. As such and agreeing with the 10/1
piece, I will suggest
you read it
and not quote any of it here lest the lack of context mar any of
There is other evidence that all is not fixed just yet as
although on a eight week run of increases, the Commercial Paper
market is still just 60% of its former self reaching $1.3TN last
week vs. $2.2TN during its peak in July of 2007.
Long a market for funding short term cash needs for some of the
lesser known names, along with those having the designation TBTF
after the Inc., LLP or LC at the end of their company names, the
recent run-up has been the result of European banks issuing in
dollars (another outlet for the cheap dollar carry trade). The WSJ
reported that the increase in foreign financial commercial paper
outstanding was $27.3BN vs. $3.4BN for U.S. domestic financial
If there is hope in all of this, I would think the example comes
from Europe as financing in the Old World was primarily done
through bank lending before the Old World almost changed into the
No World. The lack of bank funding opened up the debt markets in
Europe to a greater extent than they have been before as
non-financial firms have sold more that E735 ($1.07TN) in debt
through the first three quarters of this year according to
Dealogic. On the financial side, banks have issued E105BN ($152BN)
in paper that has not had government guarantees attached.
I raise this point as evidence that, while the markets are not
completely healed, as mounting numbers of prime borrowers in
arrears have yet to be considered for those paying current prices
for bank stocks, the markets and human ingenuity will usually find
a way around or through most problems.
Investment grade CDS spreads closed last night at 101 on the CDX
index. They have now spent 11 days back in triple digits after
their first stint of 8 days below since May of last year. If IG
spreads continue their current trajectory we will have another sub
100 close this evening, albeit a lot can happen in a day.
The time spent sub-100 in late April and early May of last year
could, if things continue, look like the reverse image of the most
recent move above 100, with the spring of 2008 being concave and
the more recent move convex. Prior to that, you have to go back to
January of 2008 to see sub-100 IG spreads.
The Credit Crunch does continue but the market also continues to
heal from it. Lower spreads mean easier credit, even if it is for
the TBTF guys. The failure of Lehman was a quick freeze; the thaw
appears to be taking somewhat longer. Lower credit spreads are at
least a sign it is continuing.
Tilson's and Tongue's Slideshow: Overviewing the
Crisis and Looking Ahead