This thing with the delay of $12 billion in Chrysler paper is not good. It may turn out not to matter but it is not a good thing.
In 1989 the unraveling of the UAL LBO came about from the financing falling apart. It caused a mini crash in the US stock market.
I suppose the current news is different enough to be explained away but it is worth knowing a little bit about this sort of history. The turning off of the financing spigot, regardless of the details, is a threat to stock prices.
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2 comments:
excess liquidity inflated equities, real estate, and commodities.
The liquidity has been drying up.
First it was sub prime, now wall street can not sell bonds for the Cerbrus buyout of Chrysler. Similar issue in Europe. I do not see the excess liquidity anymore so I think prices of all investments will decline for a while. 3 to 18 months is my guess. It depends on how deep and quick the correction is and what the central banks do in response.
Actually that is the biggest risk to getting out of this market. If the central banks flood the system with liquidity the correction might not be that severe. But I am betting the Fed is still more worried about inflation and can live with equities declining for a while.
Any way I can live with 99% cash for now.
I'd say the odds on the KKR/TXU deal have grown significantly longer, of late.
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