18 June 2007

speculative credit excess

Bears' Chat - Welcome: "In a foreword to the report, Crispin Odey, CEO of Odey Asset Management, says: 'Not only does he [Chancellor] make a cogent and persuasive case that current trends are unsustainable, but his unique knowledge of the hinterland of previous periods of speculative credit excess also illuminates the range of potential outcomes...There is no question that financial markets are not priced for the sorts of risks that Chancellor identifies.'

Well, Chancellor's latest: Inefficient Market: Blackstone Letter, may indeed prove prescient. It was posted here earlier, and presents what to me is a plausible outcome to the financial madness so rampant today. Once again, the salient points:

'Looking back over this difficult period, most of our problems can be ascribed to deteriorating economic conditions; extraordinary convulsions in the credit markets; a worsening political and legal environment for the buyout industry; and the consequences of what is now commonly referred to as the 'private equity bubble.' I will briefly examine each of these issues in turn.'

1. The Macro-Economic Climate: When Blackstone came to the market in the summer of 2007, economic conditions were remarkably benign. Most economists agree that the decision by Congress to impose punitive tariffs on Chinese imports during the "

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