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    Thoughts From the Frontline, July 2007

    The Subprime Virus

    July 27, 2007

    As predicted in this letter early this year, the credit markets have finally begun to tighten, as a major re-pricing of risk is underway as a direct result of the subprime markets. The subprime virus seems to be spreading, despite the view a few weeks ago that there would be no "contagion" in the rest of the credit markets. This week we look at the re-pricing of debt and take a rather positive view and explain how a bottom in the credit market is reached. As ugly as it looks on Friday...

    Fun in the Subprime Summer

    July 20, 2007

    This week I am already in Maine and getting ready for a weekend of fishing with my son Trey, so I am going to take off a week from writing the letter. I spoke this morning to the Maine chapter of the Chartered Financial Analysts in Portland. The question of the day was about the subprime markets, private equity and the debt markets in general. And these are the right questions, as this is the part of our economic world with the most risk.

    And that gives me a chance to send you the...

    The Birth/Death Ratio

    July 13, 2007

    Is the economy slowing down or is it getting ready to go on a new tear? Judging by the run-up in the Dow, the answer is a major turnaround for the economy in the last half of the year, from the close-to-recession numbers of the first quarter. So, what has happened to my forecast of a slowdown or minor recession? This week we look at some hidden problems in the employment data, analyze retail sales and consumer spending, and speculate about the last half of the year. And we also look at...

    Where is the Real Risk in the Subprime Debacle?

    July 6, 2007

    This week we continue to look at an alphabet soup of problems: RMBSs, CDOs, Alt-A, BBB and - a new acronym to put on your radar screen - the very useful CDS. When does an AAA rating not mean an offering is ready for prime time? What type of contagion are we seeing from the Bear Stearns blow-up? I survey my friends in the hedge funds space, trying to find some evidence of cracks in the foundation, and let you know what I hear. We will again look at a wide variety of items and see if we...