To Those Who Think The Credit Problems are "Contained"

Here's a sampling of the WSJ content (with one from FT) right now, most of which are going to hit the street tomorrow....

"In another sign of these ripple effects, Fitch Ratings released a report yesterday raising cautionary flags about the commercial real-estate market. It projected rising defaults in this sector after years of increasingly lax lending standards, which could hit bonds backed by commercial real-estate loans."

No, you think? The CMBX says this has been going on for a while. Finally, some ink.

"John Snow, the chairman of Cerberus Capital Management LP, yesterday acknowledged that investors have lost some of their appetite for debt at a time when the private-equity firm is trying to raise billions in financing for its planned purchase of Chrysler Group."

What happens if he can't fund the deal? Think the markets will "take it all in stride"?

Then there was the misdirection of the day, this ditty on SLM:

"Shares of SLM Corp. plunged nearly 10% after the educational lender, better known as Sallie Mae, said legislation that would slash federal subsidies for student loans is threatening a pending $25 billion leveraged buyout of the company."

In a word, bullshit.

As I see it what's threatening the deal is the LCDX spreads. That's an index covering the cost of borrowing money for LBOs, and guess what - they're yawning wide.

C'mon guys, tell the truth.

I wonder - were debt spreads partly responsible for this?

"General Electric Co. and Abbott Laboratories abandoned their $8.1 billion deal for GE to buy two Abbott units that make medical-diagnostic equipment, leaving each company looking for other means to an important end."

Oh, and let's not forget this:

"“Meltdown.” We are careful about using such terms at The Wall Street Journal. They can have their own consequences for markets. And having lived through a few real meltdowns, we have found it helps not to get too wound up every time a market corrects.

But avoiding the M word just got tougher, since we see it now deployed by Standard & Poor’s Leveraged Commentary & Data service. In a report released just minutes ago, it quoted institutional loan traders, who are using that fateful term to describe the current state of their market: “Meltdown.”"

Or, if you prefer a more "continental" flair....

"European credit markets are feeling some of the same chill enveloping the U.S., as debt comes under closer scrutiny and new borrowers shy away from rising interest-rate costs.

Yield spreads on a benchmark European credit index jumped wider for the second day, raising fears that the troubled U.S. subprime housing market has dented the appetite for European corporate credit."

That's all on the WSJ's page - right now.

Ok, the "Meltdown" story is a day old.

One more....

"Investors in European and US credit markets accelerated their flight from risk on Wednesday as the turmoil from the US mortgage markets continued to spill over into other asset classes.
.....
JPMorgan observed that swings in derivatives prices were so extreme they implied “scenarios in which the core of the global liquidity system suffers a serious assault”. But it stressed “the meltdown in the credit indices seem completely at odds” with trends in the real economy, implying it should be reversed. "

Oh. Really? Is that good?

People will read this tomorrow.

All in one day.

No, there's no problem in the credit markets.

If you say so.....

Psst - don't look at carload tonnage on the railroads over the last few months either.....