U.S. stock swings will be more than triple the average for the next seven months, volatility futures are saying:.

May contracts on the Chicago Board Options Exchange Volatility Index, or VIX, closed yesterday at 43.80, while futures expiring before then trade at higher levels, showing investors expect the Standard & Poor’s 500 Index to rise or fall at least 2.8 percent a day through June 17, according to data compiled by Bloomberg. The last time the benchmark index for U.S. stocks moved that much during the same amount of time was 1932.

“It’s astonishing,” said Jeremy Wien, a volatility trader at Societe Generale SA in New York. “It’s beyond even what were considered worst-case scenarios just last year.”

The S&P 500 rose or fell 4 percent or more on 26 days since Sept. 15, as bank writedowns and losses from the U.S. mortgage market’s collapse approached $1 trillion worldwide. The last time the S&P 500 had as many 4 percent moves was 1933, when it happened 38 times, according to data compiled by Bloomberg. The index has increased or decreased 0.8 percent each day on average in its 80 years of history, Bloomberg data show.

Record High

The 18-year-old VIX, which never exceeded 50 before October, closed at a record 80.86 on Nov. 20 when the S&P 500 tumbled to the lowest level since 1997. The VIX fell four straight years through 2006 and slid to a 13-year low of 9.89 in January 2007, a month before surging a record 64 percent to 18.31 on Feb. 27, 2007, as U.S. equities suffered the worst rout in four years. It lost 8.1 percent to 62.98 today.

The VIX averaged 30.98 this year and 56.14 since Sept. 15, compared with 15.60 in 2003 through the jump in February 2007. January VIX futures closed at 56.24 yesterday, while March contracts were at 47.88.

GM wants 4 billion to survive this month:

GM won’t have enough money to finish this year, asked Congress for $4 billion immediately and access to $18 billion total as a worsening economy forces the automaker to use more cash.

GM is seeking $12 billion in loans and an additional credit line of $6 billion, as it tries to shrink U.S. employment by 34 percent, close plants and emphasize only four of eight current U.S. brands, according to a statement today on its Web site. The Detroit-based company also is seeking to cut debt in half and win new concessions from the United Auto Workers union.

Ford Motor Co. earlier today asked Congress for a credit line of as much as $9 billion, saying it expects to break even or be profitable before taxes in 2011.

The two companies’ requests exceed the $25 billion in aid lawmakers have been considering for all three U.S. automakers. Ford, GM and Chrysler LLC must convince a divided Congress their plans to shrink are severe enough to ensure repayment of the loans.


Corporate bonds, CDS, libor, commodities, are all in crisis mode at the moment. But the situation is not the same as in September, the financial system is already wrecked, and all that the investor has to do is waiting. A general pessimistic bet on the economy is likely to pay well for the next six months, even if angels descend to the Earth to save us all.

The cost of protecting corporate bonds from default surged to records around the world as the prospect of U.S. automakers filing for bankruptcy protection fueled concern of more bank losses and a deeper recession.

“Markets are back in crisis mode,” said Agnes Kitzmueller, a Munich-based credit strategist at UniCredit SpA, Italy’s biggest bank. “There is fear in the market.”

General Motors Corp., Ford Motor Co. and Chrysler LLC executives left Washington empty handed yesterday after two days of pleading with lawmakers for a $25 billion bailout. Credit markets have “significant” liabilities to the automakers, raising the prospect of “continued writedowns,” BNP Paribas SA analysts told investors today.

Credit-default swaps on the Markit CDX North America Investment-Grade index jumped 23 basis points to an all-time high 270, according to broker Phoenix Partners Group at 11:15 a.m. in New York. The Markit iTraxx Crossover Index of 50 European companies with mostly high-yield credit ratings rose 37 basis points to 927, having earlier traded at 933.

Stocks slumped worldwide as a Conference Board report of leading economic indicators fell for the third time in four months, signaling a deepening recession. U.K. retail sales dropped for a second month in October as rising unemployment and the financial crisis dissuaded shoppers from spending.

Treasury yields declined to record lows, with two-year notes dropping below 1 percent for the first time, as investors shunned all but the safest assets.

Credit-default swaps on New York-based Citigroup Inc. rose 40 basis points to 405, Phoenix prices show. Contracts on Goldman Sachs Group Inc increased 65 basis points to 400 and Morgan Stanley rose 60 to 515.

“Anything’s possible in this market,” said Mark Bayley, a director of credit at ABN Amro Holding NV in Sydney. “You’re seeing sellers of risk and very few buyers. The sellers are becoming more stressed and willing to accept very wide spread levels for corporate bonds.”

Investors also shunned high-risk, high-yield loans, driving the Markit iTraxx LevX index of CDS on leveraged buyouts down to a record low of 78.5, BNP Paribas prices show. The current series of the index began trading at 99 on Sept. 29. The benchmark falls as credit risk rises.

The US Treasuries keep outperforming everything else. But this may not remain so forever, if the Fed decides to activate its most outlandish contingency plans, so to speak. I believe that the Federal Reserve is soon going to engage in the most unprecedent reflationary effort of any government at any time, and we’ll together see the results of the experiment. Three month treasuries are yielding 2 basis points, that is 2 hundredths of one percent, at the moment.

Treasury yields declined to record lows, with two-year notes dropping below 1 percent for the first time, as global stocks slumped and a deepening recession drove investors to the safest assets.

Yields on two- and five-year notes and 30-year bonds dropped to the least since the Treasury began regular issuance of the securities. Ten-year note yields touched the lowest since 2003 after yesterday’s release of the minutes of last month’s Federal Reserve meeting showed policy makers expect the economy to contract through the middle of 2009 and more interest-rate cuts may be needed to counter deflation.

Investors turned to government debt as recessions in the U.S., Europe and Japan hurt corporate earnings and drove prices of shares, commodities and real estate lower. Stocks declined worldwide, with the MSCI World Index losing 2.4 percent.

Longer Maturities

The 30-year yield fell as much as 21 basis points to 3.70 percent, the lowest level since regular sales started in 1977. Yields on five-year notes declined to 1.93 percent, not seen since 1954, according to data compiled by Bloomberg and the Fed.

Treasury Bill Rates

Two-year notes returned 6.5 percent in 2008, compared with 7.5 percent last year, according to indexes compiled by Merrill Lynch & Co. The yield declined from 3.11 percent on June 13, the highest level this year.

Rates on three-month bills dropped to 0.02 percent. That equals the level reached after the collapse of Lehman Brothers Holdings Inc. on Sept. 17, the lowest since the start of World War II.

Fed officials lowered their economic-growth estimates to zero to 0.3 percent for 2008, from 1 percent to 1.6 percent previously, the median forecast of Fed governors and district- bank presidents showed. The predictions for GDP next year ranged from a contraction of 0.2 percent to growth of 1.1 percent. The jobless rate is projected to be 7.1 percent to 7.6 percent.

Derivatives contracts tied to the value of the yen have helped drive down 10- and 30-year interest-rate swap spreads as the Japanese currency rallies against the dollar, Ahrens said. The yen has gained 12 percent since September as investors purchase the currency to repay loans made in Japan in order to unwind investments in higher-yielding assets.

Paulson’s Decision

The price to exchange, or swap, floating for fixed-rate payments for 30 years fell below the yield on similar maturity Treasuries by the most ever as dealers hedged against risk related to derivatives, Ahrens said. The yield on the 30-year bond was as much as 51 basis points higher than the 30-year swap rate. The swap rate has remained below the long bond’s yield since Nov. 5.

The gap between 10-year swaps and the 10-year note yield reached as low as 6 basis points, the narrowest since at least 1988, when Bloomberg data began tracking the instruments.

Yields have hit record lows since Treasury Secretary Henry Paulson said on Nov. 12 he would abandon plans to use the Troubled Asset Relief Program to buy mortgage assets from banks. The London interbank offered rate has spiked 11 basis points in the three days after Paulson’s shift. Before Paulson’s announcement Libor, which banks charge each other for three- month loans in dollars had fallen for 23 straight days.

“Changing the terms of the TARP as suddenly as he did undermined investor confidence,” said Richard Schlanger.

Investors erased more than $33 trillion from global stock markets this year as the U.S., Europe and Japan slipped into recession.

Breakeven rates, which show the difference in yields between inflation-linked and nominal bonds, suggest traders are betting the U.S. economy may face deflation over the next two years. The two-year U.S. breakeven rate was minus 4.09 percentage points.

“You have the cloak of a declining inflationary environment,” said Tom Tucci, head of U.S. government bond trading in New York at RBC Capital Markets, the investment- banking arm of Canada’s biggest lender. “People are denying it, but we are mirroring the whole Japanese situation and if that’s the case interest rates are going to go a lot lower.”

Credit rating downgrades are going on, adding fuel to fire. Though of course, it’s the natural outcome of past’s complacency, and the rating agencies should not be blamed for downgrading these firms now, but for not having downgraded them before.

Macy’s Inc., the second-biggest U.S. department-store company, is headed into the holidays facing the possibility of losing its 11-year-old investment-grade rating.

Macy’s debt has started trading like a junk bond, a signal that ratings companies may demote the owner of Bloomingdale’s department stores to non-investment grade. That would increase the company’s cost of raising funds at a time when capital is increasingly difficult to come by and the retailer is preparing for about $1 billion in 2009 debt repayments.

“The last thing Macy’s needs at this point is a downgrade,” Pete Hastings, a fixed-income analyst with Morgan Keegan & Co. in Memphis, said today. “They’ve got enough trouble the way the economy is going, and this would just make things tougher for them.”

Junk Territory

The extra yield, or spread, that investors demand to own Macy’s 5.35 percent notes due 2012 instead of similar-maturity Treasuries was more than 15 percentage points yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

That was greater than the 13.2 percentage-point spread on non-investment-grade BB rated bonds, according to Merrill Lynch & Co. index data. The spread on J.C. Penney Co.’s similarly rated debt due 2023 was 765 basis points. A basis point is 0.01 percentage point.

Moody’s Investors Service said Oct. 15 that it had a “negative” outlook on Macy’s Baa3 rating — the lowest investment grade — meaning it was more inclined to downgrade the retailer. Standard & Poor’s Corp. did the same on Oct. 10. They may next put Macy’s on review for a downgrade, or simply cut ratings without the interim step.

`Not Ordinary Times’

“Ordinarily they wait until the holiday season is over to make changes to retailing ratings, but these are not ordinary times,” Carol Levenson, an analyst with Gimme Credit LLC in Chicago, said Oct. 15. “Given the agencies’ waning credibility in other areas, they may be quicker to pull the trigger on marginal names such as Macy’s than they would have been before the credit crisis.”

The company plans to pay off debt due next year with cash and may use its $2 billion credit facility, he said. It has borrowed $150 million, he said.

That plan may impair the retailer, Hastings said in a telephone interview.

“If they use cash on the balance sheet to reduce debt to keep the investment grade, they would have less flexibility to weather the downturn,” he said.

Sales at stores open at least a year may fall as much as 6 percent in the fourth quarter, after dropping in 10 of the last 11 quarters, Macy’s said.

A rating downgrade can depresses demand for bonds because some funds prohibit investing in junk. The rating increases borrowing costs by forcing the company to offer investors a higher interest rate to assume more risk.

Macy’s would be joining General Motors Corp. and a growing number of so-called fallen angels — former investment-grade companies. There were 40 as of Nov. 11, compared with 29 a year earlier, according to an S&P report. Fifty-seven more, including Macy’s, are at risk of being downgraded to speculative grade, S&P said.

Macy’s, which runs more than 850 stores, has $350 million of bonds coming due in April and about $600 million in July, according to data compiled by Bloomberg.

The retailer’s ratio of debt to earnings before interest, taxes, depreciation and amortization — a measure of earnings that the credit rating companies track — rose to 3.17 times in the third quarter, from 3.04 times a year earlier. Junk-rated Sears has a ratio of 1.82.

Will Citigroup survive this crisis? It depends entirely on the government. If the government shows hesitancy, they are doomed.

Citigroup Inc. fell as much as 25 percent in New York trading, after losing almost a quarter of its value yesterday, as concern intensified that the U.S. recession will generate losses and weaken demand for financial services.

Citi, down for eight of the past nine trading days, declined 81 cents to a 13-year low of $5.59 on the New York Stock Exchange at 1:09 p.m. The stock, which fell as low as $4.76, slumped even after Saudi billionaire Prince Alwaleed bin Talal said he would boost his stake in the New York-based bank.

Chief Executive Officer Vikram Pandit said this week Citigroup will cut 52,000 jobs in the next year, double the target announced in October, as loan losses surge and the economy shrinks. JPMorgan Chase & Co., the largest U.S. bank, plans to fire about 10 percent of its investment-banking staff, or about 3,000 people, a person familiar with the bank said today. Its shares dropped $3.35, or 12 percent, to $25.12.

Citigroup has lost about $20 billion in the past four quarters as bad loans increased and demand for banking services declined. Analysts surveyed by Bloomberg expect a $673 million deficit for the fourth-quarter.

U.S. Aid

The world’s biggest finance companies have taken almost $1 trillion in writedowns and losses since the credit markets seized up last year. The U.S. has injected more than $200 billion into the top U.S. banks and insurance companies to shore up their finances, and analyst Paul Miller at FBR Capital Markets in Arlington, Virginia, said as much as $1 trillion may be needed.

Jobs, Cars

The U.S. unemployment rate rose to 6.5 percent in October, the highest since 1994, as companies slashed payrolls, the Labor Department said this month. Auto sales plunged 32 percent, manufacturing contracted at its fastest pace in 26 years and consumer confidence fell by the most on record during the month.

The irrational and disastrous expansion of the TARP is continuing. The latest is GMAC. It is obvious that if he could, Mr. Bernanke would save the entire wreck of the financial system of today, and perpetuate it to the next decade. Sadly for him, but fortunately for the US, I suspect that even he can’t save the reckless lenders of these years.

-GMAC LLC, the largest lender to General Motors Corp. car dealers, has applied for status as a bank holding company so it can get access to the Treasury’s $700 billion rescue fund for the financial industry.

The lender also began an exchange offer for $38 billion of notes issued by the company and its Residential Capital LLC home lending unit to reduce outstanding debt levels, Detroit-based GMAC said today in a statement.

GMAC joins money-losing commercial lender CIT Group Inc. in trying to shore up its finances to gain bank status. That may help GMAC quell doubts about its survival after home foreclosures pressured the mortgage unit and GM’s auto sales plummeted to the worst level since 1945. GMAC may also be able to obtain U.S. government guarantees on new debt as a bank.

“If you let this many people participate, the benefit gets so diluted you haven’t done a lot of good,” said Peter Sorrentino, a senior portfolio manager at Cincinnati-based Huntington Asset Advisors. “You can’t save everybody. That’s the hard call.”

Meanwhile the future of GM looks more ominous by the day. The issue is whether it can survive until the next handout under the Obama administration. It’s unclear to me, whether they can do so.

General Motors Corp., the largest U.S. automaker, probably has weeks rather than months left before it runs out of cash without federal aid, said Jerome York, an adviser to billionaire Kirk Kerkorian and former GM board member.

Chief Executive Officer Rick Wagoner “all but said” at congressional hearings in the past two days that GM can’t continue to operate until a new U.S. administration takes over in January, York said in a Bloomberg Television interview today.

GM, Ford Motor Co. and Chrysler LLC should develop a detailed plan for sustained operations and present it to Congress as a condition of receiving support, with “chains” rather than “strings” attached, York said.

U.S. lawmakers after hearing from Wagoner, Ford chief Alan Mulally and Chrysler CEO Robert Nardelli remain deadlocked on an auto-industry bailout. Democratic congressional leaders disagreed with Republicans and President George W. Bush’s administration over how to provide $25 billion in aid to the three companies, with just two days left in Congress’ lame-duck session.

Bankruptcies of shipping companies are highly likely to rise in the coming months, as their profit margins collapse with the collapsing price of commodities. Today crude settled around 60 dollars.

 DryShips Inc., a transporter of commodities including iron ore and coal, dropped $4 to $15.30 in Nasdaq Stock Market composite trading. The shares have fallen 80 percent this year, reducing its market value to $666 million, after saying that it may not be able to raise enough money to pay off loan commitments if low charter rates continue, The company said it may sell as much as 25 million shares from time to time to help raise capital.

The company had $2.9 billion in debt at the end of the third quarter, according to a Nov. 3 earnings release.

The Baltic Dry Index, a measure of shipping costs for commodities, has fallen 91 percent this year due to a global economic slowdown and slowing international trade amid tight credit markets.

“We are especially concerned about the company’s compliance under its debt covenants, specifically its value maintenance covenants, given the potential for a fall in secondhand asset values in this weak market environment,” Natasha Boyden, an analyst at Cantor Fitzgerald LLC in New York, said today in a note to investors. She cut her rating on the company to “hold” from “buy.”

The stock market keeps on with its collapse, as central banks keep slashing rates to calm the speculators. They will probably keep falling until the end of December. There may be a brief rally then, but there may be not. What is certain is that the stock markets will keep losing value next year, along with most other asset classes:

U.S. stocks slid, sending the market to its biggest two-day slump since 1987, after jobless claims jumped and the shrinking economy crushed earnings.

 “We’re a long way from the end of the economic challenges,” said Mike Morcos, who helps manage $1 billion at Old Second Wealth Management in Aurora, Illinois. “Earnings next year are going to be significantly lower and estimates are going to continue to come down.”

The Standard & Poor’s 500 Index fell 5 percent to 904.88, extending its two-day loss to 10 percent. Switzerland’s central bank and the European Central Bank reduced their main lending rates by 50 basis points.

The S&P 500 is down 38 percent this year, poised for the steepest annual retreat since 1937. The VIX, as the Chicago Board Options Exchange Volatility Index is known, climbed 17 percent to 63.68.

Worries about General Motors viability keep intensifying:

GM’s Survival

General Motors Corp. had the steepest decline in almost a month, tumbling 14 percent to $4.80. The largest U.S. automaker is focused on winning government aid to survive through 2009, not to help a merger with Chrysler LLC, as it uses cash faster than it forecast, people familiar with the plans said. GM plans to give an update on liquidity when it reports third-quarter results tomorrow.

Blackstone tumbled $1.05 to $7.55 after the financial crisis eroded the value of the businesses and real estate it has acquired, triggering a quarterly loss excluding items of $502.5 million. Blackstone had been expected to break even, based on the average estimate of seven analysts in a Bloomberg survey.

As analysts continue to expect profit growth from 2009:

Companies in the S&P 500 may see fourth-quarter earnings advance 15 percent, down from 42 percent projected at the end of August, according to a Bloomberg survey of analysts. Profits in 2009 may grow 13 percent, analysts say, compared with the 24 percent predicted two months ago.

Meanwhile hedge fund clients continue to withdraw their funds, forcing more firms to liquidate. Clients worldwide may pull as much 25 percent of their money from hedge funds by the end of the year, according to a Morgan Stanley report of Oct. 24.

Platinum Grove Asset Management LP, the hedge-fund firm co-founded by Nobel laureate Myron Scholes, temporarily stopped investor withdrawals from its biggest fund after it lost 29 percent in the first half of October. The decline left Platinum Grove Contingent Master fund with a 38 percent loss this year through Oct. 15, according to investors. It joins Blue Mountain Capital Management LLC and Deephaven Capital Management LLC which have also frozen freeze funds to stem the tide of withdrawals.

Scholes, 67, winner of the 1997 Nobel Prize in economics, was a founding partner in Long-Term Capital Management LP, the hedge fund that lost $4 billion a decade ago after a debt default by Russia.

Investors worldwide may pull as much 25 percent of their money from hedge funds by the end of the year, Morgan Stanley said in an Oct. 24 report. Combined with investment losses, industry assets may shrink to $1.3 trillion, a 32 percent drop from the peak in June, the New York-based bank said.

Brazilian hedge funds saw a record 14.3 billion reais ($6.7 billion) in withdrawals last month after returns trailed a fixed-income benchmark even while defying a 25 percent plunge in the Bovespa stock index.

Which all leave Fed as the most active financial player at the moment:

The Federal Reserve expanded its holdings of commercial paper issued by U.S. corporations by $98.9 billion, boosting its share of the $1.6 trillion market in short-term debt to 15 percent. It has incrased its holdings by 68 percent to $244.6 billion in the week ended yesterday.

Direct loans to commercial banks fell to $108.6 billion as of yesterday down from a previous record of $110.7 billion a week earlier, while cash borrowing by securities firms totaled $71.6 billion, down from $79.5 billion the previous Wednesday.

Interest rates on the highest-ranked 90-day commercial paper have dropped more than 1 percentage point since then to 2.24 percent, according to yields offered by companies and compiled by Bloomberg.

Central bankers are flooding financial institutions with temporary loans in an effort to overcome cash hoarding by banks. The loans have enlarged the Fed’s balance sheet to $2 trillion in total assets, $1.2 trillion from a year earlier.

In addition to the CPFF, the Fed started a separate program in September to lend to banks for purchases of asset-backed commercial paper from money-market mutual funds. Loans under that program totaled $85.1 billion as of yesterday, down from $96 billion a week earlier.

A third Fed program involving commercial-paper purchases, the Money Market Investor Funding Facility, will begin soon. Under that program, the Fed will lend up to $540 billion to five special funds to buy certificates of deposit, bank notes and commercial paper with a remaining maturity of 90 days or fewer.

But if you really want to see what will happen in the end, look no further than the California of today:

California Governor Arnold Schwarzenegger said his state’s finances have deteriorated so rapidly that a budget he signed just six weeks ago has already fallen into a $11.2 billion deficit and taxes must be raised.

Schwarzenegger ordered lawmakers into a special session to consider ways to close the gap. He proposed increasing the sales tax by 1.5 percentage points for three years as well as raising oil severance and alcoholic beverage taxes and motor vehicle fees. In all, taxes and fees would increase $4.7 billion while spending is cut $4.5 billion.

“We have a dramatic situation here and it will take dramatic solutions to solve it,” Schwarzenegger, a 61-year-old Republican, told reporters in Sacramento. “We must stop the bleeding.”

Update on September 18th: The outcome of this event has been even worse than I had anticipated. This post is updated here.  


The growth of the CDS market has been parabolic; a growth over 10000 percent over a period of about 10 years can easily be characterised as a bubble. In fact, the growth rate is greater than that of asset backed commercial paper, the implosion of which lies at the root of today’s problems. It remains to be seen if the CDS and bond markets will face the same consequences as asset-backed market, but there are signs that Lehman bankruptcy is providing a turnaround point to this relatively untried and unregulated field.


From Bloomberg: “Counterparties are being judicious in their actions at this point, given what’s happened,” said J.J. McKoan, who oversees about $65 billion as director of global credit at AllianceBernstein Holding LP in New York. “Few are willing to take on new risk positions.” In Bill Gross’ words dealers in the corporate bond and CDS market shave mostly been engaged in bookkeeping, as there’s little liquidity.


This lack of will to take new risk is reflected in widening spreads today. The number of corporate issues that are trading at distressed (high risk of default) levels is now close to 1100, and this is the highest level of the credit crisis. CDS indexes have also hit all time highs recently. While a brief rally in the stock market is possible in the coming days, provided that a solution to the AIG problem is found, and the Fed cuts rates, the CDS and bond markets are unlikely to participate strongly. Whether these markets will also contract or not is very important for the future of the economy.


Right now, contracts on Wachovia are trading at levels close to Morgan Stanley, and at 753 basis points, they are higher than the rates for Goldman Sachs, Citigroup, JPMorgan or Bank of America. CDS are strongly signalling, in this generally distressed environment, that Wachovia and Morgan Stanley present the greatest default risk.


Yesterday I posted about the need to follow the corporate bond market, and, here are the words of Mr. Henderson, the COO of GM, on the present state of the capital markets, via Reuters: 

“The bankruptcy filing of investment bank Lehman Brothers Holdings Inc. and the pressure on the financial sector will mean a short-term “contraction” in credit markets for corporate borrowers, General Motors COO Fritz Henderson said today.

Henderson, who was speaking to the Reuters Autos Summit in Detroit, said that the credit markets have been effectively closed to corporate borrowers except those with the highest credit ratings, but said the turmoil in the U.S. financial sector could add to the pressure.

“I would say things have been difficult already,” Henderson told Reuters. “Capital markets have been quite difficult, and this is just going to make it more so.”

He added: “We’re in for some rough waters here at least for this week if not the next couple of months.”

Henderson said GM, like other companies in restructuring, was already facing tough credit market conditions at a time when equity financing and private equity firms have also been in retreat.

“In terms of raising capital, you’ve got pretty much closed debt markets for anything other than triple-A-rated companies. You don’t have that avenue available to you,” Henderson said. “If you look at any company that’s got business challenges, the markets are very difficult to deal with.”


These remind of the sudden shutdown of the ABCP market last year.  The same phrases were used at that time “rough waters here at least for this week if not the next couple of months”, “closed to corporate borrowers” are the phrases we kept hearing for months, until writedowns began and financial firms resigned to the end of the securitization market.

Finally, today the Fed has left rates unchanged, but they will have to cut them soon, unless they bail out some large financial firms to calm the situation.