The Big Short?

Summary

Discussion of the potential effects on equity, bond, commodity, capital and asset markets regarding:

Widening CCC/BBB debt spreads; Alt-A MBS and banking Coco's.

Student loans; Automotive debt; Italian Corporate NPL's.

Casey Kasem's Countdown for The Big Short?

"Charlie Ledley-curiously uncertain Charlie Ledley-was odd in his belief that the best way to make money on Wall Street was to seek out whatever it was that Wall Street believed was least likely to happen, and bet on its happening."

- Michael Lewis, The Big Short: Inside the Doomsday Machine

In the film based on the non-fiction 2010 book of the same name, The Big Short by Michael Lewis about the financial crisis of 2007-2008, which was triggered by the build-up of the housing market and the credit bubble; and in Al Gore's film, An Inconvenient Truth, the following quote is mis-attributed to Mark Twain:

"It ain't what you don't know that gets you into trouble, it is what you know for sure just ain't so." - Everybody's Friend, or Josh Billing's Encyclopedia and Proverbial Philosophy of Wit and Humor (1874). What can we say, Mark Twain is more popular than Josh Billings?

"There are two major issues driving banks down this quarter, the governments seem to be running out of QE, which has been bailing them out of their mistakes for the last 7 years and, this time, the fact that the banks have refused to lend to consumers has deprived them of a base of mortgage and small loan revenue streams they can fall back on when commercial loans are in a rocky climate. The banks have lived by the commercial loan and now they risk dying by it." - P

Widening Debt Spreads

Above an astute anecdotal observation of the banking sector disintermediation (due to razor thin NIM's) caused by monetary policies QE/ZIRP/IOER and the consequences thereof. But those chickens coming home to roost are also evidenced in a dearth of liquidity. Witness below junk bonds are now trading with spreads over 20%...

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