The Deadly Part of the Storm
Anyone who has ever been in a hurricane knows that second half, after the calm of the eye has passed, is the time when the storm causes the most damage.
Recently, more and more experts are now applying this analogy to the credit crisis.
There seems to be sentiment developing that the U.S. has weathered the worst of the current cyclical economic storm and blue skies are ahead. We disagree. Any blue skies you see are likely to be short lived. The economy is in the relative calm of the eye of the business-cycle hurricane. The mortgage credit problems are not over. And credit problems in other sectors are just beginning as the housing recession spreads to the rest of the economy.
May 15 (Bloomberg) -- Blackstone Group LP President Tony James said banks are mistaken if they think credit markets have begun a sustained recovery.
``It's not clear to me if it's a permanent upswing, as I think many of the banks are saying, or the eye of the hurricane,'' James told reporters on a conference call today.
From my perspective, I can't believe anyone could have thought that the credit crisis was getting better. More foreclosures. More notices of foreclosure. More bank failures. More CRE defaults. More loan delinquincies. But I guess if a eye was fabricated, so be it......but get ready because now the really big loans start defaulting.