Wednesday, October 15, 2008

Mischief Managed

The "recession" has been reserved:

From JPM-Chase, today, "The allowance for loan losses to total loans retained was 3.85% for the current quarter, an increase from 1.80% in the prior year."

The tightening of credit standards, a draconian clamp-down, is ... like generals preparing to fight the last war.

The last war ... is in the past. Overshooting on this side of the credit bump is not going to "fix" it.

If banks and financial companies borrow at 2.5%, soon, on the guarantee plan, and lend at credit-card rates from 10% to 20%, that's a minimum spread of 7.5%. Even if you leverage five times, that's a HUGE sum.

So, let the spice flow.

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