Guest Editorial: Honey, I Vaporized My Customers, by John Mauldin
…to have to be eaten by all sorts of financial institutions, without being all that pessimistic. Banks are being forced to reduce their loan and margin books in order to get the necessary capital required by regulatory authorities. Plus, credit is now more expensive as risk premiums rise from absurdly low levels in what more than one authority called a “new era of finance.” Turns out it was just normal old era greed. It is not just the mortgage market. It is commercial mortgages, safe municipal bonds, credit card debt, student loans and a host of credit that is under fire and cannot find a buyer at what should be a realistic price. We should not be surprised at the lack of liquidity in the credit markets. We have essentially vaporized 60% of the buyers of debt in the last six months. The various alphabet of SIVs, CLOs, CDO, ABS,…