This is incredible

http://www.fpafunds.com/news_070703_absense_of_fear_print.htm
This is one of the best things I have read in the last month. Talk about reaffirming my belief that this is a credit crises not a liquidity crunch. The most amazing thing was that this was written on June 28, 2007. Some of his statements happened verbatim the last two weeks.

Some Highlights:

1) "This report shows the following changes in underwriting standards between 1998 and 2006, with the major changes occurring in the last two or three years:

ARM % of origination's rose from 0.7% to 69.5%
Negative Amortization rose from 0% to 42.2%
Interest Only rose from 0.1% to 35.6%
Silent Seconds rose from 0.1% to 38.7%
Low Documentation rose from 57% to 79.8%
FICO scores were essentially unchanged at an average of 706."

2) "Over the next two or three years and should lead to a retrenchment in the securitization/origination industry. If our assessment is reasonably correct, mortgage credit availability will likely contract and, therefore, exacerbate the housing contraction and its effects upon the general economy."

3) "As Dan Fuss, manager of the top-performing $10.7 billion Loomis Sayles Bond Fund, recently said, “I haven’t felt this nervous about a market ever.” - this was said several months ago.

4) "The report provides a forced unwind example where an initial 5% price decline in the value of a hedge fund’s assets could lead to a forced sale of as much as 25% of its assets, assuming leverage of 4.0x (20% margin)." - Umm didn't I just see this

5) "We see little value in the domestic equity market since we view valuations as being elevated because, in our opinion, consensus profit expectations are assuming unsustainably high operating margins." - I have argued this point often