The Freight Train

Hussman predicted almost perfectly what is going on now back in 2003 with a piece entitled Freight Trains and Steep Curves seen here http://www.hussman.net/html/debtswap.htm.

He writes his updated thoughts on the link below. Very good read. (Thanks Nathan)

http://www.hussman.net/wmc/wmc080219.htm

As we enter 2008, the excessive creation of risky debt is beginning – and I should emphasize only beginning – to produce writedowns and losses. Though that “Freight Trains” piece has played out largely as expected, the situation has been complicated by a prolonged housing bubble that has only made the debt imbalances worse.

and

Last week, AIG was hit hard when it admitted it could not “reliably quantify” its losses on these credit default swaps. One wonders how companies can have much sense about the risks of their counterparties when they cannot reliably quantify their own.