Market Review and Outlook 3rd Quarter 2008
It would be difficult these days to be unaware of the dislocation in the economy and in financial markets. Stocks are down sharply this year, as are bonds issued by companies with even the slightest hint of financial stress. We view this period as the culmination of decades of poor management by business and government leaders, excessive consumer borrowing, and increasingly lax regulation. Derivative markets and off-balance sheet financing created opacity that, even now-eighteen months after the implosion of the two Bear Stearns hedge funds that launched the crisis-exacerbated the illiquidity and lack of confidence in the financial markets. There is ample evidence that the financial crisis has now spread to the broader economy.