The following graph is from the Feds recent data on bank reserves, total, excess and required. The total, dominated by the excess reserves, has exploded in the past few months. This somewhat details how the banks are holding and not loaning out funds.
I have also been looking at the preachers of total doom such as Roubini who has somewhat accurately detailed the problems with mortgage debt and how large it could become. We agree and discussed that last year. He also has come upon the commercial real estate market issue again which we discussed last year. The problem missing is the collapse of the high yields debt markets. We still wonder what is keeping some companies alive like Sirius which has billions of short term high yield and massive losses. There must be loan covenants which if not breached are at the edge and there are paybacks due shortly. We see over 100 companies with 2-% billion of high yield debt each on the precipice. This is another explosion behind the commercial real estate. Our concern is that the Roubini's of the world lay out one spoon of doom at a time with not placing it in total perspective and worse suggesting no solutions.
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