Credit Crunch Visionary

Several months ago I had the pleasure of spending several hours with Dave Beal of Twin Cities Business discussing the subprime credit crisis and the developing global credit crunch.  Recently he published an excellent article titled “Credit Crunch Visionary” that reflects on our conversation, discussing the causes of the crisis, the roles various entities played in its creation and the future of structured finance in its aftermath.  You can read the article here.

The conclusion:

But Kragenbring suspects that the end of the game—the time when the subprime market bottoms—won’t arrive until 2010 or 2011. He bases that forecast partly on the Standard & Poor’s Case-Shiller quarterly index of housing prices, which has been falling since June 2006. The index for the first quarter of 2008 hit a record low of 16.3 percent.

He believes that when that index finally bottoms and two other housing measures stop sliding, we’ll reach the seventh inning stretch—a stage when we’ll have a pretty good sense of when the end will arrive.

But what about the broader question of when the credit crunch will end? Kragenbring thinks it won’t stabilize until 2009 and won’t rebound until the following year—“barring unforeseen economic shocks.”

JJK