The banks are getting in on the blame game. The hedge funds in their letters to investors have, of course, already proved themselves adept.
Jonathan Blau, the co-head of the leveraged finance strategy and portfolio products group at Credit Suisse, was earlier this week speaking on the bank’s “state of the credit market” conference call. [There’s a playback available although we can’t find a link online.] He was discussing the piecemeal repricing that’s going on in the credit markets - where liquidity is at a premium as the market establishes a new level through the repricing of large numbers of over-the-counter instruments.
But in fact, says Blau, the media is partly to blame in the over-egging of this pudding - particularly those ambitious types who are just longing for a move onto the political beat. He says on the call:
I would argue that this remains an idiosyncratic event. And it’s being amplified by the financial press because the financial press talks to a banker, talk to a trader. The trader says to himself, ‘I’ve lost all the money I made this year; I’m having…a bad day; my bonus is impaired’ and he tells the financial reporter it’s the end of the world.
The financial reporter of course prints that because he wants to make a big splash with his editors so that he can move on to some other job that he’d much rather have, say working on the political desk.
So we have this amplification because of the nature of the fact that the bad thing is now happening to us. Nevertheless we still see robust economy and low volatility in most of the developed markets around the world.
So, now you know. When you read about the spread widening and the credit markets, you must now factor in what we are calling the ‘Blau effect’.
Not that those at Credit Suisse are without empathy for the plight of others. Mr Blau also says:
Because this shift is happening in the financial market, and because of the fact that this is the market that pays all of our salaries and bonuses - when it’s happening to you, it’s terrible. When it’s happening to someone else in another market, in another industry, it’s a very sad thing.
