Can everyone be wrong?

Back when the subprime crisis had not fully bloomed, there were a few brave souls who were convinced--absolutely!--that the mortgage edice was about to crash. You can imagine the pitch meetings. They were likely derided as delusional. You can almost hear the argument: "So you mean to tell us that everyone is wrong? That this entire industry built up by the likes of Merrill Lynch and Lehman Brothers and Bear Stearns is all a house of cards?"

We all know the rest of the story. Now we see something else at work: the entire buyside seems to be rushing into distressed credit. Every brand name private equity firm is busy launching distressed credit funds. Hedge fund are even angling in. So is the herd headed toward a cliff again? Maybe, maybe not. Consider leveraged loans. Banks pretty much had to offload them for balance sheet purposes. But are any issuers set to default? Not likely. Some leveraged-up firms may suffer to be sure, but it's more likely that most will find a way.

Then again, we've heard that before.

- Jim