"The severity of the subprime debacle may be only a prologue to the main act, a tragedy on the grand stage in the corporate credit markets," Ted Seides, the director of investments at Protege Partners, a hedge fund of funds, wrote in the Economics and Portfolio Strategy newsletter.
"Over the past decade, the exponential growth of credit derivatives has created unprecedented amounts of financial leverage on corporate credit," he added. "Similar to the growth of subprime mortgages, the rapid rise of credit products required ideal economic conditions and disconnected the assessors of risk from those bearing it."
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