This mainly US and European crisis-of-bad-debt is going to hit particularly hard on firms that are heavily leveraged because these firms will need to refinance their debt on a continuing basis and this is getting increasingly harder as this crisis unfolds. GM is very vulnerable in this regard and so are many other vehicle producers. The previously announced 25 billion USD loan package for US automakers should be viewed in this context. It is needed right now to prevent bankruptcy among US automakers that increasingly cannot find capital to refinance their heavily leveraged balances. It is not really so much about promoting the retooling of factories to produce more efficient cars that are in demand but if you give large loans that is a natural requirement to increase the chance that these loans will actually be fully redeemed. Time will tell whether this auto loan package is enough to prevent bankruptcy.

Anyway, expect to see an unusual high number of bankruptcies also among non-financial firms in the next 12 months at least. This is more serious than anything else I have seen in my life and it is going to get worse by every day as long as prices in the property market keep falling because that will cause more banks to bankrupt, emergency merge or to be nationalized. A real recession appears to be inevitable now but it will not be nearly as serious as in the 1930’ies because that crisis was foremost caused by global protectionism and consequently a complete collapse of global trade. If we can avoid protectionism and trade wars most of us will be just fine and the crisis will be manageable.

Looks like it is time to start collecting more stocks - they are on discount!

Unfortunately, I have seen nothing to insure that the credit markets will become healthy again any time soon. You can buy their bad loans secured by devalued assets, but you can not make them lend again, even to fully qualified borrowers.