This is one of the longer commentary that Hussman has published, and it’s great.
In order to avoid having to restate assets, banks have allowed an increasing gap to develop between the volume of delinquent loans and the volume of loans actually in foreclosure, creating a growing “shadow inventory” of impaired but unmodified and unforeclosed loans…
In short, my impression is that investors are deluding themselves about the solvency of the banking system. People learned in the 1930′s that when you don’t require the reported value of assets to have a clear and tangible link to the value that the assets would have in liquidation, bad things happen.
http://www.hussmanfunds.com/wmc/wmc100412.htm
