According to conservative estimates by the Fed, there's around $100 billion in worthless credit IOUs circulating on the financial markets, though some commentators have put it nearer to $200 billion.

The fear was that this would lead to big losses among investment vehicles across the board.

BUT - the investment banks are reporting their financials this week, and according to them, everything seems pretty hunky-dory and there's no real problem on their books.

The big question is what's happened to all those worthless CDO's?

Are the banks cooking their books to play for time? Have they simply been farming them out to smaller company vehicles less likely to hit the headlines?

Or was there really no credit crisis at all?

I can't help but think that there's something screwy going on - investors have panicked through August, but they seem no nearer any real answers than before.

I think the credit crisis has yet to fully unfold. Delinquincies on mortgages especially in the sub-prime market are no big surprise but there were reports that selected portions of the prime market are affected as well.

Another report showed that delinquincies on car-loans is on the rise as well.

It seems as the, in my opinion unnecessary, aggressive fed rate cut will be a temporary fix to the problem which will have a more negative economic impact in the future.

The Fed just temporarily delayed the problems a few months into the future.

Not all banks reported earnings which were good and I think many smaller regional banks will be more affected then the top 10 banks in the country. Let's wait and see until third-quarter earnings season get going.

Overall I think there will be more disapointments during this earnings season and watch out for below expectation fourth-quarter guidance.

Analysts are slow to adjust their 'earnings-models'.

FYI: Many hedge fund managers expect a recession next year in the U.S. (Yes, I know you could take a contrarian approach now but that only works if the majority of investors expect a recession...hedge fund managers are a minority in comparison to the overall pool of investors so the contrarion approach most likely won't work)

Definitely agreed - ripping the plaster off more slowly with the Fed cut, but it'll still need to come off.

Funny, though - I've been expecting the economic cycle to move to an end since 2004, but cheap credit left it running longer than I would have anticipated - I think therefore the end of the current cycle, because it's been so artificially extended, is going to be potentially a lot more painful.

2c.

I think you are not the only one who expected the current bull-run to end sooner.

The current cycle has been long overextended and I think markets are fully valued at current levels and expect them to correct but we may trade sideways for a while.

Last time I called markets fully valued we saw a correction and I think we bounced back too fast from the lows in August. If we trade sideways for a while we could see a double top and may correct of that one.

The S&P 500 has a few more point to add but I think once we get to the 1,550 level we are likley to see a correction.

The FTSE 100 seems to have a reached a top as well (and it is below the closing-high we saw on June 15th). Miners have kept the FTSE 100 at current levels and the FTSE 250 has not really participated in the recent rally. I think that we will see a correction in those markets as well.

That's the funny thing about markets - how attitude driven they are. I still can't get to grips with the "running with the herd" mentality that drives them.

Still, the bulls have been leading the way and bulls are slow to stop. But when they do...

Yes, the bulls have been in control for most of the time but I think they are running against a wall.

The bears are waiting...