Will the troubles in the US subprime market pass by as a little local difficulty – or will they start a rout across capital markets and bring to an end the great bull run in a broad range of asset classes? That’s the big question faced by those in capital markets right now.
Can history teach us anything on this score? Well, it’s certainly worth looking at the collapse of Long-Term Capital Management in September 1998. The near-demise of this mammoth hedge fund marked a turning-point for credit markets, hitting brokers and banks hard.
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