Continued credit/liquidity issue …. “Light at the end of the tunnel, or a crack in the ceiling?”

Worst might be over just because of trillions in fiscal and financial stimulus. Reliance on these short-term fixed may not be a sign of economic strength – nor, for that matter, is taking comfort in relatively slower declines. Many takes comfort on the fact that payrolls fell by 539,000, fewer than economists forecast, after a 699,000 loss in March, 2009. Still, the unemployment rate jumped to 8.9 percent, the highest level since 1983 and the unemployment number looks rosier since US government hired 72,000 temporary worker for US Census Bureau.

While last few weeks stock market has surged nearly 40%, there’s still plenty of downside left in this economy. There are some proverbial shoes that have yet to drop and liquidity/credit remains a big concern. Instead of talking about the potential for commercial real estate nosedive, we may want to understand private equity debt, “Level-3” assets, otherwise known as the billions in worthless paper that remain on the balance sheets of banks. What will happen when these Level-3 paper issue hits the fan?