Stock futures in the U.S. collapsed in the morning about the same time DR Horton (DHI) and Beazer Homes (BZH) rolled-out their depressing “lack-of-earnings” reports. Rumors were also swirling concerning potential credit problems roiling Germany’s financial markets as a CEO at a major German bank up and left without warning. Obviously, as previously announced LBOs are struggling to scrape together the necessary financing, many of the major Wall Street investment banks are being forced to open wide. Today, credit-default swaps on Goldman Sachs Group (GS) and Bear Stearns (BS) rose to records on concerns investment banks will be stuck with this toxic debt. We’ve been sliding towards this point for some time now and the day of reckoning for the woefully over-levered world financial system appears to be knocking on its doorstep. Whether or not the world’s investment banking cartel and central banks are capable of stemming an all-out rout remains to be seen, but forestalling the massive and accruing global financial imbalances has only guaranteed eventual disaster when its shear weight renders the “cartel” irrelevant. The Dow Jones Industrials suffered is second largest set-back of 2007, down over 300-points, but still a mere 3.5-percent from its all-time high.
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