Feb 8: MARTIN FRIDSON on soaring corporate defaults

Part 1, February 8 2009: Martin Fridson, chief executive of Fridson Investment Advisors, which invests in corporate debt, expects corporate default rates in the US to peak around 15 or 16 per cent, the highest level since the Great Depression. More dire economic conditions could push this level higher. The reason for the soaring default rates is that the quality of outstanding bonds is so much worse than in previous cycles. Investors lent money to companies that were a lot riskier to lend to than they have in the past. This expectation assumes the financial system will get back on its feet, but the outlook could worsen again for the financial system, and that would mean expectations have to be reviewed.