Credit spreads are very benign, and I do not think we are heading into a credit market problem. The selling you are watching is a retail problem, not a credit problem, and those are two very different things.
Start with what credit actually is. Credit is a loan. Leveraged loans sit outside the banking system, and demand for that paper is across the board: every endowment, foundation, pension fund, insurance company and sovereign wealth fund you can find. I talk to these people. The demand for these securities is firm, and that institutional bid is what determines whether spreads hold.
The exception is the retail investor who is bailing out of this stuff because he did not understand the risk he was taking. Why? Very simple. Nobody explained it to him. That is not necessarily his fault. The fault sits with the people who put these deals together and distributed them to buyers with no way to evaluate the structure. I am mad at them, not at the people selling. The bottom line is that it should not hurt most portfolios.
