Here's more on that vicious c ycle - and the disconnect between perception and reality.

Deal Junkie found a great piece today to remind us that, yes, the credit market is a mess. The perception I've been writing about here is that the future will bring us to hell in a handbasket.

But what is the reality?

“The majority of CMBS bonds are triple-A bonds, and the triple-A buyer has just gone home,” said Leonard Cotton, vice chairman of Centerline Capital Group, an asset manager with a core focus in real estate and more than $14 billion in assets. “They're not willing to take the risk in price if a bond bought today is worth less tomorrow, even though the fundamentals are the same.”

Delinquencies on CMBS have risen, but the increase is not nearly enough to account for the market's weakness. Moody's delinquency tracker, which follows delinquencies in excess of 60 days on loans backing U.S. CMBS transactions over the past 10 years, showed a delinquency rate in June of 0.45%, up one basis point from May and up 23 basis points from the low of 0.22% in July 2007.

At those rates, even if the delinquency rate triples, the commercial real estate market remains a solid investment and is not likely to see a collapse like the one residential real estate has experienced, Mr. Cotton said.

Hmmmm. So, yes there's some softness, but we're fundamentally not in an awful place, but we're afraid to do anything because things could get sooooo bad and to top it off.... You see where I'm going. We can't do deals in spite of ourselves. At least the traditional lenders are getting deals done most of the time. I think it all comes down to seeing your shadow and moving forward instead of retreating! And if that means the end of the go-go days of CMBS, then so be it. Let's find another vehicle to ride. But people are afraid to be the first to make the move.