China credit impulse pulls up copper and oil.
Posts tonen met het label credit. Alle posts tonen
Posts tonen met het label credit. Alle posts tonen
vrijdag 6 januari 2023
donderdag 10 november 2022
Base metals rebound coming
woensdag 13 juli 2022
vrijdag 15 april 2022
zondag 14 november 2021
donderdag 17 juni 2021
dinsdag 16 maart 2021
Credit Card Company Vs. Delinquency Rate
Credit card companies bottom out at the peak of delinquency rates. When delinquency rates go down, people will start buying things again and go into debt.
donderdag 12 september 2019
Credit Card Interest Rate Vs. 10 Year Bond Yield
Credit card interest rates are correlated to the 10 year bond yield. However, we see a divergence in 2019.
woensdag 11 september 2019
China Credit Impulse Vs. China GDP
The China credit impulse is a leading indicator for China GDP with a 1 year lag.
The 6 month impulse is leading.
zondag 14 juli 2019
AAA Credit Spread Vs. Real GDP
The credit spread between AAA rated corporate bonds and the 10 year U.S. treasury is a leading indicator for real GDP.
At this moment in 2019, we see credit spreads broadening (green line going down), which means that U.S. real GDP should be coming down as well (blue line going down).
For more info: https://pdfs.semanticscholar.org/e460/faf649cd2b43c5674dedcf45370973133c87.pdf
At this moment in 2019, we see credit spreads broadening (green line going down), which means that U.S. real GDP should be coming down as well (blue line going down).
For more info: https://pdfs.semanticscholar.org/e460/faf649cd2b43c5674dedcf45370973133c87.pdf
donderdag 6 juni 2019
Credit Spreads
A good way to predict recessions is to look at credit spreads between corporate bonds and treasuries.
The 30 year mortgage bond typically follows the BBB rated corporate bond yield.
The 10 year treasury bond typically follows the AAA rated corporate bond yield.
When these diverge from each other (for example in 2008 and in 2015), a recession is likely to occur as people flee from corporate bonds to the safety of treasuries.
The 30 year mortgage bond typically follows the BBB rated corporate bond yield.
The 10 year treasury bond typically follows the AAA rated corporate bond yield.
When these diverge from each other (for example in 2008 and in 2015), a recession is likely to occur as people flee from corporate bonds to the safety of treasuries.
dinsdag 4 december 2018
Credit Spreads Are Widening
In case you are wondering why the 10 year yield has dropped below 3%. Here is the answer.
The economy is slowing down and you can see this in the people fleeing corporate bonds and going into treasuries. Credit spreads are widening and it's a bad thing.
The economy is slowing down and you can see this in the people fleeing corporate bonds and going into treasuries. Credit spreads are widening and it's a bad thing.
dinsdag 29 september 2015
Investment Grade Credit Risk Vs. Buybacks
Investment grade credit spreads are a leading indicator for buybacks. Buybacks are correlated with the stock market.
A credit spread is the difference in yield between two bonds of similar maturity but different credit quality. For example, if the 10-year Treasury note is trading at a yield of 2% and a 10-year corporate bond is trading at a yield of 4%, the corporate bond is said to offer a 200-basis-point spread over the Treasury.
As credit spreads rise, it gets more and more difficult to finance buybacks (credit conditions are worsening). Yields on corporate bonds go up (which coincides with a credit spread rise), which means that debt issued by the company (to buy back its own shares) has a higher interest rate. The result is that there will be less buybacks. There is a lag of 3 months (we borrow and then we spend).
A credit spread is the difference in yield between two bonds of similar maturity but different credit quality. For example, if the 10-year Treasury note is trading at a yield of 2% and a 10-year corporate bond is trading at a yield of 4%, the corporate bond is said to offer a 200-basis-point spread over the Treasury.
As credit spreads rise, it gets more and more difficult to finance buybacks (credit conditions are worsening). Yields on corporate bonds go up (which coincides with a credit spread rise), which means that debt issued by the company (to buy back its own shares) has a higher interest rate. The result is that there will be less buybacks. There is a lag of 3 months (we borrow and then we spend).
As buybacks are correlated with a rise in the stock market, we can assume that higher credit spreads are a leading indicator for lower equity markets with a lag of about 3 months.
So you could have predicted black monday in August 2015 (red graph) by looking at the rising credit spreads (blue graph).
So you could have predicted black monday in August 2015 (red graph) by looking at the rising credit spreads (blue graph).
A good way to predict recessions is to look at credit spreads between corporate bonds and treasuries.
The 30 year mortgage bond typically follows the BBB rated corporate bond yield.
The 10 year treasury bond typically follows the AAA rated corporate bond yield.
When these diverge from each other (for example in 2008 and in 2015), a recession is likely to occur as people flee from corporate bonds to the safety of treasuries.
For more info: https://pdfs.semanticscholar.org/e460/faf649cd2b43c5674dedcf45370973133c87.pdf
The 30 year mortgage bond typically follows the BBB rated corporate bond yield.
The 10 year treasury bond typically follows the AAA rated corporate bond yield.
When these diverge from each other (for example in 2008 and in 2015), a recession is likely to occur as people flee from corporate bonds to the safety of treasuries.
For more info: https://pdfs.semanticscholar.org/e460/faf649cd2b43c5674dedcf45370973133c87.pdf
The credit spread between AAA rated corporate bonds and the 10 year U.S. treasury is a leading indicator for real GDP.
At this moment in 2019, we see credit spreads broadening (green line going down), which means that U.S. real GDP should be coming down as well (blue line going down).
It also pays to watch the CCC rated bond yields as they are always first to go bad.
woensdag 19 maart 2014
U.S. Debt
It is interesting to monitor how the public and private debt curves are trending.
Since the crisis of 2008, total credit market debt as a % of GDP has been going down for the first time since history. Private debt was in a debt deleveraging mode (blue graph), while the Federal Reserve's public debt was in a debt expansion mode (red graph).
If we look at the nominal value of debt, we can see that since 2014, total, private and public debt are all growing again, resuming exponential expansion.
Since the crisis of 2008, total credit market debt as a % of GDP has been going down for the first time since history. Private debt was in a debt deleveraging mode (blue graph), while the Federal Reserve's public debt was in a debt expansion mode (red graph).
If we look at the nominal value of debt, we can see that since 2014, total, private and public debt are all growing again, resuming exponential expansion.
maandag 17 maart 2014
Marc Faber: When China Implodes, This Might Be Bullish For Gold
A very important development is happening today in China.
One after another company in China is defaulting on its debt. Marc Faber quotes: "We have a gigantic credit bubble here in China." Example: Zhejiang Xingrun Real Estate Co real estate developer defaults. Chinese bank defaults.
What this does to the yuan is obvious, the yuan is declining. If it manages to go above 6.2 USD/CNY, you can expect large problems as the China carry trade will halt and many people invested in Chinese structured products will be in the dumps.
Marc Faber confirms this in the next video. He expects Chinese GDP growth to slow 50% from 8% to 4%. You would think that when the yuan drops, Chinese can't buy that much gold anymore, but Marc Faber has another view on this. The yuan could drop and as a result Chinese gold demand could actually go up due to people protecting themselves from inflation (and defaults) in China.
dinsdag 17 december 2013
Total credit market debt Vs. Dow Jones
Total credit market debt growth is correlated with the Dow Jones. As everything in the economy requires loans, credit expansion drives the economy today.
Whenever this credit growth stops (blue line drops), the Dow Jones (red line) will go down with it. We have seen this in the 1987, 2000, 2008 crashes.
Monitor the blue line as it may be an important indicator.
zaterdag 2 maart 2013
Total Credit Market Debt
Since 2008 we have started a new era. We entered the period of deleveraging. For more than half a decade we had an exponential growth system in credit, but we have ended this period. I will show you by analyzing "Total Credit Market Debt".
Total Credit Market Debt today, is at an astonishingly $55.3 trillion dollars.
And it is 350% of GDP.
The total credit market debt = federal/state/local government debt + federal debt to trust funds + business debt + household debt + domestic financial sector debt.
This total credit market debt can be divided by federal debt and private debt.
1) Federal debt: $16.7 trillion.
Federal debt is at 100% of GDP.
2) Private debt: $40 trillion.
Private debt is at 245% of GDP.
As you can see, since 2008, the private sector has been deleveraging (Chart 6) and the Federal Reserve has been preventing this to happen (Chart 4).
But overall, the Federal Reserve hasn't printed enough money to keep debt going up exponentially (Chart 1).
So what happens when debt doesn't grow exponentially? You will get an economic collapse as Chris Martenson explains here.
To read the analysis: go here.
Total Credit Market Debt today, is at an astonishingly $55.3 trillion dollars.
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| Chart 1: Total Credit Market Debt Owed |
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| Chart 2: Total Credit Market Debt as a Percentage of GDP |
This total credit market debt can be divided by federal debt and private debt.
1) Federal debt: $16.7 trillion.
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| Chart 3: Federal Debt: Total Public Debt |
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| Chart 4: Federal Debt: Total Public Debt as a % of GDP |
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| Chart 5: Private Debt |
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| Chart 6: Private Debt as a percentage of GDP |
But overall, the Federal Reserve hasn't printed enough money to keep debt going up exponentially (Chart 1).
So what happens when debt doesn't grow exponentially? You will get an economic collapse as Chris Martenson explains here.
To read the analysis: go here.
donderdag 31 januari 2013
Public Sector Credit Expansion Vs. Private Sector Credit Contraction
In 2009, Marc Faber said these words at one of his famous seminars:
"But for the fiscal stimulus to even have a small chance of succeeding at reviving economic activity it has to be larger than the private sector credit contraction."
In today's world we have 2 opposing forces, one is Ben Bernanke's public sector credit expansion (Chart 1) and the other is private sector credit contraction (Chart 2). If credit grows, all is well, but when they cancel each other out and credit contracts, a recession will start. To make it easy I took the credit growth chart for the money creation of banks (Chart 1). For the private sector I took the household debt chart (Chart 2).
Bank credit is going up due to money printing:
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| Chart 1: Bank Credit |
Private sector debt is declining due to repayment of debt. I indicated that the savings rate has gone up to 6% now, so I expect more repayments in the future.
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| Chart 2: Private Sector Credit |
If we then add these two charts together we get Chart 3 and the picture isn't pretty. The percentage change in credit has gone negative and is at a historic low. As you can see, each recession (grey bar) is accompanied by a dropping credit and 2008 is by far the worst one. If we don't see a rising trend here, you can expect ugly times ahead.
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| Chart 3: Credit Expansion/Contraction |
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