DoctoRx's  Instablog

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Over 30 years of investing in individual stocks. Extensive business experience with small to mid-size companies, including as CEO. Many hundreds of blog posts on financial and economic matters since 2008. Focus on value with catalysts for upside price action. Background as a physician and... More
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  • Corporate Downgrades Now Exceeding Upgrades May Be Important 0 comments
    Jun 26, 2013 9:32 AM

    An important article from today is titled Ratings Ratio Worst Since 2009 as Profits Slow.

    Please read it. My recollection is that the late '90s had a similar phenomenon; I remember reading late in the bubble that the business expansion then underway was the first in US history in which the average credit quality of corporations declined.

    As the article details, something similar to 2007 is going on now.

    This goes along with the effective Fed Funds rate consistently coming in around 10 basis points. Where is the demand for loans with this low a number, which is reminiscent of 2011 numbers?

    Now we find yet another downbeat GDP data point from Q1.

    As I've been saying, there is a reason why the Fed is doing what it is doing. They are playing their assigned role, and they see the economy up close and personal. In saying this, I'm not expressing an opinion on the entire Keynesian financial structure and philosophy, but I am giving a lot of deference to the Fed's views of the financial underpinnings of economic activity in the US and abroad.

    Anyway, the credit cycle for corporations looks to be late-cycle stuff.

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