Andreas Stover

A Fed Cut Is Priced-In; No Cut Will Trigger A Selloff

Sorry about that. Should just have been cyclesandtides.blogspo...

A Fed Cut Is Priced-In; No Cut Will Trigger A Selloff

The markets are still up by several percentage points for the year, indicating not only that a rate cut is priced in, but that it's success in curing credit woes is too.

However, looking at our current late stage in the credit cycle, it seems unlikely that there is any way to clear the system of the excesses of the credit expansion without the economy experiencing some pain.

Investors with any concerns about the short-term prospects for the credit markets and the economy should be very careful to get in when the market is still so relatively optimistic.

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Credit Concerns Haven't Gone Away

Thank you for a good article, it really does not seem the market has a doubt in the world about the future and despite ample evidence, it still doesn't seem like the average investor understands that there is such a thing as a credit cycle.

When credit can't expand anymore because of a change in the default rate, which in turn was caused by low lending standards, the worst ponzi borrowers will default. This will trigger the gradual tightening of lending standards that characterizes a downturn in the cycle. If this really is the the beginning of such a downturn, as I believe it is, investors would do well to brace themselves for more trouble ahead during the next many months.

cyclesandtides.blogspo...

Number of Distressed Bonds Rising at Rapid Rate

These distressed bonds and default rate numbers are likely to get worse if the standards on bank C&I loans tighten as this will push the worst of the ponzi borrowers over the edge.

The July data from the Senior Loan Officer Opinion Survey on Bank Lending practices indicates that we might be in the middle of a wave of such tightening.

This doesn't necessarily mean that junk bonds are not undervalued right now, just that their values cannot be properly estimated using current default rates.

cyclesandtides.blogspo...

Ready For Peak Gold?

It is worth noting that the dow/gold ratio is in the middle of a downward slope and that the gold/farmland ratio is well below its long-term average. In the absence of a breakup of these wave patterns gold seems more desirable than stocks to me at this point.

On a more fundamental level, coming easing of monetary policy amid fiscal deficits and rapid M3 growth (as calculated by shadowstats.com) bodes well for gold. Should we see a currency crisis because of this gold's future would look even brighter.

cyclesandtides.blogspo...

Consumer Credit: The Next Bubble?

Marc Faber recently mentioned in an interview that the sectors of the stock market bottom out around the same time, but peak out over a longer stretch of time.

It might not be too far fetched to believe that the credit cycle would follow the same pattern. After all people who need credit will try to obtain it another way, if one credit market tightens. They will thereby cause a yet loose market to expand further and eventually push up rates of default there too.

The most important credit data for investors is the default rate on corporate loans, which is still exceptionally low. However, according to the July data from the Federal Reserve Board's Senior Loan Officer Opinion Survey on Bank Lending Practices credit standards are slowly beginning to tighten on commercial and industrial loans.

Should we see a spike in this data, investors should probably be very careful where they put their money.

See: www.federalreserve.gov...

Andreas Stover
cyclesandtides.blogspo...