Kevin Kessidli (Kevin Cassidy), a senior credit analyst at Moody's recently talked about the $ 700 billion risky higher-yielding corporate debt, which has already appeared on the horizon and said: "The avalanche накроет us in 2012 or later, regardless of whether or not the company try something do anything to avoid it.
Minyanville offered a similar assessment of how the corporate debt of $ 871 billion in September 2008, enlarged by the end of the year. We think that there are two possible scenarios: the credit cancer, eat up financial footing, or car accident, which ruined the system to pressure world debt. Read "Pirate's Booty", released on Minyanville.
I agree that another flood would be the tip of the Credit Mountains, while the risk has passed from the corporate coffers of sovereign savings, value is the aggregate of the causes and effects. And, despite the alarming parallels with the financial crisis in 2008, and with a modern extension, experienced investors continue to monitor corporate credit, like clockwork to assess the recession.
Because the shares have beaten 18-month maximum, we are left to wonder, will remain at the same level as the possibility of corporations, when they were again forced to pay. Credit markets show a surrealistic effect and only in such a perspective in the stock market has enough room to maneuver.
Because it begs the question: Who will beat the bell, when back problems?
Predators are waiting
No one denies that the bulls dominated year after year. At that time, how can you disagree with synthetic catalysts, price - this is the final arbiter of various financial views. The market is never wrong, we must never allow anyone's opinion affect the way of earning money.
As for investors is extremely important corporate credit, there is a long list of risks, waiting in the wings. Realizing that such information can lead increased fears, I describe 10 reasons why we are seeing a cyclical bear market with a long and painful consequences.
1. There remain questions about the assistance of Greece to pay the debt of 20 billion euros, which will be addressed in April and May. Such actions are not tied to boundaries, if you want an agreement is reached, this method will be tested, when it begins to sink following "rescue". Read "A Five-Step Guide to Contagion", published by Minyanville.
2. New legislation on health can add hundreds of billions of dollars to Ithaca gaping budget deficit. This gap could be reduced only by the growth of taxation and strict approach to the initiatives, but not because of the proportional growth or decline of consumption. Of course, such events can occur only when the relationship of governments and markets will be higher than ever.
3. State budget break up, and a recent Pew Center report estimated unfunded pension liabilities in the eye-popping $ 452 billion. Although, I hope that the package of federal grants, as discussed in January, would like to transfer money from one pocket to another. Read "Ten Themes for 2010".
4. Databases shaky at best, and explosive at worst. Since the "big division" still continues to grow (the red states against blue), Main Street against Wall Street, the wealthy against the poor - Social acrimony has passed into the social unrest in some parts of the world, and economic difficulties lead to geopolitical conflicts.
5. It is too much complacency, which can be measured by traditional means, such as the index of volatility (VXO 15.25, -0.29, -1.87%). Although we have seen long periods of subdued volatility (2004-2006) and the fierce debate over the demonstration effects of these measures, risk premiums are at levels that were last recorded in June 2008, just months before the financial crisis.
6. Campaign against Google Inc. -China and the USA-Toyota Motor Corp. to the EU-Greece, continue to point to protectionism. This posturing on the other side of globalization are clearly thriving.
7. While this unemployment rate ranges below 10%, almost one in five Americans - the unemployed. This means that they do not work, stopped to look, do not work on specialization or underemployed, because they can not find a place with full employment.
8. Economic point of view. At interest rates is only one path, the ratio of price to earnings will never be close to the point of incidence, and the ratio of debt to GDP ratio will approach or exceed 100% in all countries of the Group of Seven in 2014, with the exception of Germany and Canada, according to John Lipsky (John Lipsky) from the IMF.
9. With Congressional oversight has warned that commercial property losses the banks could reach $ 300 billion since 2011. Almost half of those loans that are concentrated in small establishments with total assets of less than $ 10 billion for the same banks accounted for almost half of all loans for small businesses. Read "What to Expect from the Commercial Real Estate Crisis".
10. It's easy to forget about the crisis in the housing sector, in terms of relevance, this problem is practically in the past. We must remember that a huge number of mortgage securities incorrectly positioned in the best case, worst case, they are toxic, and are in the balance of private and public institutions, and, accordingly, in bank accounts across America. This is in addition to the appearance of "sunk" mortgages (negative equity) and to foreclosure across the country.
Recall
Do I think that the system broke down in the process of repair? No, I believe in a lot of opportunities, after we took the medicine from the debt destruction. Read "The Great Expression"
This process may take 5-7 years, but it certainly is hard to say, much depends on how the will to develop multi-linear dynamics, which includes adjustments to rates, the evolution of loans, $ 500 trillion global derivatives, bilateral administrative reforms, changes in social attitudes, geopolitical instability and trade relations.
Perhaps we are faced with an echo before the coming retribution? Of course, markets are no longer natural, and we must respect both sides of the financial equation. Depending on the direction in which the emphasis will be placed and used for trumps, the result we obtain is only one way to reconcile these seemingly disparate point: move cautiously, making a time only one step.
Yielding to pressure at the end of the quarter, though the rates of anxiety is increasing, the market psychology remains one of the most important of four indicators. The last round of the fundamental data points (profit) beat expectations in the aggregate, the bulls also pick up the baton technical S & P above 1150 and the banking index over 50 (the resistance comes into play S & P 1200) and while the structural drivers of the U.S. is currently stable, we have not heard about the status of other sources.
If you had asked me about the short term, I would suggest that the ribbon reaches the highest level at the end of the fourth quarter to S & P 1200, in accordance with the best bad developments. Remember, when the S & P 1150 has been overcome, has opened a lot of positions on the decline, which was removed before the natural layer of demand. Since then, we will follow the movements of capital in the second quarter, which should help to formulate a report by early April.
Each of us has a unique time horizons and risk profiles, because the blind surf so dangerous. I do not believe in reasoning, I believe in activism and individual responsibility for our financial decisions. I hope that made his stroke in the big picture, which added some information, thanks to which we find our way.
MarketWatch
Mar 24
