Turbulent 3 days of the market comes to end with a breakdown decline, 2 of last 3 days were triple digit losses. Good chance for follow thru into early next week.
Since 1952 total credit market debt as % of GDP has been rising from around 125% to near 375% just recently, a turn down has begun almost imperceptable from a long term chart.
We have experienced credit growth for almost 70 years as debt has expanded but now this cycle has been reversed and the trend is CONTRACTING, and this is not condusive to sustainable vibrant economic growth.
We now have come back from the brink, banks have raised capital, stock markets have rebounded, but the imbalances remain unchecked (Doug Noland "Deficits 25 years and counting").
As is normally the case, lowering interest ratesgets us out of recession, but this time there is NO PENT UP DEMAND for housing and autos. STRIKE ONE
The inventory to sales ratio is weak.
The recovery off the Recession bottom expressed in job growh and many other areas is one of WEAKEST on record and is one reason I see this rally contained inside a super bear secular trend.
Investment and credit expansion has not returned and remains increadbaly weak. STRIKE TWO
Tightened credit standards, falling bank loans reinforce an economy that at best is fighting not to be drawn inside the BLACK HOLE. STRIKE 3
A V shaped market rally, does not equate to a V SHAPED economic rebound....show me the data otherwise.
Now Wall Street Bankers are on the firing range, and being demonized. A not so friendly attitude towards wall street is not stock friendly IMHO.
Though rates can fall further, they are already rising from near historic lows. 2 years we have gone with FED easing and huge stimulus.
Can we simply print our way to proserity? HIGH levels of bullishness and marginal new highs on skimpy volume SMELL like distribution from strong insider hands to the bag holder weak hands.
One day OUT OF THE BLUE the bear wilL ROAR back and force a reconciliation with our abusive debt ridden past and that will be UGLY but necessary so we can repair and move ahead
Duratek
Subscribe to:
Post Comments (Atom)
3 comments:
"We have experienced credit growth for almost 70 years as debt has expanded but now this cycle has been reversed and the trend is CONTRACTING, and this is not conducive to sustainable vibrant economic growth."
Interesting post. But if credit use has been growing for almost 70 years, then a trend reversal may be exactly what we need.
Credit contraction is not conducive to sustainable vibrant economic growth, because existing economic policy relies on credit expansion for growth. Yet surely other policy options exist.
I can think of nothing else.
The private secter will deleverage but the Federal government will leverage up until the bond market intervenes. The recent move to "allow" 401k etc to hold treasuries is a ploy to buy time using pension funds to continue federal spending spree.
Yes, some healing is needed, the downside of that is our economy is based on consumer spending....no easy way out
Leaders and FED either dont want to face the reality or too stupid
Post a Comment