Monday, March 19, 2007

Credit Crunch Is a Sham...../ really? time will tell

this is a interesting report from Tony Crescenzi/the it shows that we have seen nothing yet. i´m pretty sure that the debt growth drivers have changed. from the private sector and real estate to the corporate sector. the monthly data that tracks the consumer credit shows clear sign of slowing down and is growing the least over the past years ( down to 2-3%.) . the party is over.

interessante daten. die treiber des kreditwachstum haben eindeutig gewechslet. die privaten haushalte können aufgrund der schuldenlast und sich verschlechternder kreditbestimmungen kaum noch weitere kredite aufnehmen. hier ist die party vorbei

we just have to look on our bloomberg or other newscreen to see all the leveraged buyouts that are fueling all stock markets around the world. the party is in full swing (i hope close to the peak.....) and as we have seen in the subprime market the u-turn caa happen over night....

ganz im gegenteil zum gewerblichen sektor der uns ja jeden tag mit neuen kreditfinanzierten rekordübernahmen überrascht und die aktienmärkte alleine am laufen hält. hier ist die party gerade kurz vor dem siedepunkt (hoffe ich zumindest...). und wie wir bei den subprimes gesehen haben kann sich die wende praktisch über nacht vollziehen......

and of course another source of credit is running amok. margin debt is hitting new highs. thanks to barry ritholtz. here are the details

und selbstverständlich darf da eine andere quelle des kreditwachstums nicht fehlen. margin debt läuft amok und erreicht neue rekorde (link oben)

i aslo wanted to highlight the leverage of all the hedge funds out there. here is one drastic example

ich möchte zudem noch auf die massive verschuldung der hedge fonds hinweisen. hier ein beispiel

Citadel trading costs hit $5.5bn (must read)

More than 90 per cent of the investment expenses represent interests payments, including the cost of the roughly $100bn of net debt provided by investment and commercial banks

Right now, the hot topic is the subprime market. One of the biggest questions is whether this sector's problems will spill over into other areas of lending. In other words, will problems in the subprime market crimp overall lending and cause a credit crunch, which would then harm economic growth and potentially lead to a recession?

I closely follow data released every Friday at 4:15 p.m. ET by the Federal Reserve on the assets and liabilities of U.S. commercial banks

These data are an excellent gauge of whether any change in lending conditions is occurring. In this report, the Fed sums up the total amount of money extended by the nation's commercial banks to individuals, businesses and government entities via loans, leases and securities purchases. The data are comprehensive, meaning that if the problems in the subprime sector are broadening out, this will be obvious in the data.

The newest data released Friday squash the idea that a credit crunch is developing in response to recent subprime problems. The Fed's data show that bank credit expanded strongly in the week ended March 7, increasing $23.9 billion to $8.437 trillion. The rise follows other large gains over the previous five weeks, which saw bank credit expand at a 13% annual rate, which is faster than last year's gain of 11% and 2005's gain of 10%.

( the higher the dose the harder the ......../ je höher die doses desto kälter der entzug....)

Interestingly, recent increases in bank credit have been partly the result of steady increases in real estate loans, which reached a record $3.381 trillion in the latest week.

In addition to these data, it is notable that bond issuance has been very robust over the past two weeks, with issuance running several times the normal levels. Hence, many entities are looking for money (many of these have been financial companies), and investors have been very willing to give it to them

thanks to

here is more on this topic from russ winter

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