New Signs of Stress in the Credit Markets
New signs of stress in the credit markets... Corporate borrowing is falling off a cliff... Keep an eye on the dollar... Is the 'Trump Trade' reversing?... New lows for Hertz...
U.S. bank lending to commercial and industrial companies has ground to a halt...
That's according to the latest data from the Federal Reserve. In fact, lending is now contracting for the first time in six years. As you can see in the following graphic, it has plunged at a 5.4% annualized rate over the past three months...
A chart of the much broader market of commercial bank loans and leases is showing similar – though less severe – stress, too...
Now, these charts are no reason to panic... It's still too soon to know if this is the start of a more significant "tightening" of the credit markets.
But as regular Digest readers know, credit problems tend to precede problems for stocks and the real economy.
If this trend continues, it could be an early warning of trouble ahead. We'll be keeping a close eye on it.
In the meantime, one of the biggest "Trump Trade" trends is in danger of reversing...
As we've discussed, stocks and the U.S. dollar soared following November's election, while U.S. Treasury bond prices plunged.
But while the stock and bond markets have traded in a narrow range for most of this year, the dollar has been falling. And as you can see in the chart, it has now given up nearly all of its gains since Trump was elected...
This, too, could be an early warning sign... It suggests doubts concerning Trump's pro-growth agenda are growing, and the bullish sentiment that has propelled markets higher since November could be waning.
Plus, the market is beginning to wake up to the massive troubles ahead for the rental-car industry...
Yesterday, Bloomberg singled out the recent "panic" selling in shares of Stansberry's Investment Advisory short recommendation Hertz Global (HTZ). From the report...
As investor panic spreads about the plunging prices of used cars in the U.S., one company and its high-profile top investor are enduring the biggest beating: Hertz Global Holdings and billionaire Carl Icahn.
Hertz shares lost one fifth of their value last week, as a troubling reading for a used-vehicle price index was followed by warnings that lender Ally Financial and automaker Ford Motor see more pain to come...
"You have a long list of concerns and you can't give them the benefit of the doubt," Chris Agnew, an analyst at MKM Partners LLC, said in a phone interview. "They're not even giving guidance."
Of course, regular Digest readers shouldn't be surprised...
As Porter explained back in the November 8 Digest, the same day Hertz shares lost half their value in a single trading session...
Today, the leading car-rental business in the world saw its share price fall more than 50% in the first few hours of trading. The collapse erased more than $2 billion from the accounts of some of the world's best investors, including Carl Icahn, who owns more than 12 million shares.
While some of the best investors in the world got hurt by changes they never saw coming in the credit markets, many of our subscribers saw their portfolios increase in value by huge amounts.
This is only the latest example of how our understanding of the credit markets greatly increases our ability to guide investors in the equity market. These credit trends are by far the most powerful force in the stock market. Ironically, however, they're largely invisible to virtually all investors – even the most sophisticated.
Following the latest decline, HTZ is now trading at a new all-time low of less than $18 per share. Stansberry's Investment Advisory subscribers are now up 35% on their combined short position in Hertz and Avis Budget (CAR) in less than six months.
New 52-week highs (as of 3/27/17): Allianz (AZSEY), iShares MSCI Italy Capped Fund (EWI), Barclays ETN+ FI Enhanced Europe 50 Fund (FEEU), National Beverage (FIZZ), Shopify (SHOP), Sanofi (SNY), and Two Harbors Investment (TWO).
The feedback on Porter's Friday Digest is still rolling in. If you missed it, be sure to catch up here. And please let us know what you think at feedback@stansberryresearch.com.
"Porter: Wonderful! You are in the vanguard. Very important stuff, and unfortunately many Americans either don't want to hear about what is actually going on, or refuse to believe it. Keep up the wonderful work of you and your fine team of unique individuals working well together in all areas 'important' to us. For the modest sum of $20, I'll definitely be watching April 5th. Thanks!" – Paid-up subscriber Art B.
"Porter, interesting article, I think you hit some terrific points. The destruction of the middle class with the high corporate rate is on point, and a critical point for all to consider. I think you may be missing one aspect however on the CIA and the deep state; and that is the CIA has a new Director, assuming he can clean house some and install new people, he can break the loop. He is A West Point guy, and my hunch is that he could give a rats you know what on perpetuating the 'deep state'. My bet is he will support the Constitution and do the right thing above all else. Time will tell. If I am wrong then we have sunk far lower than you and I thought possible. I am a West Point guy as well, and I say he will Not under any circumstance let the country down. 'Let Freedom Ring'. This is not Rome in 48 BC – YET!" – Paid-up subscriber Steve S.
"Porter, I am going to be in Asia when you have your meeting with the Met-Man, and the time difference and my itinerary are going to prevent me from dialing in. If we sign-up for the conference call service, will we be able to listen to a recorded call sometimes after the actual meeting? Thanks." – Paid-up subscriber Bert N.
Brill comment: Yes, your $19.95 registration fee gives you live access to the call on April 5, as well as the unlimited access to the full replay whenever you'd like. Reserve your spot here.
Regards,
Justin Brill
Kiawah Island, South Carolina
March 28, 2017