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Credit markets

Article Index

This Credit Market Barometer Shows Heavy Storms Ahead

By , Global Credit Strategist, Money Morning • @MichaelELewitt -

credit market

Private equity firms serve as a startlingly accurate credit barometer. The less productive their behavior, the more likely the cycle is reaching its late stages.

When credit is mispriced, the credit cycle is far advanced, and debt investors should be running in the other direction from bond and loan offerings involving private equity?owned borrowers... because private equity firms are doing two destructive things.

And that's what we saw up until the end of 2014 when the music in the credit markets stopped. Here's what to watch for...

Warning: Business Development Companies Just Got Doubly Risky

By , Global Credit Strategist, Money Morning • @MichaelELewitt -

Business Development Companies

At this point of the credit cycle, a lot of securities look cheap.

Business Development Companies (BDCs) are looking exceptionally cheap right now - trading at 82.7% of their net asset value and kicking off very high income of 10% to 17% at the same time.

Due to their structure as closed-end funds that pay high dividends, BDCs are designed to appeal to retail investors.

The problem is that investors often forget that high dividends come with a price - and that price is usually that the loans made by these companies are illiquid and high risk.

And Congress just made the risk much worse...

What Credit Markets Are Telling Us About Stocks Now

By , Global Credit Strategist, Money Morning • @MichaelELewitt -

Rather than trust markets to heal themselves, the world's central banks have polluted markets with flawed economic theories and trillions of dollars of debt. Rather than ignite economic growth as they had hoped, however, they have suffocated the global economy.

It began with the U.S. Federal Reserve's move to lower interest rates to zero seven years ago, followed by several bouts of quantitative easing...