Author: albie

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A new era of Credit Growth?

I am constantly engaged in conversation with my broker (he seems to be the only one who agrees with me) about the current generation of people that have no memory of the Great Depression and who seems to believe the more credit the better.  The habit of “buy now, save later”.  I don’t think it can last, not here in SA, not in the US or in the rest of the world.  The savings of the Asian countries will not forever finance the spending of Western nations.

Credit growth is still high here in SA as well as in the US it seems.  The  document (click here) and the discussion here,  by Ives smith of Naked Capitalism all confirm my beliefs that the world as we know it currently is not sustainable in terms of credit growth and a return to the normal is inevitable.  This is not good news for stocks generally.

veneroso-why-the-second-wave-is-inevitable-61908

US Credit vs GDP Growth
US Credit vs GDP Growth
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Credit is “Mother’s milk”

Or as a farmer would call it, the ghries of an economy !

But the cost of credit is going up, not down, in contrast to prior cycles, because astute investors recognize the myriad of global imbalances that threaten future stability. In addition to home prices, $130 a barrel oil and their resultant distortion of global wealth and financial flows head that list. For now, investors should remain in high quality assets – until – until, well…until the prospect for home prices points skyward or until the cows come home, whichever one’s first.

Pimco article

Albie

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US Credit and housing crisis

Below follows a link to a presentation by Whitney Tilson of T2 Partners explaining the current crisis and why it will continue for a long time still. It also puts into context the relative size of the problem compared to history.  Scary stuff!

Regards

albie

Whitney Tilson Presentation

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How wrong so called “experts” are.

Or is it more a case of talking their books, or protecting their
interests. I also note that while telling the public to buy these
shares, the funds have actually sold significant amounts of banking
shares in this period.

See below timeline of how they protect their interests, and the public have to bear the costs.

banks-are-cheap

Albie