Cracks In The Credit Market

To All,

Cracks are beginning to form in the credit markets. Riskier, high yield debt is stumbling as inflation fears rise. Tech valuations are at an all-time high and volatility is increasing.

Investors fear that the recent decline in high flying tech stocks will spread to corporate debt. Investors have bid up low-rated credit default swaps from $123 billion in December to $197 billion in January as an anticipation that companies will begin defaulting on their debt as interest rates increase.

The market is nervous. Investors are preparing for an ultimate downturn. It is one thing when equity valuations decline. It is another matter at hand when credit valuations crumble as the entire global establishment has been addicted to cheap debt for the past few decades. When the heroin is taken away from the junkie, all hell breaks loose.

In yet another sign that credit markets are beginning to show cracks are seen in the outflow of capital from the High Yield Corporate Bond ETF (HYG). Year-to-date withdrawals are now $11 billion.

Overall, if the cracks in the credit markets worsen, it will spread to additional asset classes, leading to valuations decreasing. As I have stated multiple times in the past, we are in an overinflated bubble that is on due course to crash. With all of the debt in the system and interest rates due to rise, it is now a damn good time to figure out what you will do when the entire financial market implodes.

Snippets

• Former meme stock rockets 10% afterhours as well-known financial guru goes for round two: One of the great things about investing in these obscure microcap companies is the pump and dump nature that comes along with these stocks. Yesterday, one of my largest holdings was pumped by a well-known guru that sent the stock up over 10% in after hour trading. This was after a nice 7% upward move that day when the market was open. The pump came from this tweet. Interestingly enough, last time this guy tweeted about this company was last year around the same time, and the stock went from $1 to $10 per share in a matter of days. Read More.

• Go FRauD Me: TruCK Fudeau

• $30 Trillion In Debt Means Ignore All The Talk: Central Bankers Are Only Pretending To Lean Against Inflation: “Average hourly earnings ran at a +9.2% annualized pace in Friday’s employment report,” said the Oracle. “On a three-month annualized pace, wages grew +7.0%,” he said, alone in the desert.

  “For those hoping that the US will avoid a wage-price spiral, this report was no quaalude.” But the past was not what I’d called to explore. Of all my sources, only the Oracle foresaw 7% inflation back in early 2021. And my hope was to glimpse what the future holds. Read More.

• Texas power grid passes biggest test since last winter's disastrous freeze: The maligned Texas power grid kept most of the lights on during this week's winter storm despite near-record demand, with state officials praising changes made since last February's brutal storm for the grid's stability. The Texas grid has 15% more power generation capacity than a year ago, and for most of the latest storm, it was working with a power capacity cushion of 17K MW, enough extra electricity to power 3M homes. Read More.

• Ted Cruz buys up to $50,000 in bitcoin: Sen. Ted Cruz (R-Texas) bought up to $50K worth of bitcoin (BTC-USD) late last month as the cryptocurrency came close to a recent low. Cruz bought between $15K and $50K of bitcoin on Jan. 25, according to disclosure filed Friday. Read More.