“…The Collateralized Loan Obligation (CLO) market was one of the financial nuclear bombs that blew up and triggered the financial system de facto collapse in 2008. Well, it’s back – with a vengeance…”
Prepared by Lorimer Wilson, editor of munKNEE.com – Your KEY To Making Money!
[Editor’s Note: This version* of the original article by Dave Kranzler has been edited ([ ]), restructured and abridged (…) by 49% for a FASTER – and easier – read. Please note: This complete paragraph must be included in any re-posting to avoid copyright infringement.]
“Bank stocks are in a bear market now and there’s a reason for that...
The chart above shows an ETF operated by Blackstone that invests in senior secured leveraged loans – the type of loans that get magically transformed into CLOs…[and what it shows]…is the beginning of an investor stampede out of this asset class…It reflects the onset of fear…in the leveraged bank debt market. It [suggests that] parts of the stressed financial system – leveraged loan, investment grade and high yield debt markets – are breaking at the same time…The latter two had been showing signs of breaking down well before the leveraged loan market started to crater. Investors have been pulling billions out of all three segments of the credit market. The deteriorating financial condition of corporate America is spreading its wings. This is part of the reason the volatility in the stock market has ramped up recently.
Bank stocks are in a bear market and bank liquidity is drying up. There’s a massive liquidity crisis developing and the chart of SRLN reflects that. The sell-off in the housing stocks – down over 30% since the end of January foreshadowed this, just like the sell-off in homebuilders preceded the onset of the last financial crisis. This time it will be worse. This crisis is beyond the banking crisis 10 years ago. It’s everything. You do not want to be a creditor or own stocks going forward.
[It] looks like the Spanish philosopher, George Santayana, was correct: We did not learn from the past and now we’re condemned to repeat it.”
(*The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)
Scroll to very bottom of page & add your comments on this article. We want to share what you have to say!
A note from Lorimer Wilson, owner/editor of munKNEE.com – Your KEY to Making Money!:
“Illness necessitates that I spend less time on this unique & successful site so:
For the latest – and most informative – financial articles sign up (in the top right corner) for your FREE bi-weekly Market Intelligence Report newsletter (see sample here).
If you enjoyed reading the above article please hit the “Like” button, and if you’d like to be notified of future articles, hit that “Follow” link.