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Business/Finance See other Business/Finance Articles Title: This ‘Under the Radar’ Recession Warning is Flashing Red – Are You Prepared? This ‘Under the Radar’ Recession Warning is Flashing Red – Are You Prepared? Mike Larson | Tuesday, May 3, 2016 at 4:30 pm Job growth. GDP. Retail Sales. Durable goods orders. They’re all worth watching if you’re trying to figure out what’s happening with the economy. But I have one “under the radar” recession indicator I never, EVER ignore. And right now, it’s flashing red. I’m talking about the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices. I know the name is a mouthful. But the short version is that the Fed surveys bankers every quarter to ask about loan demand, lending standards, credit pricing and more. Are banks tightening loan standards – and will that put a cap on economic growth? When banks are giving away nearly free money to everyone, it boosts growth. But when banks tighten loan standards, or make loans costlier to get, it’s like a lead anchor around the economy’s neck. That’s because credit is the lifeblood of a debt-addicted economy like ours. So boy did I ever sit up and pay attention late yesterday when the Fed said: >> A net 11.6% of banks tightened loan standards for large Commercial and Industrial (C&I) borrowers. That was up from 8.2% in the first quarter, and the worst reading since the fourth quarter of 2009. That means banks are increasingly reluctant to lend money. >> A reading of loan demand came in at negative-8.7 after hitting negative-11.1 in the first quarter. Those were the first back-to-back minus signs in six years – meaning companies are increasingly reluctant to borrow money >> What about commercial real estate (CRE)? I’ve been warning about a massive bubble there, and now bankers are starting to pay attention. >> They tightened loan standards across the board – for construction and land development, nonfarm, nonresidential buildings, and multifamily properties. In fact, banks haven’t been this tight with CRE financing since the first quarter of 2010. MAM3499a 0503 C&I Loan Chart But here’s where the rubber really meets the road. As you can see in the chart above, we have now had three consecutive quarters of net tightening in C&I lending. That has ALWAYS signaled recession! It did in the wake of the savings-and-loan collapse in the late 1980s. It did during the tech wreck of 2000-2002. And it did during the Great Recession of 2007-2009. I’m sure the starry-eyed optimists on Wall Street will give you all kinds of reasons you should ignore that track record. But what else would you expect? I’ll just go back to what I’ve been saying for several months. When the credit market turns, it impacts everything – stocks, risky bonds, commodities, real estate, currencies, you name it. Ignoring those major turns is a surefire way to generate losses, so I hope you’re not doing that. In fact, I’m doing everything in my power to help you navigate these important turns … to help you not just avoid losses, but also build potentially large profits. My first recommendation: Read my eBook, the Mystery of the Golden Ratio immediately. It will only be available for free online for a few more days, and it contains critical investment intelligence for you. My second recommendation: Join me at the MoneyShow Las Vegas next week at Caesars Palace. I’ll have a ton of information about the credit markets for you there, as well as specific, actionable advice on how to profit in this changing market environment. You can join me by clicking here, or calling 800-970-4355, to register today. If you call, please mention priority code 040948. My third recommendation: Get out of cyclical, economically sensitive stocks and rotate into “safe-yield” names in non-economically sensitive, lower-volatility sectors. Think consumer staples, utilities, or telecoms versus industrials, transportation, and technology. This strategy will help protect you from losses if I’m right and the U.S. economy is stumbling toward recession. Make sure you also take a few minutes out of your busy schedule to share any advice for your fellow investors, or comments for me, in the discussion section below. Poster Comment: What is credit anyway but thievery. At least that bank cancelled my card and then wrote off the debt. The clowns will not be trying to collect. When I was driving the truck I was making some good money. I had a credit card then, and made payments regularly. But that was long ago. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest Begin Trace Mode for Comment # 1.
#1. To: BTP Holdings (#0)
Not much point in borrowing for expansion, staff or new plant when the market is saturated. Just look at the massive car lots. People with money have pretty well all they need; those without money, job not going to be buying.
#2. To: Tatarewicz (#1)
No money, no job and no credit. Bad news all the way around. ;)
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