US Credit “Flashing Red”

The US’s National Association of Credit Management (NACM) has the job of monitoring credit/debt conditions, part of which is a survey of credit companies in the US – the Credit Management Index or CMI.

They’ve reported that credit conditions in the U.S. this year are worsening and possibly dramatically so.  Whilst they warned of deteriorating conditions in February, at that time they were unsure if the decline in their CMI was temporary.

It seems in March now they are much surer, writing… “There is quite obviously some serious financial stress manifesting in the data and this does not bode well for the growth of the economy going forward,” and  “These readings are as low as they have been since the recession started and to see everything start to get back on track would take a substantial reversal at this stage. The data from the CMI is not the only place where this distress is showing up, but thus far, it may be the most profound.”

UBS have since come out and included this (and other metrics) as a “flashing red” signal of a credit, and indeed broader market in distress.  They expect to see US Fed loosening rather than the much anticipatorily hyped tightening of monetary policy.  When you are already at near zero interest rates, that either means QE4 or negative rates.  They said “broad US economy returns (over the cost of capital) are in structural and cyclical decline, credit appetite is deteriorating, and that will lead to a trend widening of spreads, deteriorating credit availability and uptake, slowing growth and a new round of Fed reflation.” 

They go on to say they expect to see a resulting surge gold and gold equities prices.