US Credit Euphoria Suggests More Caution Ahead

Tyler Durden's picture

Credit markets have been bleeding wider recently but based on Credit Suisse's 'Risk Appetite Index', they remain high in Euphoria territory in the US. This is worryingly crowded on its own but the key point that they note is the divergence between US exuberance and the rest-of-the-world's far less sanguine view of credit. The risk-appetite spread between the two has been this wide two times before in recent years - July/August 2011 (which saw a major sell-off - debt ceiling) and April/May 2010 (another major sell-off - end of QE and flash-crash). As we noted earlier, equity market valuations are very much pinned to risky credit now and so this indicator is yet another canary-in-the-coalmine...

Comparing Credit Suisse's Global and US Credit Risk Appetite Indices (blue dotted lines are peak divergences...)


which happen to coincide with rather notable selling pressure in credit (and hence equity) markets...

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RSloane's picture

There are so many canaries-in-the coalmines that I'm surprised Animal Planet isn't covering the credit markets.

Zer0head's picture

coalmines?  you mean there are still coalmines?


more like a lot of dead fcking canaries and millions of other birds at the bases of wind turbines

e-man's picture

Risk is the measure of time between the perception of a fat-tailed distribution event and the annoucement of a Fed bail out.  It is usually measured in nanoseconds although recent advances in quantum financial mechanics have given rise to bail-outs being announced prior to the said fat-tail events.


OT: It's my birthday today! Woohoo!!

Member for

1 year 4 hours

Angus McHugepenis's picture

As you get older you start to notice more wrinkles on your dick.

If you live in Colorado spark a doobie in celebration. Fuck it... spark one wherever you live!

HD's picture

Animal Planet would have to expand its programing to include unicorns in order to cover the financial markets.

zorba THE GREEK's picture

Speaking of canaries, recently my pet parakeet died.

He had been ailing for quite a while. He had Chirpies,

It's a canarial desease, it was untweetable.

Yen Cross's picture

 The "MSM" spin is that people are paying off revolving debt. Longer term purchases were a bit better.

  My guess is that, people are tapped out, and using every last cent to purchase a used car to take their {i-entitled} offspring to indoctrination camp.

Zer0head's picture

no question people are draining their savings

medicalstudent's picture

we havent send out the 'money is debt' memo yet.


like the base money, it will eventually circulate.

Madcow's picture

debt WAS money.  but the game is over.  do not expect all that "base money" to "circulate."  it will not.  

there is zero incentive for people to borrow - or for banks to lend.

from the banks' perspective - another 5 years of deflation would allow the TBTF to swoop in and foreclose on 90% of the nations homes, businesses, parks, etc - 

from the governments perspective - another 5 years of deflation will make people even more dependent upon government and will break the spirit of those who still believe in "private property."

higher taxes will push those teetering on the edge into the abyss. if anyone is still standing, elimination of mortgage tax deductions will do the trick.  if that doesn't work - then there are always asset taxes.

once assets have declined 80-90% - THEN people might start to borrow again. but that would be in a fundamentally new type of currency.


A Dollar Short's picture

Madcow, unfortunately, you are right on!   "a fundamentally new type of currency".

medicalstudent's picture

you think bernanke can 'manage' a 'decline'?


really? deleverage this behemoth, without the whole motherfucker collapsing?


we are on the 50th story, not the first. after the 6th or 7th who the fuck cares? we are dead.


hyperdeflation... that will be the outcome of an attempted deleverage. and that scenario was ruled out in 2008.

Quinvarius's picture

"And how many divisions does the Credit Suisse's 'Risk Appetite Index' have?"

-Joseph Stalin, king of central planners, speaking from the grave, circa 2012 AD

Catflappo's picture

Do Campbells package their soup in a canary?

Yen Cross's picture

 Charts aside. The second wave of the selloff into Asia has begun.

mrfreeman's picture

Has anyone noticed the silver 3-month lease rate has dropped sharply (according to kitco)?  Strangely the others haven't i.e. 1,6,12 month.  There have been some weird spikes/troughs lately on those charts.  Plus the commercials are long on the dollar.  Hmmm, I don't like it, I think something is brewing!

Stuck on Zero's picture

We should urge that anyone who voted for Obama buy US T bills.  Anyone who voted for Romney should buy NYSE stock.  Anyone who voted for Ron Paul should buy gold.


n2dark's picture

To loosely paraphrase another poster, the unicorns will soon be riding a lot of the 'euphorics'.


caerus's picture

es 1400 broke...if you want to buy anything buy nat gas