"It's Starting To Feel A Lot Like 2007"

Tyler Durden's picture

The credit markets this week already look very different to how they ended last year. As BofAML's Barnaby Martin notes, beta-compression, flatter curves and credit outperformance versus equity have all been abundant themes of late. Relative value is still there, when one looks closely, but is unfortunately not what it used to be. He adds that "things in credit have started to feel a lot like 2007 again," and while he believes the trend is set to continue (though slower) and the liquidity-flooded fundamentals in the high-yield bond market have been holding up well, it is trends in the leveraged loan market, that continue to deteriorate, that are perhaps the only canary in the coal-mine worth watching as global central bank liquidity merely slooshes to the highest spread product in developed markets (until that is exhausted). The rolling 12m bond default rate among European high-yield issuers fell to 1.8% in December, whereas loan default rates rose to 8.5%. With leverage rising, the hope for ever more greater fools continues, even as everyone is forced into the risky assets.

Investment Grade bond spreads are now through post-Lehman tights...


And High Yield bond yields are simple remarkable...


With the riskiest assets (from dismally performing peripheral economies) performing the best by a long way...


even though loan defaults are surging!!!


Charts: BofAML

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ekm's picture

I don't know whether it was a slip of tongue or said on purpose but didn't Draghi just say:


LTRO's purpose is to prevent DISORDERLY DELEVERING?



Silver Bug's picture

Look out below and hold tight to your gold and silver.



ball-and-chain's picture

Don't hold your breath waiting for a collapse.

Not going to happen.

We're on our way to a Japanese-style endless recession.

The world doesn't end with a bang.

It just slowly peters out.


ekm's picture

That's what they want everybody to believe and sucker in.

Then ....baaaaaaaaaaaaaaaaaang.

Lohn Jocke's picture

That looks like a slow and drawn out bang...

ekm's picture

In 2007 Bernanke said live on TV that the housing market was out of crisis. He was simply luring idiots.

Lohn Jocke's picture

Isn't luring idiots what most people on TV are doing?

ekm's picture

That's why I haven't had a TV since 2001. I don't want to be brainwashed.

viahj's picture

Japan got away with it by selling a lot of cars and electronics while maintaining personal savings.

the US is not Japan.

ekm's picture

Only a handful of people understand what you said.


Japan's crisis happened when the rest of the world was doing pretty well. Japan was lucky.

Panafrican Funktron Robot's picture

Dear Barnaby Martin of BofAML,

Divergence between loan and bond defaults is pretty easy to explain when you have, oh, gigantic fuckloads of free money sloshing around.  All these fucking assholes acting like the spigot is ever going to slow down, let alone stop, are just trying to talk down prices.  That's it.

The country is insolvent, ergo, printing will continue, and accelerate.  You're out to fucking lunch if you think any differently.  

GetZeeGold's picture



I thought we fixed that crap already.


Not sure what the problem is....we threw a hell of a lot of money at it.

yogibear's picture

LOL, the criminals, the ones that should have been jailed,  are still pulling the financial levers and pushing buttons.

The financial criminals know their above the law. The recent robo/backdating signing fraud forgiveness is the most recent example. Blatant fraud and nobody was jailed. 

spastic_colon's picture

did we have the "free hand" of the markets pounding everyone into submission in 2007 too?

venturen's picture

the problem was the bankers were going to get no bonuses...and we fixed that problem. Now the problem is your kids future has been hocked!

LawsofPhysics's picture

Hhhmmmm, so what is the true cost of capital?  Only the shadow knows...


Hedge accordingly.

Dr. Richard Head's picture

What about the true value of our labor?  Let alone savings.  Savings of one's time or effort is not reflected in this corporate subsidized environment fortified by regulation of a world of ZIRP!

LawsofPhysics's picture

Exactly.  Go long all things and assets of real value (especially those that generate revenue).  Anything these paper-pushers cannot devalue or steal.  Get your tribe in order, you will need trustworthy, likeminded folks to defend those assets in the future.

The paper world will continue to appear to be "recovering" right up until the fiats all die.  Who are you going to believe?  The paper reports coming out of Washington and the MSM or your lying eyes?

History is very clear on where this is all headed.

Winston Churchill's picture

The shadow has been voting with its feet.

-$9 tril.divestment in the US in 4 years by the shadow banking system.

Begs the question of, where it went ?

Maybe Tyler can answer that one..Hint: rhymes with laymans.

The liquidity injections by the CB's are just to cover that.

LawsofPhysics's picture

I don't consider paper promises to be capital. But yes, you caught my reference to the shadow banking sector.  

Winston Churchill's picture

It was that or Zimbabwe Ben seeing  his own shadow, portending forty more years of depression.

Got to wonder what the money masters are investing those paper promises in though.

Its  the 800lb gorilla in the room that everyone ignores.Plus the shadow,shadow banking system,

where all the money from the securitzation Ponzi ended up.Another $16 tn at best estimate.

LawsofPhysics's picture

I see evidence that the vast majority of it was mis-allocated and mal-invested.

Winston Churchill's picture

How do you think the PM futures are being manipulated like money grows on trees for

example.A massive hidden war chest,but still only delaying whilst waiting for the

plantation to be totally ready for the slaves.

LawsofPhysics's picture

In the majority of the world, most of the people are already slaves/sheep and relatively few have PMs.  The problem is that the American sheep are still armed and have access to a relatively censorship-free internet.

Those europeans and asians know how to que-up, Americans, not so much.

ItchyBeard's picture

Zimbabwe Ben with a Brazilian wax job is lying face up in the sun watching his pecker cast a shadow. It will be noon time soon and the sun will be directly overhead.

fonzannoon's picture

enough with the 2007 stuff Bofa. Just take your slice of the 85 bil/ mo and buy some more distressed homes which you helped become distressed and be a the slumlord you always wanted to be.

chunga's picture

"No! No! No! Bear Stearns is not in trouble."

GetZeeGold's picture



Just make sure you have a stop loss over the weekend.....you'll be fine.

chunga's picture

My investments are easy to manage.

I don't have any.

epwpixieq-1's picture

Everyone has investments, although not strictly in the traditional sense.

For example, Knowledge ( about your food, the physical and the social environment, healthy living, sustainability, energy resources, and so on ) is one BIG investment for sure. And there are others that we usually do not thing of.

Every minute living IS a sort of investment.

So invest wisely!

chunga's picture

Point well taken.

My family and I have a lot of things money can't buy.

And some (material) things we have, money might not be able to buy in the future.

AccreditedEYE's picture

And High Yield bond yields are simple remarkable... They are about to get "More Remarkable"

Wake me when it's 2008 deja vu. Till then, BTFD


madcows's picture

Nope.  You can't force me into risky assets.  I won't buy anything until the system has an enema and flushes itself.

Got my first paycheck this year.  Down another 2%, and no raises b/c the bosses are worried about the year ahead.  Let's see, a 2% paycut on top of whatever inflation is, what spending can I cut now.  Um, how about the mortgage.  I guess if anyone should take a paycut, it out to be HSBC.  Fuckers.

Yancey Ward's picture

Sounds like you should get off your ass be borrowing some money to grow this economy.

JSD's picture

Natural price discovery is GONE.  Thanks Ben, Mario, et al.

epwpixieq-1's picture

Somehow agree. Whatever was "Natural" before is GONE.

But we do not have to forget that a Natural has meaning for the real and NOT for the imaginary world of money, that has ALWAYS been manipulated on different levels at different times, as a leverage of the ruling group for power control over the masses.

disabledvet's picture

I had written something longwinded and convoluted on the DB fiasco but given the "simplicity of Government response" (round peg in square hole" have shortened it to this: If the goal is to keep the securitization engines firing on all cylinders then in theory "it's like it never happened" (meaning 2008.) in THEORY. Of course I'm only speculating (with only the Paulson book of 2008 to go on)...and needless to say "no mention of trillion dollar deficits...forever" in that piece. It would be helpful if instead of Rahmbo Divisive Bullshit if the Players in that drama were reassembled for a discussion about what they thought was going, what they thought they were doing and why they think the markets have responded the way they have. My personal view is that if the securitization market has in fact refired then this can push a recovery to a more "meaningful" or "substantive" level and can be highly supportive of price (and wages) with interest rates this low. We shall see...

AccreditedEYE's picture

See how they gapped us higher on the open and thru short term resistance? Now, MSM releases negative headlines and try to force selling. Morons like Doug Kass say they're "getting short". And he probably is till the fill 50-100% of gap and then BLAST OFF again. Get ready to BUY THAT F-ING DIP.

DeadFred's picture

Not much time left for that. The market has been creating a remarkably nice ascending wedge for years but the point will be reached in a few weeks pretty closed to the time of Debt-Crisis II. My guess is we break out soon to the cap at about 1490. The action afterward should be memorable.

AccreditedEYE's picture

Maybe, if fundamental or traditional technical data ruled the house I would agree with you. If you think the Federal Reserve is going to allow that to happen I will simply say to you: hedge to the upside my good man.

Just like the yield curve, NOTHING is as it appears.

tooriskytoinvest's picture

Experts: This Is A Time For Caution. Current Stock Market A Reminder of January 2000. U.S. Economy Will Enter A Severe Recession, The Economic Implosion Of Europe Will Continue To Accelerate, Stocks Will Collapse in 2013. This Time It May Never Be Possible To Exit From It Completely



Sandmann's picture


The Gods of the Copybook Headings

AS I PASS through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.

We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.

We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.

With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.

When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: "Stick to the Devil you know."

On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbour and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: "The Wages of Sin is Death."

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: "If you don't work you die."

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!

GetZeeGold's picture



They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,


Clear lunacy on Kiplings part.

SheepDog-One's picture

The bankers will pull the rug out again when it was planned for...until then enjoy the clown show watch out for pies in the face.

Hammerabi's picture

Is that a yield?

I got a yield. . . He got a yield. . .

Errrrybody got YIELDS!

-G. Rosetti


caimen garou's picture

my riskey investment now is toilet paper,one swipe and  it is gone!" butt "it does have a valuble use.

busted by the bailout's picture

Perhaps this explains QE4?  A slowdown or another financial crisis is certainly not on most people's radar now.  But maybe the Fed did see something bad coming.

GoldenGal's picture

So when is Gold going to the moon? I have King Geore sovereigns and am wondering if I would have been better off buying netflix instead.