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The Credit Markets Are Starting To Collapse – Dave Kranzler
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TND Guest Contributor: Dave Kranzler
I kind of wish Alan Greenspan were still the FOMC Chairman. He makes a great “Wizard” figure. Bernanke looks more like an unethical elf – a spineless pansy who couldn’t bluff his way out of a paper bag but viciously vindictive when no one can see him. And Janet Yellen…well, she just looks like Aunt Bea on the Andy Griffith show, only with a much lower IQ.
I mention this because it’s become glaringly apparent that the credit markets are starting to collapse behind the proverbial “curtain.” Several analysts point to the Merrill Lynch triple-C junk bond yield index and remark that “something” blew up:
But it’s not “something.” “Something” is a general melt-down of the credit markets. The C-rated high yield index reflects this reality. If it were just one or two names blowing up, yields on related paper might drift higher, but not spike up like this. This is the market’s realization that it has been overpaying for its risky investments not by a little bit, but by a gargantuan amount. Add to that the well-publicized dearth of liquidity to accommodate general selling and we have the perfect recipe for the collapse of the entire credit market. The spike in the graph above is the market’s way of saying, “I want out.”
The unraveling of Kinder Morgan is another indicator of the malaise prevailing behind “the curtain.” When KMI announced its earnings on October 22, it increased its dividend and projected growth over the next year of 6-10% in its dividend payout. Seven weeks later, it slashes its dividend by 75%.
What the heck happened? What changed? If you look at KMI’s statement of cash flows,over the last three years KMI has funded both CAPEX and its dividend payout by issuing more debt every year. How many Wall Street or Seeking Alpha Einsteinian analysts pointed out that fact? Zero. This is just speculation on my part – as it would be on anyone’s – but I suspect that Kinder Morgan was informed by its investment bankers that any continued debt issuance would be extremely expensive and conceivably not possible, especially given the collapsing price of oil and gas. Yes Virginia, contrary to the popular myth of CNBC La La Land, KMI has business exposure to the directional movements in the price of oil and gas.
There are plenty of other market signals but perhaps the one that reflects the most desperation by the insider elitists to keep a pretty cover page on the horror story unfolding is the daily price beating administered to the price of gold. In a Groundhog Day scenario, every night the price of gold rallies while the physical gold buying heathens and NATO foes of the east feast on the cheap gold that the criminals of the west provide for them every day once the paper gold markets are in full swing.
If you don’t want everyone to run out of the coal mine when they see the dead canary, remove the bird before it dies.
As this unfolds, there is a lot of money to be made shorting all of the hideously overvalued stocks. My new subscription service will be rolling out at least one idea per week that will help you find ways to exploit the gross price distortions and sector bubbles that have developed after 6 years of extremely reckless monetary policy by the Federal Reserve and U.S. Treasury. You can subscribe by clicking here: SHORT SELLER’S JOURNAL.
It’s a weekly report delivered to your email inbox with: 1) a brief comment on the previous week’s trading action plus any thoughts on the upcoming week; 2) I will feature 1 or 2 short-sell, trading, or investment ideas – the investment ideas will be primarily junior mining stocks; 3) trading recommendations, charts and put/call option ideas.
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About Dave Kranzler:
I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics. Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.
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Should i short “Kinder Morgan” to help your short to work ?
What should i do with my winnings if i win because going double or quits in a fixed system using HFT means that i will losse it in the end and when the banks own all the money then if the go bang, well it’s good bye money and if the government gets the banks to keep printing then it worth toilet paper anyway.
i know i can “Book a profit” and buy property and hope against hope that governments won’t push up land taxes on the land they own and i built my nice new house on.
Naw me is buying physical metal, not got a clue what to value it in when SHTF but now is not the time to buy and i thinks we will soon be seeing a paper price on Silver at $12 oz for .999 coins so i will hold off just now and hope to see some panic selling so that i don’t need to pay too much over spot.
I keep lossing money on buying rice thats gets out of date, long may i keep lossing money on this deal
Noticed lately there are lots of brokers, so called self proclaimed know it alls. They all have a gimmick using crisis chaos to rip someone off.
These people trying to sell gold to the average Joe, make a bundle with hidden fees.
They make a lot of money selling gold, silver to average people. Keep in mind if half of what these economical wizards are saying is true.
Gold will not help you in a crisis economical crash event, unless you can eat it. During the crash you would easily exchange your gold coins for 3 potatoes, and a sock of dry beans.
Good luck to those that have gold coins, and no food.