Credit Spreads Widen…Shadow Bank Runs Begin

Most investors are still not familiar with the term Credit Spreads.

Nor are they aware that they are a precursor to increased volatility in the bond market…which ultimately spill over into the stock market.

Back in August, we featured an article about Credit Spreads and what you need to know about them.

(Read it HERE).

 

Here’s an excerpt:

 

You don’t need to become an expert to follow or monitor credit risks.

But you need to pay attention to whether spreads are getting wider or narrower.

Because they reflect a divergence that most investors fail to recognize resulting in surprises/dislocations in the markets that will cause the perpetrators to cry out… “I’m shocked, I tell you…Shocked…Who could have foreseen this happening.”

And right now, this divergence between spreads and equities is something you need to have on your radar.

 

 

Cue up:  Recent Shadow Bank Runs Begin as Private Credit Losses Spread.

 

Flying under the radar this week, we learned that a finance company, Renovo Home Partners (owned by Blackrock) had a $150 million loan go from “full value” to worthless overnight.

Oops!

Admittedly, $150 Million is chump change for Blackrock, but Renovo Home Partners isn’t a one-off…it’s a crack in the illusion propping up trillions in private credit.

And what started in the shadows is now bleeding into the mainstream with redemptions accelerating and funds dumping assets at fire-sale prices.

 

 

Credit Spreads are Widening

 

In Case You Missed It, we recently warned you (on November 7^th) about the FED having to step in and prop up the REPO market by injecting $125 Billion.

(Read it HERE).

And a few days before that (October 27^th) we wrote how the REPO market was tapped for roughly $18.5 billion in a single day…its largest draw since inception.

Read it (HERE).

 

So why are we mentioning this again?

Because the bond markets knee-jerk reactions are spilling over into the stock market…and this is just beginning.

 

Proof of these seismic reactions was reflected in yesterday’s euphoric rise in the DOW to 46,932 by 10:40 only to reverse direction and fall over 1,100+ points (to 45,815) in just a few hours.

 

Bottom Line Here?

 

Take some profits off the table…and buy some gold/silver mining stocks on the dip.

While you are at it, grab some other commodity stocks as well (Cough! Southern Copper, SCCO, Cough! Cough!) because they play a key role in the buildout of AI in the future.

And be sure to read this months Short and Sweet Tips column in our November newsletter (HERE).

 

Share this with a friend…even if they still don’t know anything about the REPO market.  They’ll thank YOU later.

 

And tell them:

 

We’re Not Just About Finance

But we use finance to give you hope.

“And you shall know the truth, and the truth shall make you free.”

~John 8:32~