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Credit is the lifeblood of the economy, and there are signs that credit activity is pulling back.
Consider these two data points:
1) Agricultural stocks are down on word that fertilizer demand has been down--why? Agricultural stocks are getting hit hard today: CF Industries [CF
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] down 18 percent, Agrium [AGU
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] down 12 percent, Terra Industries [TRA
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]down 20 percent, Mosaic[MOS
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] down 11 percent.
Citigroup downgraded the group on word that urea (a nitrogen product used in fertilizers) prices were down substantially on what appears to be weak demand.
Why is demand down? Traders have been speculating that the farm harvest now requires its largest seasonal financing requirements, and that farmers are having trouble getting funding.
2) credit appears to be tightening for restaurant franchisees as well. Last week Bank of America [BAC
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] declined to increase lending on existing loans to McDonald's [MCD
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]franchisees.
Now the CFO of Sonic Corp., a drive-in restaurant chain, told Dow Jones that franchisees have been notified by GE Capital that it will temporarily stop financing new loans, although GE Capital will continue to honor pre-existing financing agreements.
These are two small data points, but in two important industries: fertilizers and restaurants.
We need to improve the balance sheets of the banks and increase the liquidity in the system. Otherwise lending is coming to a halt.
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POPULAR TRADER TALK POSTS
- Risk Trade Is Back On
- This Week's Biggest Story: The Dollar
- Corporate Issuance Continues at Torrid Pace
- The Bernanke Dollar Bounce & Gross Says Forget About Rate Hike
- Colgate Really Sparkles After Hours
- Light Volume Has Traders Complaining
- Gold Shatters Another Record
- Have Retailers Reached Their Limits?
- The Retail Mind Game
- The Gold Rush Is On
Data is a real-time snapshot *Data is delayed at least 15 minutes