Bottom Fishing!
“Credit is the air that financial markets breathe, and when the air is poisoned, there's no place to hide.”- Charles R. Morris.
The people who are familiar with the investment world will tell you that the credit market is the bellwether of corporate health and leads the equity markets to predict the beginning and end of the cycles. Credit is the backbone of any economy, and the credit markets function only on one principle: “Trust”. As long as there is trust in the system, the credit markets work flawlessly.
The credit spreads are narrow, leverage is easily accessible and the corporate balance sheets are top-notch!
Every financial crisis in history led to a “freeze in the credit markets”. Banks refuse to lend even to the corporates with the strongest balance sheet in turbulent times. As a result, credit spreads widen, and the market participants lose confidence in counterparties. Everyone wants to be with the safest assets in the system, or the “risk-free” assets, a.k.a the government b…
