Advice & Opinion Memorandum

M1 & Credit...
Advice & Opinion Demographics & Markets Dipl.-Kfm. Rdiger Braun
Wildenbruchstrae 82 D-40545 Dsseldorf T +49-(0)211-6400113 M +49-(0)1525-8705859 e-Mail aodmographics@me.com www.aodm.eu

For all of those who get carried by e.g. rising business climate indices and the like this may serve as a little reminder. A monetary economy (and its incomes and corporate prots), by denition!, cannot grow without positive growth of credit, which in turn leads to growing deposits. As reported earlier today, in Germany loans to private households and businesses shrank a negative 3.8pc in August. Credit to the public sectors fell a negative 0.9pc y-o-y. Total loans were down a negative 3.2pc vs. the year-ago level (red graph in below chart). All of this spells trouble for overly optimistic earnings forecasts and it should, on the other hand, portend a (much) better bond market. Today the Bund future violated its longterm down trend line. Total Eurozone credit to the non-nancial sector also fell and marked a new all-time low. M1 growth rates declined further (blue graph) thus reducing hopes of higher economic activity in the months ahead. *****

Delivered:
Freitag, 27. September 2013

Where we are: Stocks continue to languish. There is no clear short-term trend. The only reliable constant is the steady erosion of the broad market. Market breadth is the problem for European and the U.S. stock markets. Bonds are in a solid downtrend. Bunds managed to rise above the long-term down trend line, but are short-term overbought now. Our best estimate is for a setback and the inception of base building thereafter which should be successful. In other words we are looking for a reentry point. *****

GER M1 vs. Total Loans (Ann. %)

25

M1 Ann. % Loans Ann. %

20 M1 & Loans Annual Percent Change

15

10

-5 80 JAN

83 JAN

86 JAN

89 JAN

92 JAN

95 JAN

98 JAN

01 JAN

04 JAN

07 JAN

10 JAN

13 JAN