Gavekal Capital: Commercial Paper Plunging

Monday, January 6, 2014

Commercial Paper Plunging

Commercial paper peaked at just under $2.2 trillion in 2007 before the wheels came off the shadow banking system.  It is currently just over $950 billion, and still falling, almost seven years later.  If present trends persist, the amount of outstanding commercial paper will make a new low in the weeks to come.  The shadow banking system is still clearly contracting, and this represents an interesting contrast to the pervasive bullishness on the economy.

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The pace of the contraction in commercial paper over the last five years is only exceeded by the May-August 2011 period....which was a difficult stretch for stocks.

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