Back in Marc Faber on why further correction is coming?Part 2, we mentioned that:
What is happening is that over the past few months, the US sub-prime mortgage lending sector is running into trouble. That means, a trend towards credit tightening is already underway in the US. Marc Faber?s view is that this trend will affect the economy by crimping back on consumer spending, which is dependent on rising asset prices fuelled by credit. That in turn will mean that excess global liquidity growth through the US current account deficit will decelerate.
As we can see from these Bloomberg news articles, KKR, Blackstone Find `Tide Is Going Out,’ Gross Says and KKR, Homeowners Face Funding Drain as CDO Sales Slow signs of tightening liquidity are emerging. With money getting more expensive, we can expect that the liquidity-fueled asset price boom will be in the process of running out of puff.
Be warned.
