GLOBAL SLOW DOWN STEEPENING

Credit Cycle Is Reacting

Gordon T Long
12/16/2015

DECEMBER 2015 Edition

1

Copyright 2015 GordonTLong.com

Restricted
All Rights Reserved

general@GordonTLong.com

GLOBAL SLOW DOWN STEEPENING

DECEMBER MONTHLY MARKET COMMENTARY
MARKET MESSAGE ................................................................................................................................. 4
I DEFINING CHARTS ..................................................................................................................................................................16
Defining Chart #3 - The Big M and Super Cycle b .................................................................................................................... 17
Defining Chart #4 Intermediate Term Topping Process ............................................................................................................. 19
The Bottom Line .............................................................................................................................................................................. 22
II TARGETS .................................................................................................................................................................................24
III QUARTERLY SENTIMENT RISK AND FUNDAMENTALS ..................................................................................................29
SENTIMENT ........................................................................................................................................................................................ 29
NEW-RISK ANALYSIS - Complacency .......................................................................................................................................... 34
NEW-FUNDAMENTAL ANALYSIS Valuation Summary ............................................................................................................ 35
IV STUDIES..................................................................................................................................................................................36
BUYBACKS Update....................................................................................................................................................................36
STUDY: BUYBACKS .....................................................................................................................................................................36
CHARTS OF NOTE ............................................................................................................................................................................ 36
WEAKENING BREADTH Market Has Lost Momentum..........................................................................................................39
STUDY: WEAKENING BREADTH ................................................................................................................................................39
CHARTS OF NOTE ............................................................................................................................................................................ 39
RECESSION RUMBLINGS Revenue, Earnings & Economic ................................................................................................42
STUDY: RECESSION SIGNALS ...................................................................................................................................................42
CHARTS OF NOTE ............................................................................................................................................................................ 42
Q3 EARNINGS Earnings Recession ........................................................................................................................................46
STUDY: Q3 EARNINGS -...............................................................................................................................................................46
CHARTS OF NOTE ............................................................................................................................................................................ 46
V - TRIGGER$ ZONES ...................................................................................................................................................................50
VI - DRIVER$ & BIA$ .....................................................................................................................................................................51

GLOBAL SLOWDOWN STEEPENING CREDIT CYCLE IS REACTING ............................................................... 52

QE: A FAILED EXPERIMENT ................................................................................................................... 52
AN ARTIFICAL EQUILIBRIUM ......................................................................................................................................................52
MORAL HAZARD CYCLE ........................................................................................................................ 52
BUSINESS CYCLE VERSUS CREDIT CYCLE ............................................................................................................................54
DEMAND & PRODUCTION A GLOBAL SUPPLY CHAIN SHOCK! .................................................................... 54
US Imports as a Measure of Real Economic Demand .............................................................................................................54
US Import Decline .........................................................................................................................................................................55
World Trade Timing Pattern.........................................................................................................................................................55
Annual % Change Plummets .......................................................................................................................................................56
World Industrial Production ........................................................................................................................................................57
World Industrial Production Boundaries ................................................................................................................................57
World Industrial Production Annual Decline..........................................................................................................................58
US Industrial Production - Boundaries ......................................................................................................................................58
CASH FLOWS FALLING EBITDA AND FREE CASH FLOW ............................................................................ 59
Margins ...........................................................................................................................................................................................59
Corporate Cash Flows ..................................................................................................................................................................60
Tapped Out Consumer Spending Forced to Credit Cards ......................................................................................................61

DECEMBER 2015 Edition

Copyright 2015 GordonTLong.com

Restricted
All Rights Reserved

general@GordonTLong.com

Car Loans .......................................................................................................................................................................................62

Government Presence ..................................................................................................................................................................62
US Inventories ...............................................................................................................................................................................63
Excess Leverage & Velocity ........................................................................................................................................................63
World Trade versus Major Market Turmoil ................................................................................................................................64
COMMODITES TIMING ..................................................................................................................................................................65
25th SLIDE Baltic Dry..................................................................................................................................................................66
Potential Recession ......................................................................................................................................................................66
CREDIT CYCLE HAS TURNED ............................................................................................................... 67
Credit Cycle versus Changing Cash Flows ...............................................................................................................................67
Disposable Personal Income versus Net Worth .......................................................................................................................67
Chinese Non-Performing Loans..................................................................................................................................................68
HY Upgrade-to-Downgrade Ratio................................................................................................................................................69
UNUSAL PATTERNS JUST SIX............................................................................................................... 69
GLOBALIZATION TRAP REVISITED ........................................................................................................ 69

DECEMBER 2015 Edition

Copyright 2015 GordonTLong.com

Restricted
All Rights Reserved

general@GordonTLong.com