International Investing

Speculation in todays Gartman Letter:

Of the greatest concern to us, however, shall be the
roll-over of asset backed commercial paper at the month’s
end tomorrow. If there is a place in the capital markets
where a very real leak can spring it is here. As an old
friend at one of the most important investment banks in the
world wrote to tell us yesterday that

the Asset Backed Commercial Paper is almost to
the point of being basically defunct and this is very
timely as tomorrow will be the 30th of the month
and twice the paper that the market has been able
to roll is due. There is a high chance it may not get
rolled. This is essentially telling us that banks do
not have faith in each others’ collateral. This is no
small market and to me no small issue for if banks
don’t trust each others collateral, who does? The
ABCP market currently stands at $1.1 trn but is
coming down rapidly as more and more paper fails
to roll and gets thrown back on the books of banks
who then have to “average down on a bad
position” by funding the position with good capital
that is typically used for more traditional forms of
credit [Ed. Note: Emphasis ours.]