Business Loans: Less Bang for the Buck

This chart illustrates Commercial & Industrial Loans at all
Commercial Banks.

Note the exponential growth in the C&I Loans.


The chart above is of Durable Goods Orders expressed as
percentage of Commercial and Industrial Loans.

Note how in the past, nearly 25 cents of New Durable Goods
Orders were generated by one dollar of debt. Recently this has
dropped to less than 15 cents.

Banks got in trouble providing mortgages to the consumer sector.
It does not look to reassuring that, in a recessionary period
banks are lending to the commercial sector in such magnitude,
while the marginal utility of the loan is collapsing.


This chart expresses Core Capital Equipment(CCE) as percentage
of Durable Goods orders.

I have shown this graph many times in the past.
Recall that CCE is considered a proxy for Business Investment
and that the percentage illustrated on the the chart tracked
the 90's technology boom and bust pretty well.

Notice how in recent months, CCE as % DGO has increased nicely.
Consequently, despite the softness in the economy, I would still
favor the Business sector vs. the Consumer sector.

I also presented the above graph when expecting the the rallies
from the January low to benefit the NASDAQ on a relative basis.

You can notice below that, indeed, this out performance did take
place.


Courtesy: BigCharts.com
Black line: NASDAQ 100 (NDX).
Brown line: Consumer Discretionary (XLY).