MADE UP YOUR MIND YET?

For those who love economic indicators, here's another one--informal or no--you need to pay attention to--bond rating firms. Are they lagging or leading indicators. You decide.

These are the boys and girls now warning (reminding is the kinder, more gentle term) us that there are "some troubling trends in the bond market."  Note: most of these warnings are coming out after the recent junk bond crisis hit the news.

Moody's tracks something they call "probability-of-default" for lower-rated debt. Though as you would surmise, oil and gas are the first two words out of the computers of these firms these days. And as you might guess, there's an average number seen in usual times--9%--for energy and gas. The current one: 25%. The total number on the list for all sectors is 248 firms, the highest in six years.

As you might also guess a lot of this paper is buried smewhere on the balance sheets of banks.

Over at Standard & Poor they use a ratio of junk debt trading at much higher yields relative to other higher rated bonds, a distress ratio. The last time it's been as high as it's now, 29.6%, according to the WSJ, was 2009 when it hit nearly 36%. That's to remind you unlike that old Frank Sinatra standard, 2009 wasn't a very good year.

At Fitch it's more of the same, where they expect 2016 to end with a higher rate of defaults, 4.5%, than 2015's 3.4%. But here's the good news. Like those fund managers in down years who love to  point out their funds against their chosen benchmark lost only 10% after dividends while comparable competitors did much worse:"Last years rate and this year's forecast are well below the 13.7% rate in the financial crisis.," notes the WSJ.

There's the good-news-bad-news tale about a guy who visits his doctor and the doctor informs him  he's got some good news and bad news and ask which he would prefer first to which the patient replies,  "Give me the good news."

"You have cancer and you only have one week to live," the doctor says.

"Jeez! What's the bad news?"

"I've been trying to get a hold of you to tell you for six days."

Have you decided yet about whether these firms are leading or lagging indicators?