Bronte Capital with the implications:
I have been firmly in the “second derivative is good” camp for some time. Green shoots were few and far between – but the economy no longer appeared to be in free-fall. When the free-fall stopped it was time to buy equities – and whilst it was not time to ease up on the looser monetary and fiscal policies – it may have been sensible to limit them somewhere near the levels that they now are.Delinquency Rates of Freddie Loans
The data I considered most persuasive was the delinquency data at Fannie and Freddie. It gets worse every month, but until the last data point it was getting worse at a decreasing rate (especially if you adjusted for the foreclosure moratoriums they implemented).
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTf-KFE7ey-AJ6SE_5T4wHD_W42nEocxrcOYZ8qYGuN6WQwxyt-K23fVKg0Hw7Mc3jgOToQY9QjFSCTN0nVlc132vAn1miC_xW_HTSJARukk0_SY3lGt14ObwJs3fr_Z1Rzq9m6cAMXEA/s400/freddie.png)
Today I am more worried. My favourite data point (rate of increase of Freddie Mac delinquency) has deteriorated – especially in their insured portfolio. Its not sharp deterioration – and it is possible – even likely – that Freddie Mac will have end credit losses considerably lower than the bears anticipate. But as a second derivative bull I am feeling just that little bit less certain.Three Month Change in Delinquencies
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhh9vZQK33R8QS19TQ1B3t_3DEqbNQg96lz-iWsk-m5_Ltb_6akAN72Z2qxu4Leq545Gi6Nlm9PcQ1cZ__UzwuzlGeDYIn-bN9-eE6cbOEy9KVPl5Bw_cTJpaKvB0Y73tVykMI1nLlcfj8/s400/freddie2.png)
Source: Freddie Mac
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