Kass: Credit Conditions Aren't the Problem

This blog post originally appeared on RealMoney Silver on July 3 at 7:49 a.m. EDT.

For several weeks, I have harped on a number of credit measures that indicated that credit market/bank balance sheet stress had diminished. This formed the basis and logic for my renewed bullishness in the financial sector (which has been dead wrong).

For example, the most important spread former Fed Chairman Greenspan focuses on in monitoring financial stress is the one between the three-month London Interbank Offered Rate (Libor) and the overnight index swap rate (OIS). This spread has barely moved since the start of the stock market correction in late May.

Libor Less Overnight Rate Spread

Click here for larger image.

Source: Bloomberg

So bear in mind that, when looking at credit measures, it should be clear that the steepness of the stock market's drop has little to do with credit conditions. Rather, the recent market schmeissing has to do with the following headwinds: ...