Even small business is experiencing an improvement according to the lending standards data (see Figure 5) which had been an area of anxiety, but there is ongoing frustration with respect to bank lending activity as politicians, in particular, have been hammering on this topic. But a simple analysis shows that there is a highly-correlated six-quarter lag between shifting lending conditions and changes in actual loan activity (see Figure 6). This probably reflects the ability to get cheaper funding from capital markets than from banks when credit conditions are improving and the reverse is true when the only source of funding might come from drawing down on lines of credit when all other avenues have closed due to imminent recessionary concerns. In addition, there was a two-year lag between the end of the recession in 2002 and improving small business loan standards, too. Thus, all the chest-beating in the world will not alter how companies source their funding. More notable is the reality that companies have huge cash holdings currently and thus do not need to borrow (see Figure 7), but they definitely still care about the cost of capital in case they might need to raise money in the future - keep in mind that the median S&P 500 cash position is 9.6% of market cap such that it is not just a few cash rich companies that are skewing the results. And, if some need to get money from the markets with "riskier" borrowings, there does not seem to be much trouble in the junk bond world to raise capital (see Figure 8), with 2010 high yield debt financing thus far in 2010 already equal to full year 2006 levels. Thus, the alleged funding crisis for Corporate America that ultimately hires workers and buys equipment is noticeably absent.

David Fuller's view Following a financial crisis banks understandably rebuild their balance sheets - mainly via the yield curve with the help of an accommodative central bank - before they increase lending.

This informative report confirms that banks are now increasing lending. More importantly, S&P 500 companies have increased their cash reserves significantly. Employed consumers are bringing their debt down to more manageable levels, helped by low interest rates.

These are positive trends, particularly for the corporate sector leveraged to the global economy. It was always likely that a US economic recovery, following what has certainly been the severest credit crunch and deepest recession of my lifetime, would be slow and/or sporadic. However that is a far better outcome than a depression which many still fear.

I recommend that subscribers study this short report, not least because the evidence provided cannot be dismissed as 'cheerleading', in my view. Additionally, the authors' outlook for a primarily ranging US stock market, until it improves once again in 4Q 2010, is consistent with what Fullermoney has been forecasting. Currently, upward dynamics similar to what we last saw in early July are necessary to reaffirm prior support and signal that the present reaction is ending. Meanwhile, short-term indicators are oversold. I remain hopeful that most Fullermoney themes will continue to outperform.