Could there be a Market Crash? Here is the Tell

I was reading a very interesting article on Minyanville and it pointed out a few things that I will be keeping my eye on in September.

Much has been written about the $230 billion in debt that is coming due in Fannie Mae (FNM) and Freddie Mac (FRE) by the end of the quarter. These two troubled institutions remain elephants in the room that won’t go away. Well then again, perhaps they will. 

But wait, there’s more. 

Financial institutions have $871 billion in debt coming due into year-end. 

If corporate America can successfully roll those obligations and buy more time, odds are we’ll see a sharp upside equity rally.

So that is $1.10 trillion dollars in debt all coming due by the end of this year? Now that is a whopper of a figure.  If FNM and FRE and those financials are able to roll over that debt and find buyers then all will be well.  But if they can't there might be an insane stock market crash that will probably eclipse the election and wipe out trillions in shareholder wealth.  Remember Black Monday was on October 19th, 1987 and the Great Crash was on October 29, 1929.  So what happens in September is very important for the rest of the year. 

So as you read along Minyanville provides a tell:

A microcosm of this looming dynamic will be the surge in September credit issuance. 

It’s critical—and I mean critical in the most profound possible way—that this debt to be absorbed by the marketplace or there will be a line outside the treasury longer than the Million Man March.

Yup, the tell is the credit markets.  If these companies have any problem getting credit or need to increase spreads to "historic levels" and there are still no takers then you better be all cash or aggressively short because there might be another "Black Market" day. 

I think every FNM and FRE debt sales in September should be watched and parsed better then Greenspan FED minutes.  If there is any indication that they won't be able to roll over that $230 billion in debt it is going to blast the market in the face.  So far so good with a 5 year debt auction on September 2nd. The next big auction of 2-10 year notes will be on September 8th.  If that one is a stinker then the fear factor of the market will go strait up.  Then you will hear FRE and FNM bailout talk start up again and the market will tank accordingly.  If things get worse going into October then look out below.