The other day, our friend Jerry Flum, CEO of CreditRiskMonitor.com, sent out an email saying that an accompanying chart was "worth seeing." Well, we're sort of stat geeks and we are easy prey to such notices so we took a look.

And what we saw really grabbed our attention.

Source: CreditRiskMonitor's FRISK Stress Index - US

So what is so significant about this? First, we'll tell you what we don't like. We never like month-to-previous-month comparisons. Instead, we're fans of year-over-year comparisons. Only that way can you truly compare apples-to-apples in a meaningful way and with enough data to show a trend.

So what do we like? Well, for any "leading indicator" data, we always prefer at least five-years of data. Economic cycles are never monthly or even annual. Instead, they're always multi-year phenomena. You can't really have any perspective on anything less than 3 years; and ideally 5 is a minimum. I always consider data on weekly or month-to-month housing starts to be fairly meaningless. Most short term movements - absent really dramatic moves - are simply "noise."

So we like the perspective that this roughly 8-year chart affords.

And what about that chart grabbed us?

First, we see a long-term downward trend (the graph going up is indicative of increased bankruptcy risk), beginning in roughly mid-2014. The graph measures the probability of default across all businesses in their universe.

Second, it's a trend that seems to accelerate as it continues forward to the present (maybe leveling off in the last month or two; but again, our perspective is longer term).

Finally, the magnitude of the trend is significant. Here we see more than a 50 percent increase in the risk of failure for all businesses. That's more than just "noise." And it's with a great sample size of more than 10,000 businesses.

So as we were contemplating that, another friend, Vidur Dhanda, founder of WAIN Street, which tracks economic trends "at the intersections of Wall and Main Streets," and which you'll find on our pages here at Credit Today, just a couple of days later sent a note saying "we think you'll find this interesting," and linked to the following chart:

Source: WAIN Street's Very small businesses foretell bank condition

Seeing that, a couple of days after that CreditRiskMonitor chart was a "holy mackerel" kind of moment for us!

CRMZ spends their time aiming to quantify business-to-business credit ("trade credit") risk, while WAIN Street digs deep on the question of bank loan quality. Different, but also two sides of the same coin. Heck, maybe even the same side.

We called Vidur and showed him the CRMZ and his immediate reaction was also "wow!" (Keep in mind; they don't know each other and gather data totally independently, in different ways and with different methods). "It's the same chart; even the middle up-tick there!" he noted immediately.

Again, we see in the WAIN street chart a year-and-a-half increase of significant magnitude, showing the risk approaching the risks last seen during the time of the "Great Recession."

Now, we're as interested in real leading indicators as anyone else. In fact, everyone is interested in that. "It's the Holy Grail," one smart data-gatherer shared recently. "And if I had one, I wouldn't be sitting here doing this!"

And in fact everyone and his brother is working on leading indicators. We like them all. But truth be told, we discount them and as often as not, they send false signals. There's the well-known Purchasing Managers Index (PMI). That's a really good one and many investors eagerly await it's release each month.

And then there's the Fed's Beige Book, a compilation of data from everywhere. It's hard to beat the Fed's data-gathering and analytic capabilities. So that's a great one to eyeball.

And NACM has been doing a great job with its Credit Manager's Index. We think that's an exciting development for the credit profession and pay close attention to it's readings each month.

And Warren Buffett has always liked to track rail car shipments, on the theory that "how much stuff is being shipped" has important implications for the economy and reflects both strengths and weaknesses before you might see either of those elsewhere.

And we were particularly shocked by the data supplied by our friends at Cortera not long ago which noted a marked year-over-year increase in over 90-day delinquencies (27 percent) (See "Increasing Trend in Days Beyond Terms Impacting Oil & Gas Industries." "Shocked" is a strong word, but a 27 percent increase in that category and a year-long trend - that's something you can't call either "noise" or insignificant.

So what does this mean? Well, our many years experience tracking these things certainly makes us humble.

But sometimes, things jump out at you (not often) and the combination of these is certainly a "eureka" kind-of-moment.

We'll also note that you probably won't read anything like this in the Wall Street Journal or elsewhere that we're aware of. This is good data gathered in the trenches and is flashing warning signs. So our advice is to be very careful out there. Make sure you're on top of all your risky - and potentially risky - accounts. And, if you're fully invested in your 401K, it might be an opportunity to take a little money off the table.

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