Business

Submitted by Sean Corrigan via HindeSightLetters.com,

In early 2015, after years of China's massive debt pile being roundly ignored by most so-called experts (despite being profiled here many years prior), McKinsey released a report showing that not only has the world not delevered since the financial crisis, adding well over $60 trillion in debt (through 2016), but also revealing in a format so simple even an economist could grasp it, just how massive China's all-in leverage has become.

Many were shocked when they read that China's total debt/GDP had risen by 125% in under 7 years, hitting 282% as of Q2 2014.

When commenting on yesterday's dreary 5 Year auction and previewing today's last for the week issuance of $29 billion in 7 Year paper we said that "perhaps the reserve liquidators who showed such interest in the short-end of the curve, are a little too pregnant with paper in the belly: we will find out for sure tomorrow when the 7 Year auction prices. If, likewise, it is a poor showing, then one can slowly build a representation of where "Indirects" are over exposed in terms of inventory."

The mother's milk of stock market returns is turning increasingly sour...

Earnings season took a dark turn on Wednesday, according to MarketWatch's Ciara Linnane and Tomi Kilgore, when the majority of companies reporting numbers for the December quarter missed on sales and lowered their outlook for the rest of the year.

Over the past 7 years, we as well as others (if not those who believe in magic money trees, or managing other people's money while blogging) have repeatedly said that when it comes to "market" returns, look no further than the size of the Fed's balance sheet - the single best indictor of where the S&P500 is headed to next.

That is precisely what DB's Jim Reid did overnight. This is what he says:

Today we update a chart and table we used a fair amount in 2013/4 looking at the Fed balance sheet and equity and credit performance.