Investors are now earning the smallest earnings yield on the S&P 500 relative to 2-year Treasury yields since 2007. pic.twitter.com/DHhOqOBq2G
— Lisa Abramowicz (@lisaabramowicz1) September 20, 2018
So, companies are more leveraged than ever.
According to Bloomberg, “The average debt-to-capital ratio of nonfinancial companies in the S&P 500 Index had surged to 49 percent by the end of June from 32 percent in 2006.”.
And even more scary is that “The leveraged loans are now being packaged into collateralized loan obligations and sold to investors. And the CLO market has grown to match the size of the CDO market at its pre-crisis peak. ”
Across 16 macro indicators, today’s market has eerie resemblances to previous market peaks making it highly vulnerable to a major correction or crash.
See updated Crescat macro model below. pic.twitter.com/ikwuGJhhk9
— Otavio (Tavi) Costa (@TaviCosta) September 19, 2018
YOU ARE HERE pic.twitter.com/1f6B407jyh
— OW (@OccupyWisdom) September 20, 2018
Factoid: China + Japan have reduced UST holdings by $263bln (-11%) in last 3 years
— Eric Pomboy (@epomboy) September 20, 2018
Record Debt of All Sorts, Rising Interest Rates: We Know How This Ends
Too much debt always plays a starring role during financial crises. With all-time record levels of debt in any particular incarnation you’d choose to investigate, and rising rates following an extreme period of time when everyone could borrow to the hilt and pay nearly no interest, the predictable pendulum has us ready for another collapse.