Thursday December 20, 2018 Market/Inflation - by Jeff Caughron

Eye poppers: Stocks down over 600pts again. Crude oil down another $2.27 Inflation expectations are collapsing (see Fed’s breakeven 5yr below). As Stan Druckenmiller pointed out:

  1. Corporate non-financial debt has exploded since 2010… up 60% from $6 trillion to $9.6 trillion.
  2. Overall corporate earnings are up 27%, but S & P earnings are up 60%... so
  3. Borrowed money and tax cut windfall went to finance buybacks

The asset-price bubble in the last cycle was housing…  this time it's stock price inflation.  QE created too much liquidity and late-stage fiscal policy was ill-advised. Now the chickens are coming home to roost.

Fed’s Five Year Breakeven Inflation Rate: 2013 – Today