Corporate Leverage

Goldman's Top Strategist Reveals The Two Biggest Risks To The Market Today

"We’ve also seen a growing allocation of retail and institutional money into “premium chasing” quant strategies, including, for example, ETFs that sell equity vol. I think many of these developments are positive, but the associated market structure remains largely untested. So I would not rule out the risk of a glitch that triggers, say, a 5-10% correction."

Here Is The IMF's Global Financial Crash Scenario

"Concerns about a continuing buildup in debt loads and overstretched asset valuations could have global economic repercussions. This section uses a scenario analysis to illustrate how a repricing of risks could lead to a rise in credit spreads and a fall in capital market and housing prices, derailing the economic recovery and undermining financial stability."

S&P Downgrades China To A+ From AA- Due To Soaring Debt Growth

"The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China's economic and financial risks. Since 2009, claims by depository institutions on the resident nongovernment sector have increased rapidly. The increases have often been above the rate of income growth."

Corporate Leverage Has Never Been Higher

With the following chart from Goldman's Robert Boroujerdi, we can finally close the book on whether US corporate leverage is at all time highs. It is... and it's even higher on a "normalized" basis.

"Is The Equity Market Irrational Yet?" Citi Answers With The Following Chart

As the cycle matures, pair-wise correlations drop. When the cycle turns and stock markets drop, correlation picks up rapidly as investors “sell what they own”. In 2000/2001 and 2006/2007, this correlation indicator fell to around 20% before markets peaked out. We are currently at 30%.