Bloomberg analyst Benjamin Dow speaks to the phenomenon I outlined in this morning’s log entry; i.e., the stimulus-boosted stock market advance (read bubble) that often comes when central bankers realize the world’s in deep doodoo. He also hints at the potential systemic risk that’s been subtly speaking to me through the numbers; which is the bulging corporate debt level, too much of it at BBB:

“The answer to the Question of the Day is one of simple, Fed-based arithmetic that has buybacks as the linchpin — easing will spur borrowing to buy back enough to make 3,200 a swift reality.

Whether Fed easing will reverse the slowdown in an economy held hostage by a trade war is irrelevant. Cheaper corporate borrowing is the end result, and the entire market knows to which ends that cash will go, as laid out by colleagues Liz McCormick and Ben Holland. It’s too enticing of an option for the boards of SPX Index member companies to pass up in the late cycle U.S. economy. Spending to invest in expansion or retooling business lines in this era of lackluster earnings growth. It’s far more lucrative to just take part in the Pavlovian experiment now playing out in markets — the White House rings the trade-war bell, the salivating Fed presses the button, and the buyback morsel is delivered to equity investors on the S&P 500’s path to new highs (repeat as necessary.)”