Salient to Investors:

Karl Denninger writes:

The pattern is nearly identical to that at the beginning of 2008. Debt continues to rise, and the biggest growth area remains the federal government.

The sharp change in debt and GDP over the last few quarters is identical to the sharp change in late 2007 and early 2008, even as the stock market maintained its cool.

Debt relative to equity valuations is the same as in 2007 before it all blew up, and the violence of the last move was greater than the previous, suggesting a potential drop down to sub-700 in the S&P 500.

A 40% market correction is not unreasonable since the index would merely intercept the credit and equity curves.

The driver of the next move south will be the same as that which powered the last one: namely consumers falling behind at more than 5% a year having been continually hammered without fail since Q1 2010, and they will eventually crack.

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