Nedbank strategists Mehul and Neels write some exciting stuff and like me, they don't confuse fundamentals with liquidity.

They wrote in a strategy note: There is a strong relationship between the change in global dollar liquidity (M1) and the performance of the global stock market -- a correlation of 76 per cent.

• Global dollar liquidity leads global stock markets by an average of eight months. • If there is no boost to global dollar liquidity, we expect this relationship to hold.

As a result, the risk of further downside potential for stock markets across the world would remain intact. The EMBI(USD-denominated corporate debt) spread is very close to a breakout level. • We believe this is the “canary in a coal mine” for risk assets. • USD-denominated debt of EM corporates has grown from $650 billion in 2009 to the current $3.2 trillion and there are significant mismatches -- USD-denominated debt as a percentage of GDP is 70 per cent and that of percentage of reserves is 75 per cent. • Amid a slowdown in global growth, coupled with a tighter Global dollar-Liquidity environment, if EM dollar-corporate spreads continue to widen, it would negate our view below on EM equities, i.e., that a short-term bounce is possible. My two centsSo, it comes down to LIQUIDITY and the global money supply is not expanding.

In fact, it is contracting.

The Fed is already in QT mode (forget rate increase, that's only the cost of providing LIQUIDITY).

In a widely expected decision, ECB has also decided to stop its QE.

So, how will the existing debt be serviced and how will the new debt be created if private sector and consumer is already leveraged