Companies are setting the bar so low this earnings season that they are managing to come out looking pretty decent, strategist and best-selling author Larry McDonald said Thursday.
"If you look at the companies coming into the quarter that have taken guidance down versus taking the guidance up, that's the highest in six years," said McDonald, head of U.S. macro strategy at Societe Generale.
Furthermore, he added, the markets have responded so far by rising an average 1 percent to 1.1 percent.
"In other words, companies have lowered the bar so far down that they are jumping over it," he said in an interview with "Closing Bell."
McDonald, whose book on the collapse of Lehman Brothers chronicled his experience as vice president at the firm, also sees a problem with the fact that corporate cash as a percentage of debt on the balance sheet is the lowest since 2007.
"Companies are issuing debt to buy back stock. It's a game, they're gaming the system," he said.