Sell Stocks Before The Corporate Debt Bubble Bursts.

Dec. 30, 2018 5:29 PM ETLQD, SPY56 Comments

Summary

  • Corporations have piled on record amounts of debt to buy stocks.
  • Recently their investment in stocks has turned sour while their debt burden has just started feeling heavier.
  • Corporate executives will likely cut back on share purchases, and this in itself is bad news for the future.
  • Add to the above the fact that the economy is slowing and executives expect recession, and stock investors become even rarer.

It was just on December 15th when I argued that the S&P 500 was "likely to crash deep below 2.600", and a few days ago that I wrote that it was a good time to buy stocks as the S&P 500 was around 2.400. My buy recommendation was for a relatively short period of time. The market has since bounced back nicely. Things have been moving dramatically, and the US stock market of the past couple of weeks has behaved nothing short of extraordinary. You don't see such movements every year, and there have been many decades without such sudden market crashes in the US. These times have also been great opportunities for making good profits from short-term trading, though obviously extremely few people are able, or willing, to enter such trades involving gut wrenching volatility.

Now that the market has recovered quite a bit I believe it is time to start looking at the truly bad fundamentals and position for the coming year. And I believe, as I also mentioned in my last article, that 2019 will be a bad year for risk assets, particularly for stocks. It is not very wise to stay invested until the economy starts showing significant signs of weakness. But early signs of weakness are already there, as housing, and the economy in general, have started to lose steam in recent months. These weaknesses are likely to get worse as the economic cycle moves along its already historically long lifespan. There are some serious concerns out there, which actually led to the crash we had from October to December. Let's start from perhaps the most immediate and important concern - the corporate debt bubble. Most people talk about the trade war with China, or the Fed rate hikes, but the fact is that a

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I am a private investor focused on finding opportunities across all types of investments, in all sectors, industries - stocks, bonds etc and in all countries and regions of the world. I have been investing for myself for more than ten years and I have so far profited from opportunities in Europe, US and Asia. However I do look at opportunities also in other parts of the world, though there is usually the problem of liquidity and/or accessibility in markets in the Middle East and Africa and some other markets in other parts of the world.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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