CORPORATE DEBT RISK: This IS The Silent Collapse. And Its Building Beneath the Market/Economy.

From Greg M

Lions…

So, why is this the Canary in the Coal Mine? The bond market, especially corporate debt, always signals trouble before stocks do. Look back on history for as far back as you want to go. Because unlike stocks which thrive on hype, illusion, and buybacks, debt must be paid. And the moment companies cannot roll over their debt, OR refinance it affordably, OR pay it from earnings… well, its just over.

THIS IS WHAT’S HAPPENING.

Corporate debt maturities are hitting NOW. Corporations loaded up on cheap debt during 2020–2021.

Now, AS WE HAVE SPOKEN ABOUT RECENTLY, high-yield spreads are quietly widening. This means that lenders are demanding more compensation for risk, and it is getting bigger. With this, cash flow is shrinking across sectors. Revenue is flat or declining due to inflation, consumer weakness, and slower global trade. That makes debt harder to service. Defaults are accelerating, but hidden. Smaller companies and zombie corps are quietly defaulting or restructuring. Moody’s, in a recent publication stated that the US default rate on speculative-grade debt is rising toward 6%.

WHY THIS IS SO DANGEROUS? Because corporate debt is the connection between Main Street, Wall Street, and the banks.

If enough of this turns toxic, banks themselves will get hit with downgrades and also capital buffer issues. (Yes these banks have a mainline to The Fed, but here again-IF THIS WERE TO “GET OUT,” it would shake CONfidence in the system). With that, ETFs and pension funds holding this debt start hemorrhaging value. This will freeze up credit issuance. Here, is where The Fed will slash rates, (which we all know is coming), and in doing do RAPIDLY DESTROY whatever is left of the purchasing power of the dollar and BOOM! A new system will emerge.

GM