Financial meltdown in Wall St is predicted yet again, and soon! Everyone could suffer if the collapse triggers a wave of defaults through the high-yield debt market, and in turn, hits stocks. The first to fall: the banks that were last hit by the housing crisis. Why could that happen? Well, energy companies make up anywhere from 15 to 20 percent of all U.S. junk debt, according to various sources. It would be hard to overstate the seriousness of what the markets could potentially be facing. One analyst summed it up to CNBC this way… “This is the one thing I’ve seen over and over again,” said Larry McDonald, head of U.S strategy at Newedge USA’s macro group. “When high yield underperforms equity, a major credit event occurs. It’s the canary in the coal mine.“ The last time junk bonds collapsed, a major stock market crash followed fairly rapidly. And those that were hardest hit were the big Wall Street banks… During the last high-yield collapse, which centered around debt tied to the housing sector, Citigroup lost 63 percent of its value in the following 60 days, Kensho shows. Bank of America was cut in half. I understand that some of this information is too technical for a lot of people, but the bottom line is this… Watch junk bonds. When they start crashing it is a sign that a major stock market collapse is right at the door. At this point, even the mainstream media is warning about this. Just consider the following excerpt from a recent CNN article… That swing away from junk bonds often happens shortly before stock market downturns. “High yield does provide useful sell signals to equity investors,” Barclays analysts concluded in a recent report. Barclays combed through the past dozen years of data. The warning signal they found is a 30% or greater increase in the spread between Treasuries and junk bonds before a dip. If you have been waiting for the next major financial collapse, what you have just read in this article indicates that it is now closer than it has ever been. Over the coming weeks, keep your eye on the price of oil, keep your eye on the junk bond market and keep your eye on the big banks. Trouble is brewing, and nobody is quite sure exactly what comes next.… Read more at prophecynewswatch/2014/December02/021a.html#B0r2CDcO8AFBxHS3.99
Posted on: Thu, 25 Dec 2014 08:05:22 +0000
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