The Important Message From Junk Bonds

The ever important Junk Bond market is giving us key signals right now! Could this be the next crisis to take over the markets? Check out at the chart below.

Currently, 15.7% of all junk bonds are classified as “distressed.” That the highest since 2012. We predict that soon it will be the highest since the global crisis of 2008-2009.

Junk bonds have plunged since 2013, while the S&P continued to make new highs.

Why Are Stocks Rising?

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During 2013, many smart analysts and money managers voiced their puzzlement of why the stock market continued to rise in spite of the lack of revenue growth of many companies, a stagnating economy, and looming problems in 2014. I wrote in our Wellington Letter that this year it would have been more productive for analysts to just “go with the flow” and head for the golf course each day then to do tedious analysis.

Extreme Caution Advised!


In the almost four decades we have been trading the markets, we have learned that when Wall Street firms start selling their own investments, including firms they control, it’s a sign that a top is being formed.

In late June 2007, the huge private equity firm Blackstone (BX) went public. At the time, we had warned of a monumental financial crisis to occur in 2008, while Wall Street analysts were very bullish. Our technical analysis told us that a very important bull market top was being made.