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.

A China Recovery or Just a Bounce?

China’s manufacturing picked up for the third straight month in November. We had predicted a short-term improvement, as the Communist Party Congress needed some good news while appointing a new government.

The “official” PMI (from the government) rose to 50.6 in November from 50.2 in October and 49.8 in September. That’s a seven-month high. However, it was below expectations. This PMI measures the large firms, the SOEs, which are mostly governmentally owned. A reading below 50 indicates an economic contraction. We don’t think the governmental number is reliable.