“Who is the bogeyman this time? There are zombies out there.”

November 8, 2018

The above quote comes from a recent interview we filmed with investing legend Stanley Druckenmiller — a sage, insightful sit-down we recently shared with clients. In it, Stan details his concerns about the QE distortion. Near the top of his list is the unprecedented divergence between corporate debt levels and default rates. It is not a concern new to these pages. For more than a year, we have dissected the threat posed by record corporate debt, which sat at $6.3 trillion as of June. According to Bianco Research analysis, 14% of firms in the S&P 1500 are zombies, meaning they do not have enough earnings before interest and taxes to cover interest expenses. With interest rates now rising, “something’s gotta give,” as S&P Global warned in February.

 

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