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Corporate Bonds

Updated December 17, 2022 - LOOKS LIKE WE HAVE A MATURE TOP +Down Trend!

corp. bondsBack in November 2018, the Bank for International Settlements (BIS) published a study of “zombie” businesses. Looking at the 32,000 publicly traded companies in 14 advanced economies, they found that 12% were both:

  • At least ten years old and still in business despite their inability to make any money.
  • Had an interest coverage ratio below 1.0 for three consecutive years. In other words, these companies weren’t making enough revenue to pay back their loans, much less cover their other expenses and earn a profit.

"Do you really think this is NORMAL: Corporations borrow money at 0% to buy their own shares!?"

Real Danger always comes out of a corner nobody expects it to come. The odds that the Great Depression gets fired up by the Corporate sector and infects the Financial sector and the Banks are incredibly significant. If we’re lucky, it will occur gradually, but more likely, given high leverage and interconnected markets, it will happen fast...extremely fast, so fast that it will be very hard, if possible, to adapt.

 Our Opinion: This is where the next BIG DEPRESSION of the 21st CENTURY has STARTED

DJCBPGold pf1
Corporate bonds in Gold: a DISASTER!
Falling out of Huge Bearish Wedge and the beginning of the 2nd down leg (Feb 2021)

  • The Initial Sell order was given on November 18, 2010 - expressed in Gold. We still have a BEAR TREND!
  • You have to be out of your mind to hold on to Commercial/Bank bonds!!!
  • Corporate Bonds remain in DEBT and are, as such, not as good as Equities. At the same time, in many cases, some tangible assets guarantee that obligations are met (contrary to Government Bonds and Gilts).
  • Bonds issued by Banks and Financials are - of course - as these institutions are virtually Bankrupt, a no-go.
  • We have a TOP-SELL!
  • Corporate bonds are BETTER than Government Bonds...but stay away from both.
  • Corporate Bonds are usually the Canary in the Mine...for interest rates.

This chart tells it all...over the next four years, a loss of 50% to 70% is certainly plausible.

Corp bond total return 2018 12 18 corporate debt nov11
click to enlarge  
Corporate debt 2019 05 18 Central Banks buy Corporate Bonds to create
more fiat money and Corporations buy
their shares and keep so the Stock Markets
high...a win-win situation? or plain craziness!?
As soon as interest rates rise, Corporations will massively sell corporate bonds...  

DJCB pf1

Short Candle  Chart comments
DJCBP candle1
  • October 18, 2012 - May 9, 2013: topping out?
  • June 25 - August 6, 2013: TOP and STOP LOSS?
  • Feb 11 - March 15 - April 27, 2015:DANGEROUS DOUBLE TOP... !?
  • Jan 28, 2016: the Bond bubble is deflating.
  • Jan 24 - Feb 22, 2017: Short term is BEARISH (see candle)
  • May 6: short term bearish
  • June 5 - July 25 - Aug 21- Nov 23 - Dec 29: but still going up...
  • January 18, 2018: trend reversal...brace for HIGHER interest rates.
  • Feb 16 - Feb 11, 2019: we have TOP...higher interest rates we shall have.
  • April 8: Historic Top + Bearish divergence...invest here and now if you want to commit financial suicide.
  • May 8 - July 2: This is SUICIDE and a Bearish Flag!
  • Aug 26 - March 3, 2020: This is INSANE
  • March 18: TOP ???
  • April 23: Question - who keeps buying this crap?
  • May 28 - Mar. 2022: Answer - the Central Banks!
  • Apr. 29 - May 29 - July 8: This looks like a TOP formation. Expect HIGHER interest rates.
  • Aug. 28: ????
  • Sep. 30: STOP = Higher interest rates!
  • Nov. 10 - Dec. 17: Downtrend confirmed = expect higher interest rates.
Long candle
DJCBP candle2

Junk Bonds -The Achilles of the Financial system - Also a Mature DOUBLE TOP FORMATION!

JNK pf1

Short Candle  Chart comments
JNK candle1
  • Jan 28, 2016: this is a positive breakdown.
  • Dec 29: Topping out...
  • Jan 24-Feb 22, 2017: Short term is BEARISH (see candle)
  • March 16 - Nov 23: still Topping out.
  • Jan 18, 2018: rising interest rates we shall have.
  • Feb 16 - Nov 26: We have a TOP
  • Feb 11, 2019: OVERBOUGHT
  • July 2 - Dec 5: This is 100% fantasy and LALA-land
  • Jan 19 - Mar. 3, 2020: This is INSANE
  • Mar 18: REVERSAL & en route for higher interest rates?
  • April 23: who keeps buying this crap?
  • May 28 - June 21: Answer - the Central Banks!
  • July 28 - Aug 2, 2021: still bullish...and we expect it to stay so until the CRASH.
  • Sep 7 - Feb. 22, 2022: fresh breakout of Bull trap? - sideward.
  • Mar. 22: Trend Reversal?
  • Apr. 29 - May 29 - July 8: YES -we have a mature Double Top Formation.
  • Aug 28: ???
  • Sep. 30 - Nov. 10: STOP = Higher interest rates!
  • Dec. 17: Downtrend confirmed = expect higher interest rates.
Long candle
JNK candle2

Note the 3 months Treasury Bill yields ZERO percent...just like during the Great Depression of the 1930s

bonds spread

Posted June 8, 2009 - Or how to buy Bonds for security and end up with 75-cent penny stocks!!

May 31 (Bloomberg) -- A majority of General Motors bondholders agreed to support a plan to exchange their debt for an ownership stake in the company as high as 25 percent, the New York Times reported, citing people familiar with the matter.
Investors holding a little more than 50 percent of GM’s $27.2 billion of debt agreed to the swap, removing the last roadblock for General Motors to file for bankruptcy protection tomorrow, the paper said.
The paper said bondholders would initially get a 10 percent stake in the company, with warrants for an additional 15 percent. GM scheduled a news conference tomorrow in New York, where it’s expected to make its bankruptcy filing, the Times reported.
General Motors stock fell to 75 cents on May 29, below the $1 minimum usually needed to trade on the New York Stock Exchange and the lowest level in 76 years.

Updated May 12, 2009 - Corporate Bond Woes: Spreads And fundamentals Anticipate The Most Severe High-Yield Default Wave on Record.

Currently, high-yield bond spreads anticipate a default rate of 21% in the U.S. Specifically, record bond spreads are not only due to fire sales but find some justification in the deterioration of credit quality down the rating scale. Similarly, the spike in the projected default rate is in line with the deterioration of credit quality of outstanding debt down the rating scale (Moody’s)

Corporate Bonds show a wholly different and negative image.

Through Credit Default Swaps, any (low) rated corporate bond could be elevated to a AAA level. One only had to buy insurance. Today the price of this insurance premium is increasingly becoming prohibitive, and Financial Institutions which offer these Swaps (AIG) have disappeared.

There is a vast discrepancy between the general price level of Government and Corporate bonds.

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