Head for the hills part II: Something wicked this way comes

I hear a lot about late-stage capitalism these days. I suspect it has something to do with Marxism, though I confess, I’ve never read far enough beyond Marx’s insane premises to be familiar every one of his conclusions. That said, I do know a bit about late stage bull markets, the likes of which we are most surely in now. I know, for example, that bull markets end with euphoria, followed by a crash, and while we had a moment of euphoria back in January, it has led to a fairly soft landing for reasons I’ve explained before. (Short version: tax cuts + share buybacks = everybody will have blow-out EPS over the short-term.)

One of the big dangers often seen in a late bull market, and one that we are very much seeing today, is that investors tend to pull money out of bonds to join in the euphoria of the stock market. This, in turn, causes interest rates to rise, increasing borrowing costs and dealing massive, inescapable earnings blows to all companies holding debt. Unfortunately, after so long a period of high liquidity, that’s nearly all of them. Of course, some companies are particularly bad shape, and I mean to point out a few of those today. That’s not the only problem on the horizon, though—far from it. For many popular stocks, there’s a storm coming, and there is no guarantee they can weather it.

Remember to treat these ideas as just that, ideas, and do your own research before making any investment decision.

Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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