Bloomberg reports 31 companies worldwide defaulted on corporate bonds so far in 2016. That’s the highest number since 2009’s Great Recession (when 42 companies defaulted).
And we’re only three months into the year…
Even more disturbing is the number of U.S. defaults. It’s only a few companies shy of 2009’s highs.
Most of the defaulting companies are linked to the U.S. energy sector. Plunging oil and gas prices have made many energy producers insolvent. Defaulting on bond payments is the last step before entering bankruptcy protection.
Longtime Daily readers know the defaults are a symptom of what Tom calls The Great Unwinding: the largest worldwide credit contraction in history.
The result will be a stronger dollar… which will spur further defaults. Debts are harder to repay as currencies get stronger. It’s a vicious circle.
Bottom line: Expect more defaults to come in 2016. Ready yourself for maximum defense. Stay long gold and U.S. dollars. We’ll have an extraordinary opportunity to spend those dollars on oil stocks and bonds once the carnage ends… but we’re not there yet.
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