Sometimes you need to run through a bunch of seemingly disparate news items to get your arms around the bigger picture with the markets and the economy. I am doing exactly that in this article.
Barron's couldn't find one person who thinks stocks would fall in 2016 and Bulls scared, bears growl -- There are plenty of reasons for the market to tank right now, just as there always are. Sometimes those reasons are temporary, fleeting or silly, and that makes such market tankings great buying opportunities.
Sometimes you can see a real market crash forming, as I did back in 2007 when I closed my hedge fund as real estate's fundamentals were collapsing and about to take down the entire stock market and financial sector, as I took a job as a TV news anchor. Right now, I am worried that the Great Corporate Debt Bubble, buyback binge and dividend delirium have peaked. Not time to panic quite yet, but time to really dig in and look at the reality of this potential Black Swan for the market.
The Great Corporate Debt Bubble -- As my old friend Robert Marcin and longtime Real Money contributor called it the other day, the threat of a burst is real. And it casts a serious shadow both near term and as a potential Black Swan. I am not sure it's terribly likely in the next few months, but I am doing a full work-up on how the Great Corporate Debt Bubble could be starting to pop with energy's collapse and creeping interest rates.
When corporate debt crashes, it will likely take the stock market 30% to 50% lower. As always, it's as much of a question about when and not if. I always say I fully expect we'll see at least a couple or more market crashes of 50%, or more, over the next 40 years.
Short selling in U.S. energy sector surges as oil prices fall -- I wish I'd had the guts to go all-out short in the energy, oil, MLPs, pipeline and transport stocks at any point in the last year! I do think any energy-related stock carrying more than twice as much debt as cash on its balance sheet is at risk of going to $0 in the next year or two a la Magnum Hunter Resources (MHR) already. But I wouldn't want to be very aggressive shorting energy at this point as there will certainly be some snapback temporary spikes in those stocks as they go to zero. Linn Energy (LINE), EMCOR Group (EMES), Kinder Morgan (KMI), Freeport-McMoran (FCX) are all in trouble with their balance sheets, for example, but I wouldn't short any of them as each of those stocks are already down 70%-95% in the last couple years.
How to Use Leverage to Profit from Gold's Likely Rise -- I don't like any of the gold miners while Randgold Resources Ltd. (GOLD) is down here below $1,200. If gold stays down below $1,200 or $1,300 for the next couple of years, most of the publicly traded gold mining stocks will be in as much trouble as KMI, Chesapeake Energy (CHK) and others in the energy sector as oil has stayed below $50 for an extended period of time.
I 'm not very bullish on gold miners for the foreseeable future, as they almost all carry a ton of debt. They aren't going to be very profitable, if it all, with gold under $1,200 per ounce. Because of the billions of dollars of debt that most of these gold miners carry, they actually are probably one of the main sectors to be hit/contribute to the popping of the Great Corporate Debt Bubble.
I do think buying some actual gold coins and storing them somewhere safe is probably the only reasonable way to invest in gold right now, and that is probably a good idea. The best way to invest in gold is to just buy some gold coins from APMEX on eBay (EBAY), or from a local gold dealer you know and trust. And any reader of TheStreet can just email us at email@example.com to get a free copy of my ebook, Everything You Need to Know About Investing in Gold and Silver.
Is It Time to Dump Micron Technology Stock? -- Micron (MU) has $6 billion in debt to go along with the $6 billion in cash it has. That's not a strong-enough balance sheet for me to get excited about the stock. It's cheap if the company can deliver on the $2.25 per share earnings estimate for next year. But the revenue growth was negative 10% this year and I'm not likely to buy this stock given that balance sheet and questionable ability to meet forward growth estimates.
2015's Worst Clinical Failures and Trade Alert: A new biotech/pharma/pot short -- I shorted GW Pharmaceuticals (GWPH) a few weeks ago and it's starting to crack now. I do think this stock could be a teenager (in the teens) before it's all over. Check out Trading With Cody to find out if and when I short more of this one. Health care and biotech seem ripe for a revaluation and more downside anyway.
Eminem Air Jordan Sneakers Bought For $227,000 In eBay Auction -- If I'd actually taken the $95 I spent on my own pair of the ugly red and black AJ1's that I owned back in 1985 and bought Nike stock instead, it would today be worth $30,000. Can you believe that?
I'd like to find another NKE like I did buying Alphabet Google (GOOG, GOOGL), Apple (AAPL), Facebook (FB) and others early in my career. As for the "next Nike/Google/Facebook/Apple," I work on those ideas every day and continually send you alerts and analysis about that work. I do think some of the names in my portfolio right now will have some five-, 10- or even 100-baggers over the next 20 to 30 years as some of those names already have been for me.
To summarize then: Let's stick with our long select-evolutionary-growth tech stocks, let's stay away from energy, let's avoid gold miners, let's run from overleveraged balance sheets and let's keep the Great Corporate Debt Bubble on your radar.
Let's be selective in our longs and not overly bullish and certainly not complacent as debt turmoil, stock market weakness and risks to the system rise. Interestingly, that's exactly how the playbook I follow has had me positioned for the last five years anyway.