Beware of the 'Financially Fragile'... And an Update on the 'Legal' Drug Cartel

Some stocks simply are riskier and junkier than others. It's as simple as that... Yet as I said in the August 14 Empire Financial Daily... For most investors, it's the same old "fear of missing out" ("FOMO") trap... that if they don't get in, they'll miss out on the next big home run – which […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Beware of the 'Financially Fragile'... And an Update on the 'Legal' Drug Cartel By Herb Greenberg --------------------------------------------------------------- [A rare convergence is coming...]( According to one financial legend, something that hasn't occurred in over 15 years ago is about to happen again. The last time this rare event materialized, nearly $55 TRILLION flowed into the pockets of those who prepared accordingly. Now, that same financial legend – one who's been dubbed "The Prophet" for his uncanny ability to foresee seismic market shifts – is issuing an urgent warning. He's providing all the necessary details for where you should move your money to seek safety AND huge returns during this unprecedented event. [Click here to find out all the details](. --------------------------------------------------------------- Some stocks simply are riskier and junkier than others. It's as simple as that... Yet as I said in the [August 14 Empire Financial Daily](... For most investors, it's the same old "fear of missing out" ("FOMO") trap... that if they don't get in, they'll miss out on the next big home run – which for some reason always happens to involve a company on the verge of going out of business. (When there are thousands of other stocks they can choose from, that makes perfect sense, right?) Some of these companies are easy to spot, like those that have little in the way of sales or earnings... and are really little more than public Petri dishes in search of a business. Others are a bit harder to find. But if you look closely, they share one thing you might want to go out of your way to avoid... They have so much debt and their business is doing so poorly that they can't cover interest expenses out of their operating profits. Or as my friends at Kailash Concepts ("KCR") put it in a brand-new report... With the broad economy booming, we thought it reasonable that if a firm could not pay interest expenses out of operating profits today, that was probably a pretty risky firm. After crunching the numbers, what KCR found was astonishing... Across all stocks in the United States, nearly 20% of them are NOT earning enough to pay their interest expense. A level of financial weakness eclipsed only at the nadir of the economic collapse during the COVID lockdowns. There are obviously plenty of ways to slice and dice numbers, so don't confuse this with another one of KCR's stunning stats, which I featured back in the [March 6 Empire Financial Daily](. In that essay, I cited KCR's work showing that 33% of the stocks in the Russell 3000 Index – which tracks the 3,000 largest U.S.-listed stocks – were losing money or couldn't afford to pay their interest expense. The difference here is that KCR's new report is for all U.S. stocks, small and large cap, and nearly 20% of them don't earn enough to cover their interest... KCR calls these companies the 'financially fragile'... To show just how precarious they are, look no further than the average interest coverage for the lowest ranked 20%. To say it's ugly would be an understatement, as the chart below shows so well... Or as KCR explains... The vulnerable slice of the U.S. equity market has never been so broad or so weak. Full stop. These include several companies that have been on my Red Flag Alerts, including Sunrun (RUN), ChargePoint (CHPT), and Enviva (EVA). And, of course, Carvana (CVNA), which has made frequent appearances here at Empire Financial Daily. --------------------------------------------------------------- Recommended Link: [Concerning America's Currency Reset...]( It isn't happening in a vacuum... Every country of economic importance – i.e. places like the United Kingdom... Mexico... Canada... Japan... and France – are developing their own FedCoin, which could impact over $1.25 quadrillion in global assets. Is your portfolio positioned, accordingly? Because whenever currencies undergo a "reset," profits tend to be stratospheric. [To prepare for FedCoin's deep impact on society, click here](. --------------------------------------------------------------- Obviously, some companies on the financially fragile list will get from here to there... By nature of their industries, some at times will wind up on the endangered list. And some may get saved by being the smart seller to a dumb buyer. (Don't laugh... it happens!) One thing is certain: Other than getting swept up in a bubble, in general these kinds of companies tend to underperform the market. Just eyeballing KCR's list of 150 bottom-of-the-barrel companies with market caps greater than $500 million, the top four (with market caps ranging from $37 billion to $99 billion) have been flat to down for at least three years, having been over-hyped and inflated during the bubble. (So classic!) Worse, as a group the financially fragile have considerably underperformed the broad market on all levels fundamentally with considerably worse three-year sales growth, earnings growth, free cash flow yield, return on assets, and return on equity. And yet, they continue to attract investors who for some reason either overlook the obvious or simply don't know... blinded by whatever story is being floated. None of that mattered in the raging bull market, of course, when rates were so low. But now... last I looked they're a higher and any of those companies that can't cover their interest and have debt coming due soon are – how can I put this? – somewhat screwed. (Memo to KCR or anybody else: That would be a great screen.) I think it's safe to say if you're trying to predict which public companies are likely to file for bankruptcy, as bankruptcies spiral higher at the fastest rate since 2010, the list of the financially fragile might would appear to be perfect place to start. Considering the volume of precarious companies out there, it makes far better sense to out money to work in more stable businesses... That's the goal of my Empire Real Wealth newsletter. I also don't do "meme" stocks... and I don't get caught up in crypto scams or over-hyped IPOs... nor do I try to trick my readers into thinking I have some magic indicator. Instead, the secret to my success – both financially and over the course of my 40-year journalism career – has always been to roll up my sleeves and do the work. It's really that simple. And it's what I aim to do for my Empire Real Wealth readers as well. And right now in Empire Real Wealth, I'm leveraging that approach to show you how to protect yourself from a potential "money pivot" ahead from the U.S. Federal Reserve. [Get the full story here in my new special presentation](. Moving on, if you missed it, Blue Shield of California is dropping CVS Caremark as its pharmacy benefit manager ('PBM')... Blue Shield of California is moving to several companies, including Mark Cuban's Cost Plus Drugs. (Disclosure: I'm a customer, and have morphed 60% of my daily generic cocktail over there because I've found it cheaper than even my supplemental drug plan on Medicare.) As regular readers know, I've ranted several times about PBMs (or a "legal" drug cartel, as I've called them) – most recently in the [June 22 Empire Financial Daily](. I've pointed out numerous times how broken the system is, especially with PBMs dictating which drugs we can take... or afford to take. It seems Blue Shield has had enough. As Paul Markovich, the president and CEO of Blue Shield of California, said in a statement last week... The current pharmacy system is extremely expensive, enormously complex, completely opaque, and designed to maximize the profit of participants instead of the quality, convenience and cost-effectiveness for consumers. That is why we are working with like-minded partners to create a completely new, more transparent system that gets the right drugs to the right people at the right time at a substantially lower cost. The truth is, it didn't have to be the way it was. It simply took someone with guts not just to come up with a better way, but actually execute on it. So far... so good. Regards, Herb Greenberg August 25, 2023 --------------------------------------------------------------- If someone forwarded you this e-mail and you would like to be added to the Empire Financial Daily e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2023 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 1125 N. Charles Street, Baltimore, Maryland 21201 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. [Unsubscribe from all future e-mails](