Don't Be Fooled by the 'Calm Before the Storm'

In today's Masters Series, adapted from the June and May issues of Stansberry's Credit Opportunities, Mike compares today's calm in the markets with the calm before the 2008 financial crisis... explains why he thinks the next credit crisis has already started... and discusses how investors can position themselves to profit from this rare setup... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Master Series] Editor's note: [The storm clouds are getting closer](... The S&P 500 Index rose 16% in the first half of 2023. The Nasdaq Composite Index soared 32%, its best start in 40 years. But Stansberry's Credit Opportunities editor Mike DiBiase says it won’t last… that a new credit crisis has already begun and could lead to a massive downturn in the stock and credit markets. That's why Mike believes investors must avoid being lulled into a false sense of security in order to learn how to prepare their portfolios for this credit cycle. In today's Masters Series, adapted from the June and May issues of Stansberry's Credit Opportunities, Mike compares today's calm in the markets with the calm before the 2008 financial crisis... explains why he thinks the next credit crisis has already started... and discusses how investors can position themselves to profit from this rare setup... --------------------------------------------------------------- Don't Be Fooled by the 'Calm Before the Storm' By Mike DiBiase, editor, Stansberry's Credit Opportunities It sure feels like 2008 all over again... Let's wind back the clocks to that May. The subprime mortgage crisis was well underway. Borrowers were defaulting on their mortgages. Several small subprime lenders had already declared bankruptcy. Investment giant Bear Stearns had just collapsed. And yet, you wouldn't have known anything was wrong by looking at the stock and bond markets. The S&P 500 Index was up 12% from its March 2008 low. The high-yield credit spread – which measures bond investors' appetite for risk − had fallen 22% in that time frame. It's the difference between the average yield of high-yield ("junk") bonds and similar-duration U.S. Treasurys. That meant corporate bonds were more expensive and investors saw less risk. If you'd just paid attention to investors, you would have thought there was nothing to worry about. We all know what happened next... The stock market collapsed by more than 50% within the next year... from May 2008 to March 2009. The high-yield spread exploded higher, tripling to nearly 2,200 basis points ("bps") by December 2008. Corporate bond prices plummeted. Entire fortunes were wiped out. Today feels eerily similar... --------------------------------------------------------------- Recommended Link: [The Man Who Has Cost Stansberry Research $10 Million (and Counting!)]( It was a stunning discovery: One subscriber has cost Stansberry Research more than $10 million over the past four years. He legally "redirected" money from our potential coffers – to yours. When we found out, we invited him to our Baltimore office to explain. Find out what happened... and how it affects YOU [right here](. --------------------------------------------------------------- We've seen three of the largest bank collapses in history since the beginning of March. Consumers are in the worst financial shape they've been in since 2008. Credit card interest rates and credit-card debt are the highest in history. A recession is all but guaranteed. And yet, the S&P 500 is up 14% since the bank collapses. The high-yield spread has fallen 23%. Once again, this is not going to end well for investors who aren't prepared. I’m not the only one who sees the resemblance... Bob Michele is the head of JPMorgan Chase's fixed-income group. He has more than 40 years of experience in the markets. And he recently told CNBC that today reminds him "an awful lot of that March-to-June period in 2008." Like me, Michele believes this is the calm before the storm. He pointed out that recessions always follow rate-hike cycles from the Federal Reserve. Going back to 1945, they've started anywhere from six to 18 months after the Fed's final rate increase. History is about to repeat itself. Don't be fooled by the calm in the markets today. The worst economic storm since 2008 is coming very soon. And when it arrives, you'll be able to buy safe bonds at deep discounts. Folks are missing that the next credit crisis is already underway. In mid-May, seven companies went belly-up in just 48 hours. That's the most bankruptcies in any two-day period since at least 2008. In April, 54 companies filed for bankruptcy, according to Standard & Poor's. This is the period we've been anticipating since launching Stansberry's Credit Opportunities back in 2015. True credit crises happen only about once a decade. The last one was in 2008, so we're long overdue. What we're seeing now is only the beginning. The economy is worsening. Credit continues to tighten. Credit downgrades are on the rise. In the Federal Reserve's first-quarter survey of bank-lending standards, credit continued to tighten across the board. That includes loans to big and small businesses, as well as consumer credit-card loans. When credit tightens at these levels, it always leads to a recession. Things are about to get much worse for our economy. The credit-ratings agencies are just starting to get the message. According to Barclays, we saw $11 billion of "fallen angels" in the first quarter. These are investment-grade bonds that are downgraded to "junk" status. That's the most since the pandemic. It's on pace to exceed the number of fallen angels during the peak of the last financial crisis. Expect downgrades to continue rising in the quarters ahead. Bond investors have been even slower to wake up... The high-yield credit spread is still low, at around 400 bps. That's still far below its historical long-term average of around 600 bps. We'll know the credit crisis is fully taking hold when the spread is more than 1,000 bps. We're not there yet. We're still in the early innings of the first true credit crisis since 2008. Now is the perfect time to prepare. As downgrades and defaults continue to rise, fear will eventually grip the credit market. That's when we'll see the best deals on corporate bonds in more than a decade. I hope you'll be ready. Good investing, Mike DiBiase --------------------------------------------------------------- Editor's note: This wave of bankruptcies marks the early stages of a credit crisis that could cause huge losses for investors who aren't prepared. But you still have time to prepare as this chaos unfolds – with much safer investments than stocks... One of our longtime subscribers recently went public to reveal how Mike's strategy of buying world-class bonds at a discount – earning massive gains with legal protections – helped him retire at just age 52. [Get the full details here](... --------------------------------------------------------------- Recommended Link: ['My Last Freebie Went Up 5,166% – Here's My Newest' (Ticker Inside)]( One year ago, Eric Wade posted a free investment recommendation. Since then, you could have booked a 5,166% gain, turning a $5,000 investment into more than a quarter-million dollars. If you missed that free pick, today he has another for you. [Click here for the ticker](. --------------------------------------------------------------- You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized investment advice. © 2023 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [www.stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.