Would you invest in a company that's loaded with debt?
The answer seems obvious... no, of course not.
But it's not so simple.
Longtime readers know that I look for stocks that let you sleep well at night. These are companies that have strong balance sheets, regularly reward shareholders through share buybacks and dividends, and should be around to help you generate your wealth for a long time.
Of course, investors who are looking for even more safety often turn to bonds. Bondholders, unlike stock investors, have a legal right to be paid by the company.
If a company's balance sheet collapses, its share price collapses with it (and any dividend it pays will end). Shareholders have no guarantees... But bondholders have much more safety.
A bond's interest payments are legal obligations. So if a company gets in trouble, bondholders stand at the head of the line when it comes to the company paying bills and creditors.
Even in the event of a bankruptcy liquidation, the proceeds go to the secured creditors and bondholders. Shareholders get squat.
Not only that, but the capital-gain potential of bonds is widely underrated. After a bond is issued, the market will decide its worth. If the company runs into trouble, investors can become worried about a default and a bond can fall to well below its "face value" – the money the company owes bondholders when the bond matures.
When you purchase corporate bonds at a discount and hold to maturity, you receive the full face value when the bond principal is paid off. That can be an incredible, overlooked, built-in capital gain... regardless of what the market or an individual company's stock has done.
And if investors change their minds about the company's fortunes, the bond's price recovers and you can take profits without having to wait.
One of the best times to apply this strategy is during a credit crisis. And, according to my colleague Mike DiBiase, the next crisis is already here.
Mike recently told subscribers of his Stansberry's Credit Opportunities newsletter...
The Fed won't be able to save the market this time. Unsuspecting investors will be wiped out.
Fortunately, you don't have to be one of the victims...
If you're prepared, this could be a massive opportunity. You see, the wave of bankruptcies that's just beginning opens the door for tremendous profits... if you know what you're doing.
Mike's strategy of buying what's called "distressed debt" might sound crazy to some investors. But purchased at the right price, debt can make a fortune for investors.
Don't take our word for it...
A longtime subscriber is sharing how this technique helped him solve his financial problems. He was able to retire at 52... send his four kids to elite colleges and graduate schools... and even help buy his elderly parents a beautiful retirement condo overlooking the Atlantic Ocean in South Florida...
Now, let's get into some of the things you've had on your minds this week. As always, keep sending your comments, questions, and topic suggestions to [email protected]. We read every e-mail.
Q: When it comes to having water handy, do I need to buy the bottled stuff or can I store it from the tap? – J.S.
A: Tap water is fine to store, but there are a few things to remember...
First, the water needs to be stored in a food-safe container. This can be glass, plastic, or even steel, so long as it hasn't ever been used to store nonfood items. Second, ensure the container has a tight seal. If not, you could end up with algae or bacteria.
As I've mentioned with food, when in doubt, throw it out... especially if the color looks strange or if the smell is off.
And remember, no matter if it's tap water or bottled, store it in a cool, dark place.
Q: Is there a health difference between plain yogurt and Greek yogurt? – B.E.
A: Greek yogurt has about twice the amount of protein as regular yogurt and half the carbohydrates... almost 20 to 25 grams of protein in an 8-ounce serving. Regular yogurt is lower in calories than Greek yogurt. (To avoid any confusion with the terminology, "plain" means yogurt without added flavor... Both regular and Greek yogurt are available as plain.)
Regular yogurt is the cheapest. So that's what I prefer to buy (and even make). Specifically, I like Dannon and Stonyfield Farm's regular, plain-flavored yogurt.
I also love eating Greek yogurt. Some folks don't like the tanginess, and I often add some fruit (like my favorite, blueberries) to sweeten it a bit.
I avoid all the flavored "fruit on the bottom" or "blended" yogurts. They're loaded with sweeteners I don't need.
What We're Reading...
- Did you miss it? Protect your portfolio from the next market crash.
- Something different: Costco doesn't want you sharing your membership card.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
July 7, 2023