CHART OF THE DAY: The Harbinger Of Future Defaults | $JNK

CHART OF THE DAY: The Harbinger Of Future Defaults | $JNK - Image 1

Editor's Note: Below is a brief excerpt from today's Early Look written by Hedgeye Director of Research Daryl Jones. Click here to subscribe.

"... In the Chart of the Day, we look at the true harbinger of future defaults, which is comparing shares of company losing money versus the default rate. Going back to 1985, these two metrics have moved basically in lockstep (until recently). This is no surprise since corporate profits are what companies use to make payments on their debt. So fewer profits, lead to a lower likelihood of re-payment.

 

The combination higher of rates in the short term, declining corporate profitability, and accelerating downgrades is not a great fundamental mix heading into 2016."