Editor's note: Over the past few weekends, we've been talking about the credit markets...

As Stansberry's Credit Opportunities editor Mike DiBiase has explained, the corporate-debt bubble is popping. And that spells bad news for the stock market.

But the good news is, you don't have to sit idle and lose a fortune...

Instead, in times of crisis, you can join some of the world's greatest investors and use a little-known type of investment to make more money than you ever thought possible.

Today's Masters Series essay is adapted from a brand-new Stansberry's Credit Opportunities special report. In it, Mike explains what one credit-market soothsayer is predicting today... what's already happening... and why he believes it's an exciting time...

The Credit Crisis Is Here… Now Is The Time To Profit

By Mike DiBiase, editor, Stansberry's Credit Opportunities

Edward Altman is better at predicting corporate bankruptcies than anyone else in the world.

And his latest prediction is chilling...

The New York University professor created the famous "Altman Z-score" in 1968. The 52-year-old formula assigns a number to a company based on several financial variables. It has proven to be 80% to 90% effective at predicting which companies will go bankrupt within the next two years.

When it comes to the recent market turmoil, Altman isn't mincing words...

In an interview with Yahoo Finance in March, Altman warned that in terms of the amount of debt that will go bad, we're headed for the worst period for corporate defaults that we've ever seen. He expects $150 billion in high-yield (or "junk") debt to default.

It might even be higher than that... Due to the coronavirus crisis, the world's economies have ground to a halt. At the same time, oil prices have collapsed to historic lows.

We're not going back to normal anytime soon. In fact, things are likely to get much worse...

As I mentioned in last weekend's Masters Series, a global recession is all but a certainty now. The only question is whether it develops into a much longer depression.

Either way, it's going to get ugly for many companies beginning this year...

Corporate debt already totals $10 trillion today… an all-time high. And the credit quality of this debt is at an all-time low. It's a recipe for disaster.

With the shutdown in place, many companies are burning through cash like never before. Or even worse... they're taking on more debt just to pay the bills. One in every five companies was struggling to afford its debt even before the coronavirus crisis struck.

The least creditworthy companies – those with "junk" credit ratings – will suffer the most. The Federal Reserve and U.S. government stimulus packages offer no help for these companies. And don't expect the government to throw them a lifesaver. The chairman of the Federal Reserve said that the central bank can only make loans to solvent companies (companies that can afford their debt).

Expect many to default on their loans in the months to come...

Credit-ratings agency Standard & Poor's ("S&P") forecast a 3.3% high-yield default rate at the start of this year. That's the percentage of companies with junk credit expected to default within 12 months. About five months later, it's now forecasting a 10% default rate.

S&P has never increased its forecast so drastically. And its current "pessimistic" forecast of about 13% by the end of the year would be a new 40-year high.

To see where we're headed, you just need to look at the number of companies whose credit ratings have been downgraded. Companies are normally downgraded before they default. So looking at downgrades is a great way to see where the default rate is headed.

So far this year, S&P has downgraded the credit of 1,270 companies in North America. That's already more than all of last year (906 downgrades). It's getting close to the peak of the last financial crisis... when S&P downgraded more than 1,500 companies in 2009.

And we're not even halfway through the year.

Fortunately, you don't have to be one of the victims...

If you're prepared, you could make a killing. Many people don't realize that the coming wave of bankruptcies opens the door to tremendous opportunities... That's what we capitalize on in Stansberry's Credit Opportunities.

Some of the world's greatest investors wait for moments like this...

We're talking about billionaires like Howard Marks... Warren Buffett... John Paulson... Paul Singer... Andy Beal... and Sam Zell. These guys do the exact opposite of most investors.

While everyone else is chasing prices higher in the euphoria of the late stages of a bull market, these billionaires are busy raising cash.

Then, when the crisis unfolds, they pounce. They use a little-known type of investment to make more money than you ever thought possible. It's a sophisticated type of investment that most folks know nothing about...

The world's best and richest investors have been using this type of investment to grow their wealth for decades. It's a way to boost your profits completely outside of stocks... with the potential for equity-like capital gains... and with far, far less risk than individual stocks...

This "secret" investment is a type of corporate bond called a distressed bond...

These bonds are different from the "bonds" in your 401(k). They have nothing to do with U.S. Treasury bonds... municipal bonds... "bond" mutual funds... or bonds issued by blue-chip companies like Apple (AAPL), which are little more than a way to park money and earn 2% interest.

Distressed bonds are issued by corporations and differ from most bonds in one critical way... They trade for a fraction of their contractual $1,000 par value – at discounts from 10% to sometimes more than 70%.

Despite their lower prices when you buy them, these distressed bonds work the same way as any other bond...

The companies that issued them have the same obligation to pay you $1,000 at maturity, even though you only pay a fraction of the usual $1,000 cost. That enables you to earn large, equity-like capital gains with a much safer investment than stocks. Plus, you collect interest payments that can be up to 20% per year of the amount you invested.

Most people don't know that it's possible to buy this type of bond as an individual investor...

The key to this type of investment is knowing which bonds will pay you, and which ones won't. If you can find distressed bonds that you know will be paid in full at maturity, you can make massive, equity-like returns with far less risk than investing in the stock market.

But finding truly great, safe distressed bonds with extraordinary returns is extremely difficult most of the time. It's much easier in rare moments of crisis... like the one we're entering now. The coming crisis will make it possible to buy high-quality bonds for $0.60... $0.50... even as little as $0.30 on the dollar.

That's partially because of investors' herd-like mentality...

Just like stocks, bonds trade in a public market that is heavily influenced by emotions and liquidity. When enough investors become fearful, panic sets in... And everyone starts to sell.

But the bond market is much less liquid than the stock market. When everyone panics, there aren't enough buyers to absorb the increased supply. Massive selling will force prices much, much lower... And these safe bonds will trade for pennies on the dollar.

This is an exciting time to be a distressed-debt investor. It's the type of environment my colleague Bill McGilton and I have waited for since Stansberry's Credit Opportunities launched back in November 2015.

Because of the impact of the coronavirus crisis on the economy, corporate-bond prices have begun to collapse. Thousands of bonds have seen their prices fall. This happens when the market is concerned that companies will default on their debt.

However, you must understand this... Not every company with a bond whose price has collapsed will default. In a crisis, even companies that are perfectly capable of repaying their debt see their bond prices beaten down.

We've been studying these bonds. And we've found opportunities worth putting your capital to work right now. Our Stansberry's Credit Opportunities subscribers are reaping the rewards.

I believe this is just the beginning of the crisis... Bond prices are going to get much cheaper in the months ahead as the number of bankruptcies soars. The biggest opportunities are still ahead of us.

You could see some of the best opportunities of your lifetime in the coming months.

Regards,

Mike DiBiase

Editor's note: You could have used the same strategy that Mike employs in Stansberry's Credit Opportunities to make 772% in less than five years after the 2009 financial crisis. And with the next crisis now upon us, he hopes to uncover similar moneymaking opportunities in the months ahead.

We recently handed the mic to a longtime subscriber in order to highlight the power of this strategy. He explained how it helped him retire at age 52... and how it allowed him to sleep easy during the recent coronavirus panic. We urge you to watch his presentation – and get our all-time low price for Mike's research – before it comes offline tomorrow, right here.