Editor's note: Don't let recession fears prevent you from profiting...

With out-of-control inflation, heightened geopolitical conflict, and the banking crisis weighing on the economy, many investors are hiding their money on the sidelines in anticipation of a deep recession. But according to Stansberry's Credit Opportunities editor Mike DiBiase, this economic calamity will lead to some of the cheapest corporate bonds you've likely ever seen...

That's why Mike stresses it's critical for investors to start exploring the credit market right now in order to take advantage of this unique setup.

In today's Masters Series, adapted from the September and October issues of Stansberry's Credit Opportunities, Mike explains why today's market conditions signal a recession is inevitable... talks about how we're in the early stages of a credit crisis as well... and details how investors can capitalize on this rampant market chaos...

The Next Financial Catastrophe Is Just Beginning

By Mike DiBiase, editor, Stansberry's Credit Opportunities

Every recession indicator is flashing a warning today...

You've heard of most of them. An inverted yield curve... Rapidly rising interest rates... Tightening credit... And a falling need for temporary help and rising unemployment.

But there's one you may not have heard of.

I'm talking about falling recreational-vehicle ("RV") sales.

RV sales are down 16% through September. That follows a sales decline of 18% last year. Falling RV sales in two consecutive years have preceded the last three recessions.

These are big-ticket items that people buy with disposable income. So you see sales declines in these types of items first.

No matter how hard Wall Street and the financial media wish for a "soft landing," it doesn't change the reality... We're not going to avoid a painful recession.

The next credit crisis has already begun. It is slowly unfolding...

Another 50 U.S. companies went belly up in October. That brings the total to 561 this year. That's just two shy of the 563 that went bankrupt through September 2020 when the entire economy was shut down.

The biggest name was Rite Aid. The drugstore chain hasn't been able to turn a profit since 2018 and finally succumbed to its debt load.

Credit is now tighter today than at any point since 2009, when we were in the midst of the great financial crisis (excluding a brief period following the onset of the COVID-19 pandemic).

The banking crisis isn't over. Banks are sitting on more than half a trillion dollars' worth of unrealized losses on their balance sheets for loans that have plunged in value.

Banks can't afford to sell those assets since they'd have to realize the losses on their income statements if they did. That means they have less capital to make new loans. It's part of the reason why bank credit (the dollar value of all bank loans) is contracting for the first time since 2011.

This is a big deal. According to investment bank Goldman Sachs, nearly $2 trillion of corporate debt is coming due over the next two years. Without access to new loans, many "zombies" (companies that can't afford their debt) are finally collapsing.

Credit crises can take a long time to play out. The current credit crisis is just in its infancy.

You can see this by looking at what's known as the high-yield credit spread. It's the difference between the average yield of high-yield ("junk") corporate bonds and similar-duration U.S. Treasurys.

The high-yield spread has averaged around 550 basis points ("bps") over the past 25 years. (A basis point is one-hundredth of one percent.)

As you can see in the next chart, the high-yield spread soars above 1,000 bps during recessions (highlighted in gray)...

Today's low spread means we aren't seeing any real fear in the bond market... yet. But it's coming.

Stress continues to build in the economy as households and businesses digest higher costs and interest rates.

Credit will continue to tighten and bankruptcies will soar. Much more pain lies ahead.

Fear will soon grip the market. And even safe bonds will go on deep discount.

That may sound gloomy, but it will create some of the best bond opportunities in our lifetime as it unfolds.

We're not there yet. But we're inching closer every month.

Regards,

Mike DiBiase

Editor's note: This credit crisis will be brutal for investors who aren't paying attention, but you don't have to be a victim of this ongoing mayhem. Mike says we're still in the early stages of this cycle. And this crisis is one of the best setups he has seen...

Mike believes this crisis will open the door for myriad buying opportunities with huge upside potential – with gains that have legal protections – for investors who start preparing right now. Learn more here...