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5 Ways to Beat the Fed (and Crush Inflation)

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Stocks

These Stocks Could Go To $0

  • By Money Morning Stock Research Team, , Money Morning   •   Thursday, January 19, 2023

It was fun while it lasted, but access to cheap capital has now disappeared for all but the highest-quality companies.

Investors no longer tolerate the kind of “profitless growth” that, because of record low interest rates, defined the 2010s. For proof, just look at the tech sector; some of these stocks, which were at all-time highs as recently as early 2022, are down more than 90%.

As bad as this market has been for these companies, the carnage isn’t finished yet. Dozens of these firms are essentially “drawing dead,” to borrow a phrase from poker, and they’ll soon be dead – bankrupt, at zero - if they can’t raise more debt or equity, very tough things to do in this market.

Refinancing and recapitalizing is a tall order right now because, as the Fed continues to keep rates high and all while removing liquidity from the market through quantitative tightening, capital costs five and six times what it did during the freewheeling, easy-money 2010s. All the while, these companies face declining margins; they may be forced to default on interest payments without the possibility of refinancing.

As these “zombie” companies run out of the cash needed to stay afloat, risk premiums will rise across the market, which could further squeeze liquidity and create an escalating, expanding series of corporate defaults.

Think of it as a “zombie plague,” only this isn’t sci-fi, but cold, hard reality. We’re already seeing the fallout. Bed Bath & Beyond Inc. (NASDAQ: BBBY) just alerted shareholders to the risk of insolvency; the stock is down more than 87% since August. Party City Holdco Inc. (NYSE: PRTY) had its “debt doomsday” in late January 2023 when it declared bankruptcy – its shares are off more than 93% over the past year.

That “performance” is noteworthy, and fundamental traders will know why. That’s because, if you focused on fundamentals, you could have made a fortune on these stocks as they hurtled lower.

Just take a look at the results of our “Zombie Hunt”…

Check out our top three Zombie Stocks…

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6 IPOs in 2023 You Can’t Afford to Miss

2021 was a record year for the IPO market, fueled by the popularity of special purpose acquisition companies (SPACs), low interest rates and the U.S. government handing out billions in stimulus to millions of Americans.

2022 was very different. All of the cash rolling around the global system began to accelerate dormant inflation, and global central banks, which had completely misjudged the “stickiness” of that inflation at the outset, began to tighten policy painfully, and interest rates were raised at a record pace.

But that could all change in 2023 as interest rates reach their peak and inflation comes down. Now the companies that planned to go public in 2022 have their sights set on 2023.

Here are the 6 monster IPOs to look forward to in 2023...
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The Government Is Pouring $391 Billion Into These Stocks - Buy Now

It didn’t make many big news channels, but back on January 1, 2023, the government released $391 billion. The destination: a select group of companies whose stocks could see double-digit gains this year.

This isn’t your usual pork-barrel spending. This is the Inflation Reduction Act (IRA), a sweeping bill designed to ease Americans’ pocketbook-pinch. But, if you dig just beneath the surface of the IRA, you find a particular emphasis on clean and renewable energy initiatives.

Under the IRA, a decade of funding starts right now. The companies will offer the discounts, but Uncle Sam is picking up the tab, which will boost earnings for these companies - and boost their share prices.

These are the five stocks that could benefit the most…

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January 19, 2023 • By Money Morning Stock Research Team

These Stocks Could Go To $0

January 9, 2023 • By Money Morning Stock Research Team

The Government Is Pouring $391 Billion Into These Stocks - Buy Now

December 27, 2022 • By Money Morning Staff Reports

6 IPOs in 2023 You Can’t Afford to Miss
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