We JUST Got The Latest Inflation Report - What You NEED To Know

"So now, as these debts start to readjust, because these aren't 30-year fixed rate mortgages, they're threeyear, fouryear, 5year, maybe sevenyear loans, these debts are now starting to readjust. If they're going to readjust at the higher interest rates, that means businesses are going to have to pay much higher debt servicing costs. And if they have the money to pay it, great. But if they don't have the money to pay it, that could be a problem for businesses in the future. Meaning in the next 12 to 18 months, if they have to pay these higher costs and they don't have the revenue to support it."

"But the other part that I want you to understand when it comes to businesses is the debt part which I kind of highlighted a little bit earlier but corporations are still sitting on huge piles of debt. And if that debt is in a non-income producing asset and that debt starts to readjust that's going to hurt more businesses."

"Now, if you remember back in 2020 and 2021, we saw this huge boom in stock buybacks. Now, if you were an investor in a stock that was doing a stock buyback, it was great news for you because you saw your stock values rise. But what we also saw during that time was leveraged stock buybacks really skyrocket. A leveraged stock buyback is when a company goes into debt so they have cash to buy back their stock."

"And so this is going to be an issue as companies who did these stock buybacks, the leverage stock buybacks particularly and don't have the revenue to continue supporting the higher debt costs. And that's why you really want to pay attention to interest rates because that can impact many different phases of the economy. Because now if a company doesn't have the ability to continue making the higher costs because of inflation and then the higher debt costs because of interest rates, that's going to be a problem. And we're just starting to see the impacts of the higher debt costs. I mean, 2024 is kind of like the real beginning of the readjusting phase. We're going to see more in 2025 and again more in 2026."