Bankruptcy Concerns Continue
-- July 28, 2003
The recent rally has overshadowed news of corporate bankruptcies, but that doesn't mean that bankruptcy candidates have suddenly become flush with cash. Just two weeks ago, Mirant Corporation became the 11th largest company to file for bankruptcy protection in US history, according to the American Bankruptcy Institute.
And just take a look at this list. It's a list of companies whose own auditors don't believe the companies will make it. Talk about a vote of no confidence!
We still count hundreds of companies that we believe could be on the verge of bankruptcy. And with long-term interest rates rising, we expect that companies will have an increasingly difficult time refinancing their debt to stay afloat. Plus, any surge in deflation will not only cut into company profits, it will cut the legs out from under companies with high debt levels as well.
Bottom line: Don't rush into stocks just because there is a rally. There are still plenty of stocks out there that may end up worthless because of bankruptcy.
related article: Recent Going-Concern Statements