S&P Leverage At All Time High

The total company leverage is calculated as debt to EBITDA or free cash flow. This metric is commonly used to assess a company’s ability to service its debt. When we first published this chart, it appeared there was still some runway left, as market caps were increasing in tandem. However, the ratio has now reached a record high, signalling that debt loads are at capacity. It appears the S&P 500’s torrid pace is running out of fuel, and it will be interesting to see how companies will continue to fake their growth.

As depicted by debt margin, investors are borrowing at record levels to buy shares. Speculators are still trying to squeeze out as much as they can from an overbought market, and will be vulnerable to a sell-off. Once the selling begins, it will be exaggerated as investors begin to unwind their positions. This will bring about market capitulation, and even more downside for an extended time.

Bonus article for the week: Our friend Matt Geiger, resource fund manager, has finally forayed into cobalt, and has written an in-depth brief on an under-the-radar cobalt company. Matt is a deep value investor, see why this company passed his rigorous screens and due diligence.

By Sean Zubick

In his first venture as an entrepreneur, Sean co-founded Palisade Global Investments in 2013. Having previously served as the V.P. of a merchant banking firm in Toronto, Sean brings a deep reservoir of knowledge and expertise in the investment banking, private equity and digital advertising spaces. The markets have been part of Sean’s DNA for as long as he can remember – his father was a market maker on Bay Street for nearly a decade at Burns-Frye (BMO Nesbit Burns) and subsequently went on to serve as a senior Commodities and Options Trader at National Bank. Sean has built a vast network of investor and industry contacts, spanning across North America, Europe, Asia, and Australia, that he has skill fully engaged to generate over $100M in term sheets for Palisade’s portfolio. His knowledge base and investment experience extends to a wide array of sectors, including Mining, Renewable Energy, Agribusiness, Infrastructure, Mobile/Telecom, Healthcare, and Media. Sean was a NCAA Division I Scholarship Athlete at UNC-Charlotte, which he graduated from in 2006; he was also a National Pool Player for Canada. Sean, his wife Danielle, and their daughter Scarlett Noelle are proud residents of the Commonwealth of the Bahamas.

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