While the stock market paints a picture of growth and prosperity, an alarming economic trend is unfolding behind the scenes.

Bankruptcies in the U.S. have surged by nearly 40% year-over-year in 2024, the fastest pace since the 2008 financial crisis. Companies like Spirit Airlines, Big Lots, and Red Lobster have filed for bankruptcy, underscoring a troubling disconnect between market optimism and economic reality.

This contradiction raises an essential question: Is the apparent economic expansion built on solid fundamentals, or is it a house of cards propped up by speculative hype, over-reliance on debt, and central bank intervention? The growing prevalence of “zombie corporations” sheds light on this precarious situation.

The Rise of Zombie Companies 

“Zombie companies” are businesses that survive solely by servicing their debt without generating meaningful growth. These corporations are so debt-burdened that even a minor financial misstep could spell disaster. Currently, 43% of small-cap companies (measured by the Russell 2000 Index) are unprofitable—a figure that exceeds levels seen during the COVID-19 pandemic and is more than double the percentage during the 2008 crisis.

These zombie companies have grown accustomed to an era of easy money and low interest rates. However, with rising interest rates, many are struggling to refinance or sustain their operations. As George Cipollone, an asset manager, aptly put it, “At some point, the money comes due, and they’re not going to have it. It’s game over.”

The Domino Effect of Corporate Failures 

The collapse of zombie companies poses a significant risk to the broader economy:

• Massive Job Losses: Millions of Americans are employed by these struggling businesses. When they fail, entire communities face devastating unemployment.

• Economic Ripple Effects: Bankruptcies make it harder for other companies to raise capital, tightening credit markets and stalling economic growth.

• Wealth Destruction: Investors, particularly those unaware of these risks, could lose significant amounts of money.

Corporate Mismanagement and Greed 

The rise of zombie companies is not solely due to macroeconomic factors. Many corporations have contributed to their precarious state by prioritizing stock buybacks and executive payouts over innovation and long-term growth. A glaring example is Bed Bath & Beyond, which heavily borrowed to fund buybacks, allowing top executives to walk away with hundreds of millions while the company collapsed, leaving thousands jobless.

Such practices exemplify a system designed to benefit the few at the expense of the many, further eroding trust in traditional financial institutions.

The Illusion of Market Growth 

The stock market’s apparent strength is deceptive, fueled by: 

1. Speculative Hype: Investor optimism has inflated valuations beyond fundamental levels. 
2. Market Concentration: A handful of large-cap stocks drive most of the market’s gains, masking widespread underperformance elsewhere. 
3. Central Bank Intervention: Years of quantitative easing and monetary support have artificially propped up markets. 

This unsustainable growth echoes past bubbles, such as the dot-com crash and the housing crisis, leaving many vulnerable to the next inevitable downturn. 

Gold and Silver: Your Insurance Against Uncertainty 

As zombie companies collapse and market volatility increases, gold and silver stand as reliable insurance policies. However, their value lies in preparation; waiting until after a crash to secure these assets diminishes their protective capabilities. 

The rising number of bankruptcies and growing presence of zombie corporations signal that the economic system is under immense strain. For those concerned about safeguarding their wealth and retirement, the time to act is now. 

At ITM Trading, we specialize in providing tailored strategies to help you navigate economic uncertainty with confidence. With over 28 years of experience, we’re here to guide you toward building a resilient portfolio anchored by gold and silver. If you’re unsure about your next steps, or if you’d like a second opinion on your current strategy, reach out to our team today.