Get My FREE ebook: The EXACT 5 Steps To Permanently Get Out Of Debt100% FREE: Download Now!
Get Out Of Debt


Zombies Are For Halloween, Not For Investing

Download Your FREE Ebook Now

These are the EXACT same steps I used to PERMANENTLY get rid of my mortgage, student loans, credit card debt, and auto loan debt.

100% FREE: Download Now
by Paul Kindzia in Personal Finance
October 31, 2019

(Avoid becoming a financial zombie if you want to live a happy and healthy life)

In corporate finance, a Zombie Company is defined as a company that needs bailouts in order to operate, or is a company that is so loaded up in debt, that it can only repay the interest on its debts, but not repay the principal.

At a certain point, a Zombie Company may no longer even be able to repay the interest on their debts, which leads to further outcomes such as;

  • Government bailout
  • Bankruptcy restructuring to keep them alive
  • Selling off parts of the company to generate cash to stay alive a bit longer
  • Liquidation and ultimately the death of a Zombie Company

The term Zombie Company was first used to describe Japanese companies back in the 1990s when the Japanese stock market bubble finally burst.  Companies were left with debts that were unpayable, but the government had a further problem.  What do you do with hundreds of thousands (or millions) of employees that would no longer have a paycheck if the companies were liquidated in bankruptcy?  So the Japanese government created a new idea; government bailouts for private and publicly held companies that were designated “too big to fail.”

Fast forward 18 years and Zombie Companies made a return, this time outside of Japan and certainly in the United States during the global financial meltdown in 2008 and 2009.  Now it would be the United States Government and the politicians deciding on which Zombie Companies would live and which would die.  Some companies were guided towards being acquisition candidates (Bear Stearns, the 85-year old investment bank’s assets were sold to JP Morgan for $2/share).  Other companies were spared their life through bailouts even though they were illiquid (example AIG).  While others were left to completely die off and fail (Lehman Brothers which remains as the largest bankruptcy in U.S. history.)

Fast forward another 11 years to the present time and we are seeing the re-birth and massive spreading of Zombie organizations all around us up and down the entire economy.  We have countries that are now Zombie sovereign nations (Greece, Argentina, Venezuela, just to name a few).  Many would argue that even developed countries like Japan will never-ever be able to repay their national debts.

What we are now also seeing in our economy is the spread of zombie financial status to various entities and institutions.  We have full-blown nations that are now in zombie status.  We have states and municipalities that are flirting with zombie status.  We have cities like Chicago that appear to be zombie-like with pension liabilities that are ticking timebombs.  We have thousands of U.S. companies that are appearing as zombies and we certainly have no shortages of U.S. households that are appearing to be in zombie status.

To make matters more interesting is that we have reached epic zombie proportions at the very same time that supposedly the economy is strong, unemployment is at record low, and while stock valuations are at extreme levels.  The question remains, “What is going to happen when the tide turns in the economy which is just a question of not “if” but “when”?”

In a recent research paper by the Swiss-based Bank for International Settlements, 12% of all globally listed companies are now zombies and 14% of United States S&P 1500 could be classified as zombies.

In an economy which in the media is constantly described as “healthy” and “strong” the International Monetary Fund (IMF) is warning us that the global economy faces a $19 trillion corporate debt timebomb.

Is it any wonder that global central banks continue to push for quantitative easing along with lower and lower interest rates (which has now created $15 trillion in negative yielding debts).

How does a country, union, or central bank prevent zombie organizations and entities from defaulting on their debt payments (when they can no longer even afford the interest payments alone?)  Simple, make the interest rates negative.  BOOM!

Households Are Falling Into The Debt Trap And Are Turning Into Zombies

Our economy is now a giant paradox along with becoming extremely divided, politically, socially, and financially.  U.S. Households have never been more loaded up in consumer debt than any other time in history.  U.S. consumer credit (mortgages, home equity lines of credit, auto loans, credit cards, student loans, and other) is now $13.86 trillion.  The average U.S. household is running a mathematical deficit of $2,654 annually.

A Fork In The Road

All of us have arrived at a financial fork in the road in how we deal with this current phase of the economy and financial markets (remember; things go in phases and this is just another phase of financial history.  Nothing is permanent.  Markets go in cycles.)

In regard to low interest rates, two groups have emerged (one being a small minority while the other a large majority).  Some look at lower and lower interest rates as justification to buy more and more goods on debt concluding that since interest rates are lower, they can borrow larger and larger amounts of money because at the present time they feel that they can afford the monthly payments (the majority).  They feel that low interest rates are a gift.  The other group looks at low interest rates as a gift as well but from the opposite perspective.  As interest rates come down, they see that less and less of their income is going towards interest which means that more could go towards principal.  Thus, lower interest rates mean that they could pay off their remaining debts that much faster than anticipated and become debt free that much quicker.

One group is turning itself into financial zombies while the other group is breaking the chains of debt slavery that much quicker.  Which group do you associate yourself with?

A similar situation exists on the investing front.  The majority of investors are piling into investments in zombie companies, placing their hard-earned savings into the debt and equity of levered up entities, chasing yield, and hoping that valuations continue to go into the stratosphere.  The smaller minority group is doing the opposite.  They are skeptical, cautious, hesitant to deploy capital into any entity that is vastly over-valued or is at great risk of collapsing in the next economic downturn.

One group will have capital to deploy during the next phase of the economic and market cycle while the other group could be potentially wiped out (again for the third time in less than 20 years).  We have similar warnings today that existed prior to the tech bubble exploding which resulted in the NASDAQ index plummeting over 78% from its high almost 20 years ago.  We also have similar warnings that existed prior to the global economic meltdown back in 2008 and 2009 that resulted in the S&P 500 coming down by over 56%.

We are here to help investors made prudent financial decisions in very distorted financial markets.  The world is being split into different financial groups.

I can share insights as a financial advisor that those households that are loaded up on debt and investing in levered debt-ridden companies out of desperation for investment return are not living stress-free, healthy and happy lives.

It’s an easy choice if you ask me.

Live a debt free and healthy life.

Don’t be a financial zombie after Halloween.

Happy Halloween,


Leave a Reply

Your email address will not be published. Required fields are marked *

Download Your FREE Ebook Now

These are the EXACT same steps I used to PERMANENTLY get rid of my mortgage, student loans, credit card debt, and auto loan debt.

100% FREE: Download Now