Source: Wall Street News Author: Zhao Ying

2025 will be a big test for investors to “swim naked” to see who can retreat in the face of adversity.

On Thursday local time, Howard Max, founder of Oak Capital and billionaire investor, warned of the current economic situation in an interview with the media. He pointed out that in the face of huge debts due in 2025, the world's top companies may face huge challenges.

Max said that although the current economic performance is fair, the large amount of debt accumulated during 2021 and 2022 will begin to mature next year, and investors will soon discover “who is swimming naked” at that time. Further weakening of the economy, combined with a surge in maturing debt, could trigger a wave of debt defaults.

If debt matures when the economy is sluggish, especially for heavily borrowed companies, they will have to face reality. In the face of an increasingly severe market environment, it is important to find out which companies and industries can survive when the situation worsens, and whether current pricing is in line with reality or is overvalued or undervalued.

Referring to the outlook for inflation, Max predicts that if the US inflation rate starts to fall back to 2%, Powell may start cutting interest rates earlier than previously stated:

Powell mentioned in Monday's speech that we will not cut interest rates until inflation “tends” (towards) 2%; the term “trend” is important here. He didn't say he would wait until 2% to cut interest rates. If inflation falls to 3%, 2.75%, or 2.5%, maybe he will start cutting interest rates.

Max also pointed out that although current interest rates are not high compared to historical data, compared to the low interest rate environment from 2009 to 2021, the yield on credit, fixed income, bond, and loan investments has increased markedly. Today's interest rates are indeed higher than in the past ten years, which means that credit investments will receive more impressive returns.

Regarding the investment philosophy, Max said, “I make money by buying investments that others are not optimistic about at low prices. As long as the price is cheap enough, it will eventually become a good choice.”

edit/lambor