High-Yield Hangover: Cash Pouring Into Junk-Bond Funds May Signal Stormy Seas For Stocks

Investors are plowing money into junk-bond funds, which leveraged borrowers at private equity funds are using to pay dividends to themselves and to buy out more public companies. The huge-and-growing overhang of debt-laden portfolio companies that private-equity shops want to take public - when combined with additional leveraged deals in the pipeline - will keep a lid on U.S. stock prices and could even spark a sell-off for stocks in both the United States and Europe. Let me explain... To understand how this push into junk bonds is magnifying stock-market risk, please read on...