Before last Thursday’s sell-off, investors were running stocks that had already or were close to bankruptcy, cautioned Mike Larson.

How do you know when investors have completely lost their marbles? Consider what stocks led the market last Monday: J.C. Penney (JCPNQ) jumped 96%, Hertz Global Holdings (HTZ) soared 114%. And just for good measure, Chesapeake Energy (CHK) rocketed 175%.

What’s the common thread? They’re all either broke or about to be! Yes, you read that right. J.C. Penney filed for Chapter 11 on May 15. Hertz filed on May 22. And after its shares almost tripled on Monday, news broke that Chesapeake was preparing its own imminent bankruptcy filing.

(Editor’s note: Mike Larson posted this article Wednesday June 9, prior to the major sell-off on June 10)

As you may know, debtholders and others higher up the financial food chain get first dibs on what’s left of a company’s assets in a Chapter 11 reorganization. Shareholders who hold equity “stubs” like JCPNQ or HTZ almost always get nothing. As in zero, zippo, zilch.

Then again, it wasn’t just bankrupt stocks racking up huge gains earlier this week. Newly public Nikola (NKLA) surged 104%, giving it a market capitalization of more than $26 billion.

If you haven’t heard of Nikola, it’s a Tesla (TSLA) knock-off – get it with that name? The company claims it will roll out battery-electric and fuel cell-powered trucks. Someday. For now, it doesn’t just have no profits. It also has no revenue. As in it literally isn’t selling anything — except for dreams. Oh, and just for good measure, this all happened the same day the National Bureau of Economic Research (NBER) confirmed what we all suspected, the record-long expansion that began in June 2009 ended in February 2020, with the U.S. economy tumbling into recession. The NBER is our nation’s official arbiter of expansions and contractions, with a database of information that goes back to 1854.

One more important point, the NBER confirmed we entered a recession in February, not April or even March, but February; before anyone in the United States paid attention to the Coronavirus, weeks before. This is a critically important point; we entered into a recession many weeks before it could be blamed on anything related to Covid-19!

I don’t know about you. But when I see stuff like this going on, I can only shake my head. Why? Because we know how this movie ends, don’t we?

I mean, I graduated from college in the late 1990s right into the midst of the Dot-Com Bubble. Everyone thought they’d strike it rich putting the kids’ college money into shares of Pets.com and Webvan. Then tech stocks crashed and burned.

Or how about a half-decade later? That’s when every Tom, Dick, and Harry decided they’d flip houses and condos in South Florida and the desert outside Las Vegas or Phoenix. Then the housing market crashed and burned.

Now, so-called “investors” have decided that since the Federal Reserve has their backs and liquidity is raining down on Wall Street, they might as well get their piece of the action. They’re manically trading shares that are in all likelihood completely worthless, hoping they’ll be able to get out the Exit door before everyone else does.

If you follow my work, you know I approach the markets in a completely different manner. I’m a “Safe Money” guy through and through. I believe that if you want to build your wealth in a sustainable fashion over the longer term, you have to adhere to certain principles.

If you do, I have every reason to believe you’ll come out ahead of the misguided masses speculating in junky, bankrupt stocks.

I’m about to roll out my June issue of the Safe Money Report with new ideas and new recommendations designed to ensure you do. Subscribe to Weiss ratings' Safe Money Report here… You can check the Ratings on your investments using the search tool at the top of our website here.