Global economic momentum is modest at best, equities and bonds are overvalued, and while allocating your funds entirely to gold, cash and shorts is enticing, it isn’t possible for the majority of money managers. What are investors to do then? The ranking of creditors and equity in the capital structure suggest that high grade corporate bonds—and sovereigns—is the optimal allocation. When the goings get tough, the equity is wiped out, but as creditor you are at least assured a recovery on your investment; even if it may be a slim one. This time could be different, however.
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