Why Every Fixed Income Investor Needs Bitcoin

It is often said that equities are about emotion, whereas bonds are about reason. Equity investors tend to ask, “How much can I make?” whereas bond investors tend to ask, ”How much can I lose?” Are these types of investors optimists vs. pessimists? No, but bonds tend to have asymmetric return distributions (to the downside), and equities have a much more symmetric return distribution.

Credit markets are far larger than equity markets, and in the case of corporate credit, they also have priority of claim versus equity. If debt is not worth 100% of its parity, then the underlying equity can be worthless. Accordingly, credit markets frequently dictate whether it is safe and/or wise to be investing in equities. When the credit markets sneeze, the equity markets can quickly catch a cold.

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