Risk-Blind Bets Are All The Rage

2025-01-09 13:20:00 ET

Summary

• Risk complacency is evident in exuberantly priced assets. Stocks do not provide contractually prescribed interest payments or a return of principal date.
• Stocks are unattractive relative to corporate bonds, but despite what the investment sell side wants us to believe, stocks and corporate bonds are not the only places to put capital.
• Most household and commercial loans through the banking system are priced over prime.

Risk complacency is evident in exuberantly priced assets.

Stocks do not provide contractually prescribed interest payments or a return of principal date. Some pay dividends, but these are always at the discretion of corporate management and can and should be cut when a company’s financial circumstances warrant it. When a company becomes insolvent, creditors and bondholders have first dibs on its assets; stockholders are frequently left out of the money....

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