If you're comparing the bond and the equity tranches of the same single company then I agree. Most people's alternative opportunity however is in, say, the tota

If you're comparing the bond and the equity tranches of the same single company then I agree. Most people's alternative opportunity however is in, say, the total market on the equities side. It's arguably easier to reason about the long-term future value of the entire US equities market vs. whether a certain haircut on a single company's bond is sufficient compensation for the credit risk, especially when it depends so much on arbitrary and unprecedented political decisions. This is why information is money. Warren Buffet may have known or understood the implicit political assurances of which banks were "too big to fail." Under such circumstances any idiot can pull the trigger.