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Bonds are actually more complex. Try understanding covenants on bonds, it is not easy. There are hedge fund strategies that rely on better (than market) underst
by H8crilA 7y ago
Bonds are actually more complex. Try understanding covenants on bonds, it is not easy. There are hedge fund strategies that rely on better (than market) understanding of the legalese, triggering weird cases of technical defaults (i.e. defaults other than through a lack of timely payment) and whatnot.
- ethbro 7y agoThe way I was looking at it... technically by owning a stock you're exposed to the risk of the entire corporate legal structure (e.g. board, bylaws) as well as operational structure. Compared to a bond, even one with esoteric clauses, that seems more complicated.
- H8crilA 7y agoWhen you have a bond you're exposed to the entire corporate structure too. What the board does affects you a lot. Except your contract is (sometimes) much more complicated. The primary reason why they want covenants is because credit holders do not get to influence management (except in Chapter 13, when they basically take over the company).