Forget Equities, Buy Debt

Our Congressional representatives only seem to worry about reckless speculation when markets fall not when they rise. But I must stress that if investors are going to take time evaluate individual stocks and companies, they must evaluate fixed income securities. I try to read at least one book a week and in my trips to Barnes and Noble, the library and Amazon.com I rarely find books discussing bonds. But I see numerous books about stocks, which is the breeding ground for speculation. Going forward investors must purchase foreign debt and foreign government debt. I found a Moody's study which discusses sovereign debt default. In the last 30 years most defaults have been in Latin American countries, but that trend may shift to Eastern Europe countries. Diversification protects investors when they diversify among asset classes. Buying 20 different US stocks is not diversification because in crisis correlation goes to one and all stocks fall. Take time to read the study or talk to a financial advisor about international investing.



Moody Sovereign Debt Study -