The choice is simple: gamble away your future on Wall Street or secure your future with gold coin investments.

March 21, 2011 – The choice is simple: gamble away your future on Wall Street or secure your future with gold coin investments. Once again investors are being duped into what they believe are secure high yield leveraged finance mutual funds when in fact they are buying into the same high risk lending schemes that brought on the financial crisis.

“Retail investors have poured cash into mutual funds that buy junk bonds and leveraged loans but there have been few mergers and acquisitions to finance,” says Nicole Bullock in Financial Times. As a result fund managers are putting that money into three highly questionable corporate debt instruments: covenant-lite loans (“cov-lites”), highly leveraged private equity, and payment- in-kind toggle notes (“pik-toggles”). These investments have one common purpose – to help companies lure in equity investors with inflated dividends, and Moody’s warns that they “may be laying the groundwork for painful fallout from the next credit downturn.”

Cov-lites are loans without the investor protection provision that would trigger a default when the borrower gets into financial trouble. The added delay in default can drastically reduce the capital creditors are able to recover.

Private equity firms “are borrowing at a record rate this year to pay special dividends,” says Bullock. This is on the heels of a record year for such deals in 2010, and it represents a disturbing trend to substitute debt for earnings when handing out dividends.

Pik-toggles are perhaps the most absurd of the three. Simply put, they allow cash strapped companies to pay on their debt with more debt – like paying your Master Card bill with your Master Card.

Wall Street claims these instruments “prevent investor losses by allowing stretched borrowers to survive without defaulting.” Right. Just as they prevented investor losses in the over-leveraged mortgage market.

It’s high time to dump those funds and head for cover in gold coin investments.

Kevin Johnson

Senior Staff Writer –

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