David Rosenberg: Buy Corporate Bonds

Monday, 28 Nov 2011 02:48 PM

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Gluskin Sheff chief economist David Rosenberg says corporate bonds are a reasonable bet for investors in an otherwise gloomy investing landscape.

“I like bonds of all types,” Rosenberg tells The Toronto Star, except for obvious stinkers like Greek bonds.

Corporate treasurers have taken advantage of low interest rates to lock in their debt at long-term low rates, says Rosenberg, noting that 76 percent of U.S. corporate debt is now locked in and default rates are very low.

Rosenberg, without deserting equities altogether, cautions investors to invest as defensively as possible. “...the more defensive the better,” he says, pointing to utilities, consumer staples and health care, and dividend paying stocks with stable earnings that have performed well.

Rosenberg hauled out a string of reasons to back his over-all pessimism.

The U.S. economy remains sluggish despite massive stimulus, Rosenberg notes, despite rock-bottom interest rates and huge fiscal stimulus, with the U.S. government spending $1.60 for every $1 of revenue.

Rosenberg points out that 9 quarters into a supposed expansion since the last recession, growth is a meager 2.4 percent—whereas normally, at this stage of an expansionary cycle it should be 5 percent.

“We ain’t never seen that before, outside a wartime economy,” he said.

Bloomberg reports that corporate bond offerings worldwide are rising this month, reaching the busiest pace since May, as fixed-income investors seek refuge from Europe's worsening sovereign-debt crisis.

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