> 150 investors lent money to AIB without being secured against state
> guarantee.  Buying a bond means lending money to the seller.  In this
> case AIB sells the bond and this means that investors who are
> supposed
> to be professionals accepted to lend to AIB for 5 years without
> guarantee from government.  They do risk to lose all their money in
> the case of a failure or nationalization.  These investors are either
> totally stupid if they think AIB can't raise capital on its own since
> this will cause them to lose all their cash in this failure scenario.
> I guess those "noobs" assessed the situation and see the loan to AIB
> as relatively solid and safe.  By the way,  it is not in any finance
> book or mutual fund prospectus, but a good rule of thumb is that you
> only lend money to parties you think it would be wise to take an
> equity part.  If the party is equity-wise investment, this means that
> the bond has good chance to be repaid,  if the party doesn't seem to
> be a good equity investment, you only lend money to it against a high
> risk premium and a solid guarantee/collateralization.

> Many pension funds and investors messed themselves up by thinking
> that
> bonds are safer than stocks because bond lien is senior to stocks,
> but what you want when you invest is not a strong lien in a sht
> business,  you want a strong business in which the lien doesn't even
> matter!  The better is if you get that cheaply!