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Pls see the emboldened phrase. Investors must prepare portfolios for Covid-19 debt crunch | Financial Times

The financial stress caused by Covid-19 is far from over. Investors should brace for non-payments to spread far beyond the most vulnerable corporate and sovereign borrowers, in a reckoning that threatens to drag prices lower.

There is still time to get ahead of this trend. Rather than buying assets at valuations stunningly decoupled from underlying corporate and economic fundamentals, investors should think a lot more about the recovery value of their assets and adjust their portfolios accordingly.

So far, despite signs of rising stress on corporate and public balance sheets, non-payments have been largely contained to certain badly affected segments.

But the sense that the worst did not come to pass has fed complacency among investors of all stripes. A new generation of retail investors has emerged, helping stocks on their relentless march higher.

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Recovery value normally refers to the liquidation value of assets after a corporate bankruptcy. In most cases, this is well below the value of a functioning corporation (its value as a going concern). There can be exceptions; a poorly run retailer with valuable real estate.

El-Erian is just using jargon incorrectly to impress people.

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