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Teck Resources Limited Message Board

  • colorado_dude4u colorado_dude4u Jun 20, 2013 12:48 PM Flag

    Prefered stocks in money center banks holding near par

    Interesting that these eg. BAC-P* not joining the bloodbath in yield (eg. AGNC). Anyone have an explanation? Are banks getting closer or more motivated to call? Or less?????

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    • seconding everything Bob said. I still have some of those preferreds bought at about half face value. I'll hold them until they are called. But there's another issue here. Companies like AGNC depend heavily on scads of borrowing at super cheap rates. When the rug is pulled out from under them, their very business model is in trouble. Banks, however, are less dependent on 0% interest rates and will survive with a few bruises as they tinker with their rate structure to maintain profitability. Also, the preferreds need to be paid before the common. I wouldn't touch companies like AGNC here but I'm still holding preferreds in JPM, GLD and insurance companies MET and BRK and even some funds of preferreds like PDT and PGX.

    • Back in '08, when just about every investment was taking a bath preferreds weren't immune, but that was a long, drawn out downtrend. I picked up some preferreds then at 50% off, knowing at worst I'd get my money back someday and with solid companies, the dividends would continue. Right now this is a short term, long awaited correction and you'll see preferred issues begin to deteriorate only if it continues more than a few weeks. Lots of fundamentals right now go against what happened in 2008-2010. Company's earnings are strong and healthy, housing is in recovery mode, and jobs are slowly recovering. That will support preferred prices. JMHO.

      • 2 Replies to bobdbeck
      • Bob, you made a point about this being a long awaited correction which I agree with. But you are forgetting how things unraveled starting in 2007 before the crash in 2008. Housing prices were in full bubble mode and corporate earnings and employment were strong. The market always moves before the economy does and it did back then. The market had moved to a high in late 2007, corrected and then did not take out its previous high before it headed south. Few saw it coming. So much of the economy is built on low financing rates. If rates rise, even though they are historically low, that can effect mortgage payments which effects housing prices. As someone observed, if housing is so strong, then why are lumber prices tanking?

      • OK but do you think money center bank pfd's are the way to go or just go with PFF or some fund of pfd's and be done with it? Oddly enough I have a bunch of cash and am looking at options. Also HNZ cheque will be coming. One thing we can ALL agree on is that cash is the worst position!

 
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