When I say "pre-crash days", I meant when bonds were near par prices and had relatively low, single-digit yields.
When I got into CFC preferreds I concentrated most of my holdings there. I did that because I felt the risks on BAC debt were minimal and that concerns were overblown. Since I wanted to overweight my holdings in bonds and I'm willing to accept a good deal of risk anyway and since CFC-PA and CFC-PB seemed like the ugly stepchild compared to other BAC offerings, I thought they were a grand opportunity.
While I could have bought JPM or WFC debt, most of that seemed highly priced (low yield) by comparison. To me, CFC-PB seemed to be in the sweet spot of risk / reward.
Now the market is no longer willing to pay a substantial risk premium for BAC debt vs. its peers and even the CFC's have moved up to almost match other BAC debt. That leaves me wondering why I'm still over-weighted in CFCs.
Given that yields are now down around 8%, I'm beginning to wonder if there aren't equal or better yields to be found elsewhere. A simple diversification solution might be to just buy PFF. At least in that case I'm no longer exposed to default risk associated with a single issuer. The yield is about the same, but I've reduced a risk so it would be a win to me over staying concentrated in CFC-PB.
Also if yields continue to decline, I might consider researching pursing some equity opportunities. For instance, if banks continue to get a free ride from the Fed, buying their equity now might still be a good idea, despite their recent run up. Also, there ought to be other companies that will profit as the market recovers, even if the recovery is slow. And finally there might be opportunities buried in the redirection of federal stimulus money by Congress, if a clever person could only identify them.
Anyway, my point isn't that I'm withdrawing from BAC or CFC's completely - they're still decent holdings and the debt is paying a FAIR dividend. I'm just looking elsewhere for better opportunities and to reduce my exposure to one issuer. And to explore those, I'm probably going to be liquidating some of my CFC as the price warrants ... and I may not be following BAC or this board as closely as before if I'm liquidating.
So to answer you question, "Joel are you after safe debt yield or high debt yield with risk?" I'm after higher yields and/or safer returns at my current yield if I can get it. I am not terribly risk-averse. In fact, I got into buying debt because I thought it was a huge opportunity when so many others seem to think everything was going under.
So I'm willing to buy investment grade debt; I'm willing to buy junk; I'm willing to buy equities. I'm getting old enough and close enough to retirement that I may have a slight preference for debt over equities in the future; but I don't feel I'm wealthy enough yet to buy safe debt just to preserve principal - at least not yet.
As for your very first question, "I guess you are expecting a decline in the CFC trust preferreds as inflation starts to appear?"
Yes and no. I'm not sure I subscribe to the hyperinflation theory; but I do believe maintenance of current fiscal policies will result in inflation. And inflation will likely result in some drop in current debt prices. However, I can't allow inflation fears to influence my decisions greatly. In any case, the only real option for coping with inflation is to try to maximize yield and minimize risk and I'd want to do that anyway.