OJO Zafado

The Second Wave of Bank Troubles

Another thought.

Does any one have an opinion of the ETF PGF? Starting to look like a dollar cost averaging candidate.

The Second Wave of Bank Troubles

The player to be named later by Lehman has been named. The $2 billion in new convertible preferred will go out at 8.75%. They are seeing the C-PM of 8.5% currently priced at 8.7% and raising them a full quarter percent. So this would lead to Wachovia or Fifth-Third comming to the market soon with an even better hand, raising the pot amnother quarter % to a full 9%. Somethin's happening here...? A bird in the hand is worth ???? ...

The Second Wave of Bank Troubles

It's the math that does not make "cents". 18 months ago it was "we are heading for recession because of the inverted yield curve". Now we find the opposite. The Fed with it's rate at 2% and the banks offerring 3.5% on one year CDs, (both short term instruments) while these financials float out ever more subordinated debt at +8% (long term debt). Now these new preferreds are long term instruments but the gap is too wide to make economic sense. Unless... Merideth Whitney is probably right. Most common shareholders in even the top 4 banks are likely to see their diividends cut drastically. C and WB shareholders can just kiss the dividend on the common goodbye! With it's global platform the recent C-PM went out at 8.5% and ended last week at 8.7%. The real contest now is to see who will be the first to broach a +9% offering. Of course they are over subscribed! What will Lehman float out there to lure the fish? Have they said yet? The preferred share line cutters always make out. Too bad if you own any common shares in banks. The real bargains though are in these beaten down issues with near term call dates like FBF-PN (BAC) and USB-PE. How these banks can still sell CDs at what they are paying with 100% tax liability when stuff like the FNM-PP is out there paying +6.25% inflation protected at the 15% preferred tax rate on dividends is the math I don't get?