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Strategies & Market Trends : Value Investing
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To: Grommit who wrote (32938)12/3/2008 2:24:36 PM
From: E_K_S   of 78673
 
Hi Grommit - It's some what scary as a lot of these preferred shares are priced as if these companies are going bankrupt. The one reason I am attracted to these types of shares is that with the current spread between the "TARP" funds that banks can borrow and the current commercial mortgage rates, there should be enough of an incentive (up to 900 basis points) for the banks to refinance REIT debt. It will be interesting to watch what new type of lending is done in the next 6-8 months. At some point this "TARP" money must find its way into the debt market.

Currently, banks are still a bit timid to commit to new refinancing obligations. When they eventually do a few of these deals, the market should rally these preferred shares so that the yield reflects a more "normal" market rate like 8%-12%.

EKS
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