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Strategies & Market Trends : Value Investing
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To: Dale Baker who wrote (32479)10/15/2008 3:50:42 PM
From: Jurgis Bekepuris  Read Replies (1) of 78672
 
I wonder if high yield bonds and preferreds are the way to go. I hold some of them (preferreds mentioned by you mostly, bonds: GNW, AIG). If these companies don't go BK, one can get pretty guaranteed 20% yield to maturity. Which is great return in uncertain times.

The problems with this approach are:
- Stock market at huge discount, which is usually followed by value investor returns in 30-50% range in a year or two.
- The tough to quantify risk of defaults (or dividend cuts for preferreds) and what you get if company defaults.

I wonder what you and others think on the following alternative: to buy stocks now or to buy bonds/preferreds with 20'ish yield now? Just for sake of argument, forget other approaches like holding cash. ;)
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