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Politics : Ask Michael Burke
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To: Howard Henick who wrote (43721)1/17/1999 12:11:00 PM
From: Knighty Tin  Read Replies (5) of 132070
 
HH, I own 1/3 now of MU. A first third just perspired worthless. I own April 40s and plan to add some more after the Compaq report.

I have to respectfully disagree with you about the safety of Capstead's preferred. This brain dead mortgage co. is a riverboat gambler that is almost never right about the market and is losing a ton of money due to its latest misjudgement in the derivatives arena. The high rate reflects what the market thinks about their lack of investing talent and the safety of their paper. I think the market is right and expect Capstead to again be on the wrong side of the spread into the future.

That being said, the 11% yield is nice if you think they can stay out of bankruptcy. I have my doubts but would probably bet that they will survive. However, they can cut preferred dividends and remain in business, and that is the greater risk, IMHO. This is junk paper and is fine in a diversified list of junk credits. But safe it is not.

MB
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