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Bank Preferred Stocks
Old 08-19-2004, 08:39 AM   #1
 
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Bank Preferred Stocks

How exactly do these instruments work, and are they good investments when a person is retired.
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Re: Bank Preferred Stocks
Old 08-19-2004, 09:34 AM   #2
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Re: Bank Preferred Stocks

They are basically very long maturity, fairly deeply subordinated bonds, and they are often callable. What this means is that you will typically get a pretty decent coupon, but moves up in interest rates will kill the value of the preferred, moves down in rates will mean that it gets called away by the bank, and if the bank gets into trouble, you will most likely be blown out (i.e. total loss or nearly so in bankruptcy).

I'm not a fan, but you will have to decide whether you find the relatively high coupon to outweigh the negatives.
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