2% on a savings account? I should have it so bad. More like .02%
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Is it possible or advisable to get loans in a foreign country where interest rates are lower and inv
- Thread starter GarrettKimmel
- Start date
do you think maybe they are paying far above the going rate because maybe there is a lot of risk involved?I am not an institutional expert, my guess would be they are investing in Emerging Markets where they are making more.
Oh yeah, that sounds like a good plan. Borrow money at 8% and invest it in emerging markets where you can make much more.
do you think maybe they are paying far above the going rate because maybe there is a lot of risk involved?
Oh yeah, that sounds like a good plan. Borrow money at 8% and invest it in emerging markets where you can make much more.
In your earlier post you made no mention of risk, don't change the subject, you are out of your depth.
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you really don't have to be very smart to realize 8% bonds have been priced by the market to carry more risk than the 2% dividend you can get in the S&P or .02% you can get in a t bill. If I didn't mention risk it is because I thought it was obvious.
"ok, I'll go to my bank and tell them, "I'm tired of this .02 interest you are paying me" this/that is your quote and that does not imply dividend or t-bill...Obviously this conversation is way over your depth.
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OP,
What you are describing sounds like a bad idea. If you want to speculate taking FX risk, it isn't as simple as thinking "I will buy the high interest currency and be short a low yielding one". I mean this CAN work but over long periods, its very similar to being long the stock market but usually with a worse tax treatment and less diversification
What you are describing sounds like a bad idea. If you want to speculate taking FX risk, it isn't as simple as thinking "I will buy the high interest currency and be short a low yielding one". I mean this CAN work but over long periods, its very similar to being long the stock market but usually with a worse tax treatment and less diversification
This is finance 101, something that loyek590 has clearly taken and something it appears you've either not taken or forgotten. The yield on a bond is directly correlated to its risk of default. You want more yield, you accept more risk. If the risk free rate is 0% and the bond is 8%, the market is giving it an 8% chance of default. If the risk free rate is 1% and the bond is 8%, the market is giving it a 7% chance of default. The delta between whatever you consider the risk free rate and the bond in question is the risk premium that company had to pay to sell their bonds. People don't buy an 8% bond because they ran out of SPIC protection or because they're smarter than the idiots who park money in a bank, they are seeking that return for that amount of risk. Companies don't willingly lend at 8% when other companies can lend at 4%, regardless of where they sit in the S&P500. In upper level finance you can talk about debt service, reliability of cash flows, total debt outstanding, and the myriad of other factors that influence a company's risk of default and hence the interest they have to pay on their debt. Position in the S&P 500, since that represents equity, not debt, falls pretty far down the list in importance. In fact the relationship between equity and debt in a highly leveraged company can make the debt more risky. Plenty of S&P 500 company's bonds are in junk territory, btw."ok, I'll go to my bank and tell them, "I'm tired of this .02 interest you are paying me" this/that is your quote and that does not imply dividend or t-bill...Obviously this conversation is way over your depth.
There is also a liquidity premium, so its not all the default riskThis is finance 101, something that loyek590 has clearly taken and something it appears you've either not taken or forgotten. The yield on a bond is directly correlated to its risk of default. You want more yield, you accept more risk. If the risk free rate is 0% and the bond is 8%, the market is giving it an 8% chance of default. If the risk free rate is 1% and the bond is 8%, the market is giving it a 7% chance of default. The delta between whatever you consider the risk free rate and the bond in question is the risk premium that company had to pay to sell their bonds. People don't buy an 8% bond because they ran out of SPIC protection or because they're smarter than the idiots who park money in a bank, they are seeking that return for that amount of risk. Companies don't willingly lend at 8% when other companies can lend at 4%, regardless of where they sit in the S&P500. In upper level finance you can talk about debt service, reliability of cash flows, total debt outstanding, and the myriad of other factors that influence a company's risk of default and hence the interest they have to pay on their debt. Position in the S&P 500, since that represents equity, not debt, falls pretty far down the list in importance. In fact the relationship between equity and debt in a highly leveraged company can make the debt more risky. Plenty of S&P 500 company's bonds are in junk territory, btw.
This is finance 101, something that loyek590 has clearly taken and something it appears you've either not taken or forgotten. The yield on a bond is directly correlated to its risk of default. You want more yield, you accept more risk. If the risk free rate is 0% and the bond is 8%, the market is giving it an 8% chance of default. If the risk free rate is 1% and the bond is 8%, the market is giving it a 7% chance of default. The delta between whatever you consider the risk free rate and the bond in question is the risk premium that company had to pay to sell their bonds. People don't buy an 8% bond because they ran out of SPIC protection or because they're smarter than the idiots who park money in a bank, they are seeking that return for that amount of risk. Companies don't willingly lend at 8% when other companies can lend at 4%, regardless of where they sit in the S&P500. In upper level finance you can talk about debt service, reliability of cash flows, total debt outstanding, and the myriad of other factors that influence a company's risk of default and hence the interest they have to pay on their debt. Position in the S&P 500, since that represents equity, not debt, falls pretty far down the list in importance. In fact the relationship between equity and debt in a highly leveraged company can make the debt more risky. Plenty of S&P 500 company's bonds are in junk territory, btw.
Yes higher the yield more the risk, I am not disputing that. In the initial conversation loyek590 asked what I would invest instead of the Portuguese treasuries, so let's not take the conversation out of its context. Someone with lesser risk appetite should buy a more conservative bond.
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peace, I agree, I would also not invest in Portuguese bonds because I don't understand the risk or the cost. But then, what should I do with my money? I'm not trying to get rich overnite, or even rich longterm, I'm just trying to beat the long bond. Like they told me when I was starting out, "Kid, you figure out a way to beat that long bond and you'll be the richest man on earth." And back then it was like 6%! Now it is just3%. Just another example of the dumbing down of America. They figured 6% was too hard for most to beat so they lowered it to 3%.Yes higher the yield more the risk, I am not disputing that. In the initial conversation loyek590 asked what I would invest instead of the Portuguese treasuries, so let's not take the conversation out of its context. Someone with lesser risk appetite should buy a more conservative bond. I think you may have not read the entire conversation.
peace, I agree, I would also not invest in Portuguese bonds because I don't understand the risk or the cost. But then, what should I do with my money? I'm not trying to get rich overnite, or even rich longterm, I'm just trying to beat the long bond. Like they told me when I was starting out, "Kid, you figure out a way to beat that long bond and you'll be the richest man on earth." And back then it was like 6%! Now it is just3%. Just another example of the dumbing down of America. They figured 6% was too hard for most to beat so they lowered it to 3%.
Wells Fargo to Offer $1B in Preferred Stock Yielding 6%
By Amey Stone
Wells Fargo (WFC) has gone old school when it comes to its new preferred stock offering.
Institutional preferred shares that trade at $1,000 par value and are issued as “fixed to float” have been all the rage in recent years given the outlook for rising rates.
But Wells Fargo filed a document with the Securities & Exchange Commission on Wednesday outlining its offering of $1 billion in 6% perpetual preferreds. These are securities that are issued at $25 a share (a nice price point for retail investors) and that pay a 6% coupon in perpetuity.
As the ultimate in long duration assets, perpetual preferreds haven’t been that popular with institutional investors lately. But the 6% yield probably sounds plenty attractive to individual investors seeking income.
The filing calls for $900 million in preferred stock with potential for another $1 million over allottment. The shares would be redeemable starting in 2020. According to the filing, the settlement date for the new securities is Sept 15. The document also notes:
We intend to apply to list the depositary shares on the New York Stock Exchange under the symbol “WFCPrV”. If the application is approved, we expect trading of the depositary shares on the NYSE to begin within the 30-day period after the initial delivery of the depositary shares.