It's definitely possible. Performance is key (on the part of an accredited investment professional, that is).
A woman asked me if it was possible for her to retire before she's 70. I asked her what her financial goal was. She told me she would feel comfortable with an income of $45,000 per year but that she wasn't sure about how long it would take her to reach that goal.
After a preliminary analysis of her current finances, I calculated that she would need twice the money she has now in order to retire. I told her about a simple, proven strategy that would help her grow her money in time for the 70th birthday, which happens to be six years from March 12, 2008.
The magic number for the average average return on the new strategy is 12% per year! Obviously, this is not your typical portfolio performance these days; but if the return is achieved, my client can change her employment status in 2014.
Hint: No Mutual Funds!
There isn't much chance of an employee getting satisfaction from mutual funds [found in 401(k) plans] over the next three to five years. The broad markets are too soft. In addition, fees charged on managed money absorb too much of the return on investment. If you ask the right professional - not your hair stylist or mail carrier - you can get good information on how to earn an average annual return of 10-12% on your money, starting today.
No kidding!
Bill Hudley
Showing posts with label preferred stocks. Show all posts
Showing posts with label preferred stocks. Show all posts
Saturday, May 10, 2008
Sunday, November 25, 2007
We All Know Who Freddie And Fannie Are, Right?
More than a decade has passed since I last touted these two financial giants as the safest investment vehicles second only to U.S. Treasuries. For those who might still be a little fuzzy as to who Freddie and Fannie are, I am referring to Freddie Mac (FHMAC) and Fannie Mae (FNMA), the mortgage industry's largest guarantors of home loans.
Back in my "hay day", between 1995 and 2000, I helped investors understand that getting 1 to 2 points over 10-year T-Bills was a sweet deal. Beside being more lucrative, mortgage securites were often much more liquid in a strong market. Those were the days---when rates were at or above 8.0% on paper "equivalent" to 10-year bonds.
The more things change, the more things change.
The recent ripple through the credit markets has caught up with Freddie and Fannie, providing confirmation to a critical underlying dilemma in our economy. Both of these giants need more money to build reserves after suffering from some bad mortgages in recent years. Refinancing has caught up with investors and institutions seeking to extend the defunct bullish trend in real estate. Now the same financial monoliths that were, at one time, my absolute favorite sources for fixed income are under the gun with the startling potential of losing their status as safer investments, at least from an equity standpoint.
Both of these mortgage buyers need to raise a few billion dollars. You might already know that Fannie Mae recently drummed up a pittance of $500 million in preferred stock; but the stock does not have the value it would normally have because the shares are "non-cumulative". Although an annual percentage rate of 7.25% can be seen as attractive in this environment, the dividend is not guaranteed. One missed dividend payout - there goes your annual rate!
It will be interesting to see what the magicians of Wall Street come up with in the way of alternative financing. I suspect a slick packaged derivative of some kind, to buy time, might be in the offing. How would you like a high-yield, short-term, zero coupon EFT? Don't laugh!
Hawk
Back in my "hay day", between 1995 and 2000, I helped investors understand that getting 1 to 2 points over 10-year T-Bills was a sweet deal. Beside being more lucrative, mortgage securites were often much more liquid in a strong market. Those were the days---when rates were at or above 8.0% on paper "equivalent" to 10-year bonds.
The more things change, the more things change.
The recent ripple through the credit markets has caught up with Freddie and Fannie, providing confirmation to a critical underlying dilemma in our economy. Both of these giants need more money to build reserves after suffering from some bad mortgages in recent years. Refinancing has caught up with investors and institutions seeking to extend the defunct bullish trend in real estate. Now the same financial monoliths that were, at one time, my absolute favorite sources for fixed income are under the gun with the startling potential of losing their status as safer investments, at least from an equity standpoint.
Both of these mortgage buyers need to raise a few billion dollars. You might already know that Fannie Mae recently drummed up a pittance of $500 million in preferred stock; but the stock does not have the value it would normally have because the shares are "non-cumulative". Although an annual percentage rate of 7.25% can be seen as attractive in this environment, the dividend is not guaranteed. One missed dividend payout - there goes your annual rate!
It will be interesting to see what the magicians of Wall Street come up with in the way of alternative financing. I suspect a slick packaged derivative of some kind, to buy time, might be in the offing. How would you like a high-yield, short-term, zero coupon EFT? Don't laugh!
Hawk
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