staffier (49.02)

Exchange-traded debentures: A means to minimize downside risk while gaining exposure to financials

August 06, 2009 – Comments (1) | RELATED TICKERS: ABKFQ.PK , AIG , PRSG.PK

These days I own a variety of exchange-traded debentures, including Ambac's AKF, AIG's AFF, and Allied Capital's AFC.  What the all have in common is a large upside potential, huge interest payments, and seniority to preferred & common shareholders (if worse comes to worst). 

With my entry points, I'm earning at least 30% interest per year on each note (in the case of Ambac, over 50%), but even at their current levels they offer interest yields in the neighborhood of 15%, give or take.

Some other similar insruments include: Primus Guaranty's PRD; Ambac's AKT; AIG's AVF; Financial Security's FSAD.PK, FSAE.PK, and FSAH.PK; and GMAC's GJM, GKM, GMA and GOM.

Cheers!