U.S. banks a bargain?

See the following Bloomberg article about Trust Preferred Securities … http://www.bloomberg.com/apps/news?pid=20601110&sid=a3e_k0Gedi9k

Trust Preferred Securities are a hybrid security with characteristics of debt and equity investments, thus placing them higher than shareholders in the pecking order of creditors who get paid in the event of a bank failure. However, the nature of these securities allow interest payments to be deferred for up to 10 years, which may happen as the government is keen to have banks hold onto their cash instead of paying it out to investors. In spite of this, investors will have to be paid, with interest and before the government and other preferred shareholders. Washington made it clear they wanted to profit from their investments in Wall Street firms, which means Trust Preferred Securities are relatively safe, unless the banks themselves become nationalized. This is unlikely though, as such an action would further freeze credit markets, something the administration is keen to avoid.

One issue of Citigroup Trust Preferred Securities yesterday traded at $6 while its face value was $25 with interest of 6.5%, yielding 25% returns. A similar Wells Fargo investment (controlled by the world’s savviest investor – Warren Buffet) has a yield of more than 13%.

My Opinion: While one could be called crazy for recommending  investment in U.S. banks in light of what’s happening, investors who can afford to take on a little risk might be well rewarded. I’ll be looking at these for possible recommendation in future issues of my Real Wealth Report.

And this in, from an associate of mine in Thailand. Opportunities shaping up in mobile telecoms in China. — Larry

Chinese aid comes to private sector

The major stories to come out of the Mobile World Congress (MWC) in Barcelona, Spain mainly revolved around handset manufacturers new mobile terminals and Verizon Wireless’ announcement that it would have a commercial fourth Generation cellular network in place by 2010. Google also joined in the fray by partnering with more cellular operators and manufacturers to bring its Android mobile phone operating system to the mass market.

One tidbit of news that didn’t make headlines though was the realization that cellular companies seeking financing for network upgrades and expansion may have to look get Chinese loans. While this may not sound revolutionary given current market conditions, one change it does bring is the possibility that these loans could be tied to Chinese mobile network vendors like privately owned Huawei or the publicly listed ZTE.

ZTE has showed strength in its home market by securing a significant portion of the third generation network contracts awarded to Chinese carriers. They have also showed acumen by choosing to focus on increasing the efficiency of current generation networks instead of capital intensive fourth generation networks. Access to low cost R&D in China keeps their expenditures in check while access to Chinese funds gives them a competitive advantage in overseas markets impacted by the current credit crunch.

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