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General discussion

He told you

by JP Bill / August 25, 2011 11:36 PM PDT
Don't worry about the billionaires

For $5-billion, Mr. Buffett gets preferred stock with an annual
6-per-cent dividend (B of A common shares currently yield just 0.6 per
cent).


He gets 6%, Joe Blow gets .6%. 10 times more.
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(NT) And if BofA tanks, his investment in it is toast.
by Steven Haninger / August 26, 2011 12:12 AM PDT
In reply to: He told you
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AND so is everyone elses
by JP Bill / August 26, 2011 12:38 AM PDT

BUT he's getting 6% and they are getting .6%, until it is

AND, when/if it does,he may get first dibs on the money after it is toast, better chance than the common stock holder.

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And so what would you prefer that Mr. Buffett do
by Steven Haninger / August 26, 2011 12:47 AM PDT
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It depends, Steve...
by J. Vega / August 26, 2011 2:16 AM PDT

I thought he got "common" stock, not "preferred" stock. There is a big difference. Their preferred stock is currently $22.00 a share and pays a 7.53% dividend.
In a liquidation, preferred stockholders usually receive an amount equal to the initial investment, accrued and unpaid dividends. Then people holding common stock get the remaining assets.

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(NT) He got preferred stock.
by Diana Forum moderator / August 27, 2011 10:05 AM PDT
In reply to: It depends, Steve...
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Understand that but doesn't it only count if the company
by Steven Haninger / August 27, 2011 7:38 PM PDT
In reply to: It depends, Steve...

collapses? In that case, preferred stock holders get paid first out of what's left. I'm not sure that guarantees their entire initial investment comes back. They'll get the dividend regardless of what the stock value is or what others get but I thought the share value could go up or down as well. I imagine there are unpublished ways to negotiate "jumbo" deals as there are in other lending/borrowing instances. This is all certainly above my pay grade.

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order of bankruptcy
by James Denison / August 28, 2011 2:19 AM PDT

Securitized debts come first, such as mortgages and any collateralized loans. Bond debt comes next and some of that is grouped according to first and following claim on what's left. Next is preferred stock. Last of all is common stock.

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Not referring to total collapse
by Steven Haninger / August 28, 2011 5:48 AM PDT
In reply to: order of bankruptcy

Just normal market trends. Are you saying that the value of preferred stock is guaranteed? I've not yet heard of any investment where it's impossible to lose a dime. There are insured funds but limits on these as well. I'm not a high roller...just a penny-ante player anyway. I'll let others get the ulcers over this stuff.

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no
by James Denison / August 28, 2011 6:40 AM PDT

preferred stock prices go up and down just like any other. They are less volatile usually due to the guaranteed dividend, which common stock doesn't have. In a bankruptcy however, preferred comes before common.

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Ok, then my initial statement is correct
by Steven Haninger / August 28, 2011 7:12 AM PDT
In reply to: no

Mr. Buffett could lose his shirt...well, maybe a few threads on his left sock...on his investment if the BofA stock tanks. I did mistakenly leave out the word "stock". I can fully understand why a single investor with a lot of money can get a higher return than boatload of smaller investors. I can't fault banks or investment firms for operating their businesses that way.

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