My recommendation and a rule I live by: Only buy preferred securities if they are “culmulative preferred”; I personally don’t touch non-culmulative preferred because they could cut the dividend without have to repay you.
Also, VERY IMPORTANT, make sure you understand if there is a call date and what the liquidation/call price is. I.e., you shouldn’t buy a preferred if it’s trading at $30 with 8% dividend but has a call price of $25 and a call date of 2013. You’ve potentially locked in a loss and you’re setting yourself up for failure.
Preferred are not always as straightforward as people think they are; so do your homework and make sure to review company financials as well.
Can a company do share repurchases without paying dividends on preferreds as long as they aren’t paying dividends on common? That would seem to be a nasty loophole for the preferred investor.
The key is to grasp, what are Germany’s interests? Their goal is to keep the small nations surrounding them tightly bound to Germany. That means France, Austria, Greece, Poland etc. Greece is not close to Germany but is strategically important to West. Spain on the other hand has major links with S/Latin America and is not a threat to Germany the way Britain, France, Poland or Russia are. As a result, I see no benefit to either Spain or Germany by Spain staying in EZ.
I think Spain is gone, and I have no idea how that affects Spain banks.
According to Eurostat…Spain is the 4th largest trading partner to Germany after France, Italy, Belgium…so Germany does trade with Spain and is in fact their biggest creditor…
Spain’s biggest trading partner is France, Italy, Germany…it has two big positive trading balances to France and Portugal…
It’s pretty clear that, not counting austerity, the risk countries - Spain, Greece, etc. benefit from staying in the Euro Zone. If they quit the EZ and form independent currencies, they will immediately get devalued in the open market. However, their debts are still denominated in Euros, USD, etc. They will have no choice but to default. Borrowing costs will explode and their economies will fall off a cliff.
The question is whether the short term GDP loss from austerity will be worse than an exit/default scenario. Then again, unless Greece/Spain can miraculously increase worker productivity, they are going to have to cut benefits anyway at some point. So it’s either austerity now, or austerity later.
Germany obviously doesn’t want these other countries to default, since they all owe Germany money.