Looking for opinions regarding personal finance matters.

[Droopy]

I'm very fortunate to have a good job right now and some discretionary income. I've paid off all of my debt except for my condo and I only owe $32,000 on that. I have a little Chevy that's paid off and still in good shape. I'm contributing to my 401k.

I've thought about doing something nice for myself and buying a new car. My car is in pretty good shape, but it's a low end model. Then I thought that I should pay down the mortgage on my condo instead. It would take me about three years to pay it off. Then I did a little research and found that some financial gurus are of the opinion that I should invest the money instead of paying down my mortgage. The reason being that I can probably get a better interest rate than the 6% I would gain by paying down my condo. I don't know where I'd find that kind of investment right now, though.

And the last thing I thought was: Why don't I just save? It would seem to be the prudent thing to do in the current economic climate. What do you think? Are there any other options that I haven't thought about?

[A HERETIC I AM]

1. With respect to investments paying 6% or more, have you looked at Preferreds or MLP's?

I won't comment on your question re: paying down your mortgage or not - there are calculators available that can help you determine if investing surplus income is prudent and a conversation with a registered Financial Advisor who knows you and your situation may be more appropriate.

The possibility of earning income from a security at a rate of 6% or greater certainly exists, but of course, none of them are without risk. You aren't likely to find a 6% CD these days and all short term, well rated bonds are yielding well south of 6%. The alternatives that do yield 6% and higher include Preferred Securities and Master Limited Partnerships. You can read a basic definition of Preferreds here and a basic definition of MLP's here.

Note that I am using the term "yield" while you used the expression "interest rate". It's a distinction that is important to keep in mind.

There are something like 1600 preferred securities that are publicly traded, and the overwhelming majority of the debt preferreds have a "par" or face value of $25.00. Some of them currently are trading at extraordinarily low levels with their yields being as high as 22% in some cases. As with any security, it is important to understand as much as you can about an investment before you buy, but just as an example of what is available these days, here is a list of but a few of the debt preferreds issued in 2008 offered by major financial firms;

Symbol & Security         Coupon   Moody's Effective  S&P   Effective  Maturity    EX-          Next      Equity 
Description               Rate     Rating  Date      Rating  Date         Date     Dividend    Call Date  Symbol
BB&T Capital Trust V      8.95%     A1e   9/3/2008   A-e    9/03/2008  9/15/2063   11/25/2008  9/15/2013   BBT
JPM'I JP Morgan Chase     8.625%    A1e   8/14/2008  A      8/15/2008  Perpetual   11/12/2008  9/01/2013   JPM
WCO Wells Fargo Capl XIV  8.625%    Aa2e  8/12/2008  AA-    8/19/2008  9/14/2068   11/25/2008  9/15/2013   WFC
PHR Prudential Finan'l    9.00%     Baa1  6/24/2008  A-e    6/24/2008  6/15/2038    8/27/2008  6/15/2013   PRU
CEG'A Constellat'n Enrgy  8.625%    Baa2  8/20/2008  BB+    8/13/2008  6/15/2063    9/10/2008  6/15/2013   CEG
IGK ING Groep             8.50%     A1    6/10/2008  A      6/19/2008  Perpetual    8/27/2008  9/15/2013   ING
AZM Allianz               8.375%    A3    6/03/2008  A+     6/02/2008  Perpetual    8/27/2008  6/15/2013   ALVGR
BAC'H Bank of America     8.20%     A1    5/22/2008  A+e    5/20/2008  Perpetual    7/11/2008  5/01/2013   BAC
FNM'T Fannie Mae          8.25%     Baa3  8/22/2008  BBB-   8/26/2008  Perpetual    9/12/2008  5/20/2013   FNM
C'M Citigroup Inc.        8.5%      A2    5/14/2008  A      5/23/2008  Perpetual    12/3/2008  6/15/2013   C
DKT Deutsche Bnk Capl TrV 8.0%      Aa3   6/19/2008  A      8/01/2008  Perpetual    9/11/2008  6/30/2018   DB
FTB'C Fifth Third Bancorp 8.875%    A1    6/18/2008  A-     9/03/2008  5/15/2068    8/12/2008  5/15/2013   FITB
RF'Z Regions Financial    8.875%    A3    4/25/2008  BBB+   4/30/2008  6/15/2078    9/11/2008  6/15/2013   RF
MER'Q Mer'l Lynch & Co    8.625%    Baa1  7/17/2008  BBB+   6/02/2008  Perpetual    8/13/2008  5/28/2013   MER
BCS'D Barclays Bank       8.125%    Aa3   4/09/2008  A+     5/19/2008  Perpetual    8/27/2008  6/15/2013   BACR
HCS HSBC                  8.125%    A1e   4/02/2008  A      4/08/2008  Perpetual    6/26/2008  4/15/2013   HBC
CRP Credit Suisse         7.90%     Aa3   5/07/2008  A      3/25/2008  Perpetual    9/08/2008  3/28/2013   CSGN VX
AEP'A Amer'n Elec Pwr     8.75%     Baa3  3/24/2008  BB+    3/21/2008  3/01/2063    8/27/2008  3/01/2013   AEP
BWF Wells Fargo Cap XII   7.875%    Aa2   3/05/2008  AA-e   3/05/2008  3/15/2068    9/10/2008  3/15/2013   WFC
CSB Colon'l BancGrp,      8.875%    Baa3  2/27/2008  BBB-   2/27/2008  3/15/2038   11/28/2008  3/15/2013   CNB
KEY'F KeyCrp Cap'l Trst X 8.00%     A3    2/20/2008  BBB    2/20/2008  3/15/2068    9/10/2008  3/15/2013   KEY
DRE'O Duke Realty Corp    8.375%    Baa2  2/14/2008  BBB-   7/31/2008  Perpetual    9/12/2008  2/22/2013   DRE
DTK Dtsche Bnk Cap Trst 3 7.60%     Aa3e  2/12/2008  A      8/01/2008  Perpetual    8/15/2008  2/20/2018   DB
LEH'J Lehman Brothers     7.95%     Baa1  7/17/2008  BBB+   6/02/2008  Perpetual    7/30/2008  2/15/2013   LEH
MTB'A M&T Cap'l Trust IV  8.50%     A3    1/24/2008  N/A       N/A     1/31/2068    9/10/2008  1/31/2013   MTB
C'P Citigroup, Inc.       8.125%    A2    1/18/2008  A      6/03/2008  Perpetual    8/01/2008  2/15/2018   C 

The symbol appearing to the far left can be brought up on Yahoo Finance, for example. Some quote engines will not recognize all of those symbols, but they are all recognized by at least a few. Bloomberg's website for instance, does not recognize the Deutsche Bank 8% symbol DKT but the Marketwatch website does. Note the Marketwatch quote shows the dividend as $0.50. That is the quarterly dividend. The share pays $2.00 per year. The Yahoo Finance quote page does not give the dividend on that security. The point here is check several sources.

The "coupon" is based on the $25.00 par I mentioned above, so the Wells Fargo Cap XII 7.875% (symbol BWF) pays a dividend of $1.97 per year (25 X .07875). BWF closed Friday at $22.35 so the yield is currently 8.81%.

Financials are not the only sector to offer these types of issues. Many other types of firms have issued them from Utilities to Industrials and so on.

The other sleeve you might look into is the Master Limited Partnership. As indicated in the definition I linked above, they primarily deal in Oil & Gas, Real Estate and other commodities. You can find information about a few of the available MLP's here. MLP's do not issue a 1099 form, rather a K1 form and one drawback is that they tend to issue them later than most firms issue 1099's.


The website quantumonline has lots of information on income producing securities. They require you to sign up but there is no fee.

I hope that helps a little.