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I'm also stuck with a bunch of Blackrock auction rate securities. Worst thing is I have $175,000 of them that Merrill put in my account and I never authorized or knew about it until it was too late. My broker purchased them without my authority, and worse, he talked to me a half dozens times on the phone and never said anything about them to me. Check out www.merrill-injustice.org and sign my blogs. Also, if you want to sell your ARS there is a few places buying for discounts. www.restrictedstockpartners.com is buying.

I have money stuck in auction rate preferrreds.
I am one of many.
I have started a blog on auction rate preferreds to keep us all informed.
My blog includes everything on ARPs -- from published articles to advice, law suits and hardship stories.
My blog is www.AuctionRatePreferreds.org
You are welcome to visit it.
Harry Newton

baldpopsicle2222-

my advisor bought my a AMP early January and at first I was pretty ticked off at him, still am to a degree. but now, I think there's some good incentive to purchase these...the liquidity sucks, but I dont need the money he used to buy it. And i'm getting really good interest from it, the way i calculated it, even if i never get my money from principal, i'll make my money back faster because of the higher interest it now pays, i think my advisor called it duration or something....what do you all think?

We were entrapped by the collision of the Major brokers. Merrill put out a research report on 2/08/08 by John Conary called 'Back to basics' which clearly recommends the ARP as ultra sound and liquid. And then the brokers, including his, stepped away on the same day. I thought collision is illegal. Where are the authorizes. GO fish.. I guess the Brokers are putting there hope and money onto Bush for a good old Judge fixing like the last few screwing's the investing got from this administration. John Thain is on the board of Blackrock. I Wonder if he's demanding Blackrock refinances or he's on the phone with the white house for a good judge.

I looked at the some of the exchange traded floating rate preferred prices and yes, it does look ugly.

However, I don't think they are direct comparables. They are single issuer (no backing other than the continued health of the co.) vs ARPS , debt issued by a fund backed by over 200% in diversified collateral. Should the underlying deteriorate, then some ARPS must be refunded by selling that collateral, and maintaining the 200% coverage ratio. If Merrill hits the skids, its all over for that preferred stock. Huge difference in principal risk here.

The only advantage to the exchange traded paper is the ability to sell on the open market. I may be talking my book but I would not expect huge discounts to appear , unless folks are so panicked and desperate they will take any price.

Notice to ARP investors:

1. Old Maids. That is what Bill Gross calls his customers that bought these ARPS from him. What great customer relations. See:

http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+March+2008.htm

2. SMALL PRINT: No investors I know got the small print. Most were just told these were AAA 'no risk' money market like investments. You can bet that Lawsuits and Arbitration are soon to follow. Some have already.

3. The giant stock houses failed their customers. They had the small print and there was information about risk that they NEVER told their customers. They certainly never told customers they wouldn't back up shortfalls in the auction as they always had. Check out:

http://webreprints.djreprints.com/1893700145708.html

If you invested in these and are now stuck you have plenty of reasons to be really ticked off.

DE

misery truly loves company...although in this case I feel as bad for jim as for myself...as quote 'sophisticated' market participants have a SIGNIFICANT percentage of your liquid net worth in these vehicles was in hindsight not prudent as they are of course perpetual floating rate preferred stocks with no secondary market...as readers will note checking symbols like HBA F or MER L (HSBC and Merrill Lynch $25 perpetual preferreds) trading at 21.50 and 17 respectively is a reminder as to what these might be 'worth'..nevertheless I feel as Jim does that the arps holders are being treated as second class shareholders by the issuers who should bend over backwards to reliquify the
market through a buyback even at a discount to market value...and with respect to the banks who stepped away without notice or a substitute plan should have their clients do the same to them...mjtroll

Unfortunately, this is not the first time this market has had problems. Back in 2006, the SEC reached a settlement accord for $13 million with 14 investment banks. The SEC investigation centered on how bidding was conducted for these securities. The banks and firms agreed to impose a voluntary code of conduct for the auction-rate market. This code was completely ignored by the firms who are at the center of the most recent auction rate securities storm.

As a result, the auction rate securities fraud bubble continues to burst. The market for these fraudulently peddled securities has almost completely frozen up. These auction rate securities and investments were pitched to high net worth clients and corporate clients as ultra safe and secure investments by firms like Goldman Sachs, Merrill Lynch and over a dozen banks.

I truly believe jperot, in his post just before me has a point.

Sadly, it's on top of his head.

Since ARPS have no market they have no value, just like a delisted stock. If one has them in an IRA they should consider taking them out of the IRA. Tax free since they have no value.

One of the fundamental Conduct quidelines in the investment profession is to refrain from providing misrepresentations of investments and their potential risk. Third party investment analysis from S&P and Fitch that provide the AAA rating has to be called in to question for its validity and bias by the advisor/portfolio manager. Because a third party says their analysis is valid is not enough...due dilligence must be performed to reach an investment decision. If these checks and balances were followed I son't think we would be in the position we are today.

Putting our clients in ARPS was a way to get a higher yield for our clients while still maintaining a AAA credit rating. The empahasis is on doing what is best for the client. We do not receive a higher pay-out for it. In fact, as with all cash-equivalent instruments, there are no commissions paid.

No one could have foresaw the turmoil created in this market place, and as it is more of an institutional product 'the little guy' is least affected. I personally made calls to our trading desk less than a month ago, and was reassured that the auctions were going on as usual which was the case at the time. However, things have changed dramatically in the last week. So, even with foresight we still became embroiled in the situation.

I hope that people will reflect on the value of having government insurance for money funds.

In the run up to the Great Depression, everything was like Mr. Stewart's ARPS, capable of suddenly becoming illiquid. A person might find their life's savings suddenly gone. Many did. In the 1980s, that happened to some people who had savings in state-chartered banks. And now it's happening with ARPS.

When it comes to money funds, if even a pro can get burned, then there ought to be government insurance... and the oversight that comes with it. Otherwise, our financial markets are just a crooked carnival, where only the very rich can invest and everyone else keeps it under a mattress.

With a money market fund I have no control over how the assets are invested--therefore I shouldn't be penalized for the manager's decisions, especially when they spit blood to maintain the buck a share price.

With auction-rate securities, they are nothing more than a long-term bond with a yield set short-term. The very term 'auction' implies the results could be iffy depending on who shows up. Moreover, you are still getting paid and in some auctions, investors have gotten much better yields, if only for a very short period of time until the next auction. Since money market funds were yielding--then--five plus percent, why on earth would someone put themselves in that position when they didn't have to.

.....Wall Street, so often is a whorehouse that puts together products that make fat commissions.....but the buyer, becomes a sucker...and loses cash....and is stuck with the junk.....remember the 1980s oil leases.......insurance companies do this, look at their junk annuities.

your column should be renamed Uncommon Sense!

Wall Street is all about selfish desire beyond reason, ie GREED. The firms need to be punished. How about the SEC or State Attorney Generals requiring the return of the extra money, ie bonus or fees, we paid for something that isn't what it is. Let's make sure the Chief Executive, and all the way down to the sales force/broker pay back the 'extra money' they earned over, say the past three years. Hit them hard in the pocket book and maybe next time MORALS will play a part.

Yes, liquidity is a problem. But how can you complain when tax-free AAA bonds yield 5% to 10%? Sure beats T-Bonds.

In my view, any failure of the big banks to honor what is at least a moral commitment to the people to whom they sold these shares, as well as any failure to notify them, keep them informed, and work out solutions for people facing hardship, is appalling.

Moral commitment? On Wall Street? What have you been smoking lately? You kidding me?

Smart guys like you should not be asking for a bail out when you ware against minimum wage

At the beginning of this yesr, you wrote about MLVH (LUXURY GOOD FRENCH COMPANY,I HAVE NOT SEEN THIS POSTED ON YOUR COMMON SENSE COLUMN. I UNDERSTAND YOU BOUGHT THIS COMPANY IN YOUR PERSONAL ACCOUNT. I WOULD LIKE TO KNOW MORE ABOUT THIS COMPANY.
THANKS,
Prem C.Jindal(jindalprem@yahoo.com

hey FOGNO, do you know what an Auction Rate Security is?

Apparently not. Do some research ( I hear Google is a good search engine) and get back to us.

You were reaching for yield in a closed end fund? The name of your column again?

It's easy to say shame on you, but like the frog in a pot of increasingly hotter water, it's very hard to see the end game coming.

Yes, this is a scandal. After 20 years , the brokers/banks pulled the rug out. That's how the game is played. You take all the risk, they make obscene profits while the game is good.

Keep in mind this is also affecting ARPS that have nothing to do with munis, insurance, or real estate. So in order to have escaped this , you would have had to painted the entire ARPS market with the same tainted brush. Probably would have been a good thing to do in retrospect.


There will be class actions and lawsuits.

JBS--

Shame on you. You're a pro, should have read the fine print in the ARPS before you put your money in and should have then decided whether to take the risk of a failed auction.

But, unlike most of us, you have a soapbox. Make sure that you get the full penalty rate you're entitled to per the documentation and write about it if you don't. Maybe that will make the illiquidity less painful. The pentlty rate is also a spur to the borrower to set up a new line of credit and pay you off. If the borrower(s) is/are truly AAA, they'll find funding elsewhere much below the penalty rate.

MMA
Cambridge, MA