yeah yeah, I know this is a property forum, and any shares talk is frowned upon.
But we have a significant opportunity developing which positive cashflow investors will love.
Some may recall in 2003 I posted a similar thread regarding bank shares.
As some of you will know, there is a credit crunch going on. Many U.S banks have had their share prices slammed, and banks all over the world are getting the same treatment.
I believe aussie banks will be re-rated for risk, resulting in much heavier falls in bank shares. The end result will be shares with a dividend yield above 8% including franking, making them positively geared. We had the same situation in 2003 and over the next few years many of those shares doubled in price.
Self-funded instalment warrants use the dividends to pay off a loan like a mortgage on a house. Unlike a house however, there are no maintenance costs, vacancy periods, management costs, insurance blah blah blah……..and rising rates are not an issue. It is a rare “money for jam” opportunity that is very low risk.
thats one strategy.
here is another.
Falling bank shares result in instalment warrants (diff to the self-funded type) which are out of the money. ie, if the warrant is a $40 one, and the share price is $39, the instalment warrant has no intrinsic value. However…….instalment warrants are entitled to all dividends like a normal share. So……..what happens is the instalment warrant assumes the value of the cash dividend. This occured a few years ago with NAB. NABIOJ was an out of the money warrant trading at 75c. The upcoming dividend was 75c. This was a RISK-FREE opportunity since it was impossible to lose on the deal. You paid 75c, received 75c dividend PLUS a 32c franking credit. Thus giving you a RISK-FREE 43% return. you like?
No doubt with bank shares falling currently these opportunities will present themselves again. This is NOT a recommendation to go anywhere near bank shares, or ANY shares for that matter……………..YET.
The credit crunch will destroy many lenders. The end result is less competition and higher margins, meaning banks will be more profitable than ever.
Just think outside the square a little and remember:
GOOD LUCK = PREPERATION + OPPORTUNITY
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