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In the Frank-Dodd approach, existing mortgages would be bought below face value, forcing investors to, as they say in the trade, "take a haircut".
"Next to the fact that you may have bought below the sponsor's current prices," Ms. Conte said, "this is probably your biggest advantage".
As is usually the case, if one bought below the top of the market in the "best" areas, such as the Upper East Side of New York City, Bel Air, the Hamptons or Medina, Wash., over the long term your investment will hold up nicely and maybe even show a tidy profit.
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The savings rate declines because there's no real yield available, unless you buy below-investment-grade paper with 10-year maturities.
Buying below par will mean that Spanish and Italian banks will sell but German banks won't.
But aside from such exceptions, he said, "it is not a good time to buy below the top levels".
"You'd ask people what their strategy was, and they'd usually say they wanted to buy below fair value and sell above it," Smith remembers.
Make any P/E trigger you want buy when it's below 20 and sell when it's above, or buy below 8 and sell above, whatever and you won't wind up with a trading rule that works.
"If you buy high you have more exposure to the downside," he explains, "and if you buy below issue price the stock is going to have to appreciate an awful lot before the bond does".
The most highly collateralised bonds (with high yield bonds backing a multiple of their face value) can be rated investment grade by the rating agencies, and thus can be bought by, for instance, regional European banks and insurance companies who cannot buy below investment grade.
You need to consider buying below market value and cash flow for these types of properties.
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