"The challenge of retirement is how to spend time without spending money"
Author Unknown

Several readers sent me e-mails asking to share some of the specific names in the preferred stocks arena. As I have already explained several times before- rationale behind my interest in this asset class is quite simple- (high yield, relative security and significant upside potential). It is important to remember that nothing is guaranteed and thus diversification is a key!. However, let's not forget that despite all the fear in the banking sector out there- preferred shareholders have seniority over the common stock holders and are invested alongside (pari passu) the government's TARP money.

So while complete nationalization of any specific bank would likely mean prefs being wiped out, by focusing attention on the "stronger" names, one should be able to reduce risk dramatically. Today I want to simply use preferreds of three largest "strong" banks as an example of how I approach valuing these and to show why I believe this market is quite inefficient and thus offers an opportunity for diligent investors.

All of the thoughts below are simply my thoughts on the matter, and shouldn't be perceived as recommendations of any sort..

First name- JPM- the strongest one out of all "domestics"; has a wide variety of various types of prefs- trust preferreds, cumulative ones, fixed and floaters etc. As you can see- yields vary from 9.16% on the JPM-I to only 6.29% on JPM-G. As an example of inefficiency in the market let's take three names: JPM-G, JPM-F and JPM-E. Basic terms and risk is identical for all three (cumulative).