There may be a buying opportunity for preferred stock investors coming up. If it happens, it will be fairly short-lived, but it might be worth watching out for.
Yesterday, a federal judge sided with two Reuters reporters who had filed a law suit against the Federal Reserve in order to force the Fed to reveal the names of banks seeking federal loans.
Historically, the Fed has held the identities of such banks in confidence, concerned that public disclosure could cause unnecessary fear in the minds of the public and investors and unjustly damage the institution.
But to Reuters, being able to run a juicy story for a few days is apparently more important.
And that's where there may be an upcoming opportunity for preferred stock investors. Depending upon how Reuters packages the newly obtained information (assuming the Fed will not appeal the judge's decision), doing so could trigger a short-term down spike in the market prices of the common and preferred stocks from the outed banks.
Further, to the extent that this judge's decision is precedent setting, future disclosures by the Fed may be unavoidable as well, potentially causing additional short-term buying opportunities for preferred stock investors.
There has always been a stigma attached to any bank that borrows money from the Fed, even though doing so has been standard practice for decades. The Fed's discretion has sought to protect the bank, public and investors from this stigma. Now that the Fed is required to out the banks to which it lends money, investors may be able to take advantage of any short-term down spike in the market prices of the stock shares (common and preferred) offered by such banks.
Going forward, if you are interested in adding bank preferred stocks to your portfolio, there may be opportunities for you to do so on the cheap because of yesterday's ruling.
To read more about the case and the judge's decision, click here.
Many Happy Returns.
