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Got TruPS?

Fast Money Portfolio
Fast Money Portfolio

If you’re thinking about putting money to work in TruPS, Ed Deicke says there’s something you should know.

But before we get to that – you may be asking yourself, what's TruPS?

An acronym for Trust Preferred Securities, TruPS are something of a hybrid between bonds and preferred stocks. TruPS are generally long-term, they make periodic interest payments and they mature at face value.

And although TruPS can be issued by any company – they’re often issued by banks because banks benefit from their accounting treatment – TruPS can be included as Tier 1 capital.

Got that?

Now here’s the ‘there’s something you should know’ part.

Dodd Frank is changing the accounting rules.

“The trust preferreds according to Dodd-Frank will no longer be counted as Tier 1 capital on bank balance sheets,” explains Deicke, JHS Capital Advisors senior vice president.

“That means between 2013- 2016 banks will have to take them off the balance sheets. We like them to buy, not only because you collect a coupon – but also because you will get called away.”

Why is that good – getting called away? Seems strange but Deicke explains.

“Right now in fixed income we’re concerned about buying long term – because with interest rates near 0% there’s a lot of interest rate risk on anything long term. However, with this paper (since it will get called away) you’re probably not taking a lot of interest rate risk."

If this kind of investment interests you Deicke gives us a few recommendations.

“I like Goldman Sachs HJG and HJJ – both are two trust perferreds. If you want more risk BofA and Citi offer them. And I’d be careful of JPMorgan. I think the credit is very good but it can trade at a premium to par value and if it’s called away, you’d have negative returns.”






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Trader disclosure: On May 9, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders

Karen Finerman is short AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long RIMM; Karen Finerman is long HPQ; Karen Finerman is long AVP; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDX; Dan Nathan is long JAN 450 puts AAPL; Dan Nathan is long BAC MAY 7 PUTS; Dan Nathan is long MS MAY 16/15/12 PUT FLY; Dan Nathan is long IBM JULY 200/185 PUT SPREADS; Dan Nathan is long RIM JAN 20/25 CALL SPREAD; Dan Nathan Is long MLD Jun 92.5 Put Spread; Dan Nathan is long SPY Mar 135/130 Put Spread; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Brian Kelly is long WFC; Brian Kelly is long QQQ; Brian Kelly is long T; Brian Kelly is long VZ; Brian Kelly is long ADM; Brian Kelly is long USG; Brian Kelly is long KRE; Brian Kelly is short KRONE; Brian Kelly is short FTSE 100 Futures

For Ed Deike
Ed Deike is long HJJ
Ed Deike is long HJG
Ed Deike is long C-S
Ed Deike is long C-W
Ed Deike is long BAC-U
Ed Deike is long MER-K

For Aaron Kessler
Raymond James & Associates makes a market in shares of priceline.com Incorporated.

For Dennis Gartman
Dennis Gartman is long GOLD
Dennis Gartman is short EUR
Dennis Gartman is short Yen
Dennis Gartman is short US10Y

For Colin Gillis:
BGC Financial LP and/or its affiliates, does not expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report: CSCO
BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Cisco within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from CSCO


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