The “Nine Brothers” are the original two brokerage firms and seven banks that the Secretary of the Treasury said were too important to fail. Now they are all banks so the "Nine Brothers" are nine banks. They were so important that the United States government invested our money in these “Nine Brothers”. The Government anointed them, as safe places that they were going to keep safe regardless of what happens.
This commitment to the “Nine Brothers” was tested and the government made good on its promise. Citibank is one of the “Nine Brothers” and when all the talk was going around that Citibank was going to fail, what happened? The government stepped in and gave them more money. The government was not going to let one of the “Nine Brothers” fail.
Some of the rest of the “Nine Brothers” are Bank of America, JP Morgan Chase, Wells Fargo, Goldman Sacks, and Morgan Stanley. Secretary Paulson identified these nine institutions as too important to fail. So, what is the opportunity with the “Nine Brothers”?
Many of the “Nine Brothers” have preferred stocks that have a current yield of 10% or more. Today 90 day T Bills were paying one basis point and 30 year T-Bonds were paying 3.13%, not much yield. On the other hand, let us use an 8.20% preferred stock offered by one of the “Nine Brothers”. The current yield is around 10.5% and the stock purchase price, which was originally $25, is now about $20.
If nothing happens over the next 5 years, you would receive over 52% return in dividends. If the rest of the market finds this opportunity then I would expect to see the price rise over the next 12 to 18 month back to its original $25 perhaps higher as demand will be greater than supply.
Why shouldn't I invest outside the “Nine Brothers?” Investing in banks outside of the “Nine Brothers” could have significantly higher risk.