Nearly Risk-Free Assets On Sale Everywhere
By Dr. Steve Sjuggerud
September 07, 2007

On August 20, Garrett Thornburg had to take a loss of nearly $1 billion for no good reason...

Thornburg doesn't take losses. His business hasn't taken a single dollar of loss on any investment in more than five years, according to my colleague Tom Dyson. And Tom says that in more than a decade, the cumulative bad investments that Thornburg's company made total $174,000. This is a business with tens of billions of dollars in assets.

You see, Thornburg only loans money to very wealthy people with excellent credit. So these people are practically "no risk"... They have more to lose by defaulting on their loans than Garrett does. And even though they are no credit risk, Garrett still only lends out two-thirds of the value of the collateral he's holding, which is generally the wealthy person's primary home.

Thornburg's business is pretty simple, really. It borrows money from Wall Street banks and then turns that money around and makes nearly risk-free investments (giving rich people loans with good collateral). The loans he makes are the opposite of subprime.

But on August 20, banks forced Garrett to sell $20.5 billion of his nearly risk-free portfolio.

What happened? Garrett Thornburg's bankers "called in" their loans... So he was forced to basically dump his no-risk assets in a fire sale in order to give the banks their money back. It didn't matter how safe Garrett's investments were. Wall Street simply panicked and demanded a big chunk of money back.

So Thornburg made the sale. And he lost nearly $1 billion.

Thornburg sold a perfectly good portfolio for $20.5 billion. The problem was, the portfolio's value was roughly $21.4 billion.

Being forced to sell a dollar for 95 cents is near criminal – especially when you're talking $20 billion. But the banks demanded their money. What else could he do?

This story is one example of the panic in the credit markets... It's a time when excellent assets – basically risk-free assets – can (and do!) sell at a discount.

In the current Sjuggerud Confidential, published this week, I shared my favorite way to capitalize on the panic. We're buying a dollar for less than 95 cents... In fact, we're buying quality assets for a much bigger discount than Thornburg was forced to offer. Even better, what we're buying is not in the real estate or mortgage business.

While I feel for Thornburg, as investors, we actually wait and hope for times like now... times when investors panic, creating big profit opportunities. Now is a rare moment. We must take advantage of it.

Don't be scared... Now is a time to step up to the plate and buy asset-backed investments. In Sjuggerud Confidential, I showed how we can buy a dollar bill for 87 cents... And we'll get paid 9% a year in interest!

When all is said and done, I believe this month's Sjuggerud Confidential recommendation will lead us to a safe 20% return. That return could come in one year – or less.

Good investing,

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.

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