Update 6/5/2009: Cramer named Sallie Mae common shares as his speculative play for the year in tonight's Mad Money. TheStreet.com While I have no intention of buying the common shares, his arguments did convince me to continue holding the exchange traded bond that I currently own, OSM, that pays interest tied to the CPI and matures in 2017, as explained below. It closed on Friday at $11.5 with a $25 par value. OSM: Summary for SLM Corp. - Yahoo! Finance
I linked the prospectus in the post below. Information about this bond can also be found at the Quantumonline site (free with registration)Exchange-Traded Debt Securities Table - QuantumOnline.com
There is another CPI linked note from Sallie (SLM) with the symbol ISM which matures in 2018 with a 2.05% spread to CPI.
UPDATE JUNE 29, 2009: I subsequently added to my position in OSM at $11.8. (item #3:Late Afternoon Buys and Sells 6 9 2009) Shortly thereafter, the government awarded a servicing contract to Sallie Mae and J P Morgan upgraded the common stock: Bought 150 TC PKM/ SLM News/TIP Sinking and Break-Even Staring to Narrow Again/Payment of a Deferred Dividend-Who Has the Right to Receive It?
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I do not own shares in SLM (Sallie Mae), but I do have a small position in one of its exchange traded bonds, OSM. That security is a floater tied to the CPI with no guarantee and a maturity date in March 2017. Investment Grade Corporate Bond Spreads/ CPI FLOATER: OSM
There is nothing positive that I can say about SLM's prospects. I read the Morningstar report tonight which was discouraging. On the one hand, this security is selling at less than $10, near my cost basis, so I could sell now for a small loss. On the other hand, if SLM can survive another 7 years and 10 months I stand to collect the $25 par value, a good return on my investment, plus the interest paid based on a calculation of 2% over the CPI, computed in a manner outlined in the prospectus: /www.sec.gov.htm I can only say that this is a month to month decision and a close one now. But for now, I will wait and see, but expect no good news from the Obama administration. This link explains Obama's plans, and how they would impact Sallie Mae Bloomberg.com There is no way to spin that in a positive vein.
See also,
After looking at this, I decided to punt the decision until the end of May.
Other posts about OSM include:
One major factor favoring the sell now, mentioned frequently in my brain chatter, was the admission that I would not now buy OSM after Obama announced what he intended to do with the government's student loan program.
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