1. The chart provides a comprehensive snapshot of how preferreds have fared over the past five years. The period captures the start of the financial crisis through 4/30/12.
2. Over 80% of publicly traded preferred securities are issued by financial institutions.
3. Prior to the financial crisis, preferred securities have historically offered investors a yield spread of 100-250 basis points over the benchmark 10-Yr. T-Note (see yields from 4/30/07). That spread was 493 basis points on 4/30/12.    
4. The Merrill Lynch U.S. Preferred Stock Fixed Rate Index carries a BBB2 credit rating (investment-grade), yet its yield spread (493 bps over 10-Yr. T-Note) more closely resembles that of speculative-grade debt.
5. The Merrill Lynch U.S. High Yield Master II Index carries a B1 rating (speculative-grade) and has a yield spread of 567 basis points over the 10-Yr. T-Note.
6. While the recovery in the financial sector continues to be a slow and arduous process, preferred securities, in our opinion, offer investors seeking current income an intriguing alternative in today’s climate.

View from the Observation Deck

1. Global pharmaceutical sales by PhRMA member companies totaled an estimated $295.5 billion in 2011 (see chart), with 38% occurring outside the U.S. In 2006, that figure was 30%.
2. These nations followed the U.S.’s 62% share of global sales (by PhRMA members): Japan (4.6%); France (3.3%); Germany (2.7%); Italy (2.3%); and Canada (2.3%).
3. So-called “Big Pharma” is looking to expand heavily into emerging markets (“pharmerging”), particularly in Brazil, Russia, India & China (BRICs), where governments are investing more in health care. (IMAP, Inc.)
4. In 2010, the BRIC countries accounted for about 3.5% of total global sales. (PhRMA)
5. Approximately $89.5 billion worth of branded pharmaceuticals are scheduled to lose patent protection between 2009 and 2014. Generic sales are expected to grow from $107.8 billion in 2009 to $129.3 billion in 2014. (IMAP, Inc.)
6. Biologic sales, on the other hand, are expected to grow by $41 billion between 2009 and 2014. (IMAP, Inc.)
7. The fastest way for a drug company to acquire new medicines is through mergers and acquisitions and through licensing agreements, in our opinion.
8. In 2012, some drug companies have been willing to pay premiums 71%, on average, above a biotechnology company’s average 20-day stock price (deals > $500 million in 2012) to acquire them. (Bloomberg)