What’s an Easy Way to Buy Cheap Assets?

It’s much, much bigger than regional banks buying GSE preferreds. You can buy Fannie and Freddie senior debt at significant spreads over the government which is guaranteeing it; hell, you can write credit protection on the US government and make non-negligible amounts of money doing so. More generally, there’s a large number of bonds out there issued by non-leveraged companies which are nicely profitable and don’t have significant funding needs, but which are still trading at all-but-distressed levels.

So here’s my question: Let’s say you’re a buy-and-hold investor — someone with a personal pension fund, say, which won’t be touched for a couple of decades. You don’t care much about mark-to-market losses, you just want to take advantage of some of the present craziness to buy good long-term assets on the cheap. I’m not talking distressed debt funds, or anything which requires active management: I’m just looking for a simple way of playing the reversion-to-making-sense trade. Is there one?

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