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Confidential To Any Hedge Fund Managers Tired Of Seeing Red: Try Yellow

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Are you a down on your luck hedge fund manager who hasn't had a good and/or original idea in a while? Did you get your face ripped off the last two years by going the wrong way on everything? Do you sense that your investors are only sticking around to be nice and/or because you won't let them leave but will desert you the second you give them an option better than illiquid shares of a walkie-talkie passion project, unless you come up with something and fast? Then you might want to consider sticking their money in this:

The sale of two New York City taxi medallions for a record $1 million each in October is sparking investor interest and bolstering shares of Medallion Financial (TAXI), a company that owns medallions and lends money to people who buy them. Investors see the medallions, which confer the right to operate yellow cabs in the city, as “a safe asset,” says Medallion Financial President Andrew M. Murstein. His company owns about 300 and plans to buy “several hundred more” in New York and other cities, he says. “These are little cash cows, constantly taking in fares and spitting out money to the owners.” While it would take a lot of long rides to run up $1 million on the meter, the return on medallions compares favorably with other investments. Someone who leases a medallion to a driver or garage operator could expect to earn about $2,500 a month, according to Simon Greenbaum, a broker at NYC Medallion Brokers. That’s about a 3 percent return for a $1 million medallion, better than the 2.13 percent effective yield on U.S. AAA rated corporate bonds as of Nov. 7 and the 2.04 percent yield on 10-year Treasuries...The bottom line: A purchaser who spends $1 million on a New York City taxi medallion could expect to earn about 3 percent annually on the investment.

Just something think about. And don't mess around buying shares of TAXI. Pick up 50 medallions, have your traders and analysts drive the cars and then sit back and watch the cash roll in. This has the potential to be even bigger than your subprime short.

Million-Dollar Taxi Medallions [BusinessWeek]


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