Tuesday, July 13, 2021

Sukuk -- July 13, 2021

 

Rereading "sukuk" definition - the M's are allergic to being paid interest - so you're right about that not looking like a bond.... But, it may be a distinction without a difference.

For instance, Treasury Bills do not pay interest - they produce yield.

If you buy a $10,000 TBill at 98.25, you'd pay $9,825.  Then, as long as you hold the Bill to maturity, you get paid $10,000.  The difference, $1,075, is commonly (but erroneously) referred to as interest.  Of course, those yields are a thing of the past.  So - I don't know how the sukuk compensates for the time value of money.  Again, with the middle man, it's easy to imagine some contrived liquidation and repurchase of the position - producing something that functioned as interest, but wasn't called interest.  

I did a number of shopping center financings with an Egyptian Muslim fellow - Houstonian.  He came over here for college, married a Yank and they've lived happily and prosperously ever after.  His original gig was with an oil company, but he decided to get into real estate and has excelled in that.  Anyway, if I ever run across him again , he'd gladly explain the whole deal to me.  There may be a couple more folks that I could tap,...

He and his wife supported one of the most interesting charitable endeavors I've ever heard of.  That'd be a good excuse to see if I could get ahold of him...hmmm...

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