amnesiac, you right, it's not looks like good bussines for someone who have 1 mil... but... if I have 100k and put them in trading account with 1:10 intraday margin then actually I borrow 900k from broker and put those money in stock, right? is't it risky? I guess yes. I'm going to invest 1 mil into my city's municipal bonds. and I don't think they have grater risk incesting 1 mil into municipal bonds for 1 year than investing 900k into stocks for one day... So how to borrow 1 mil? if you a big XYZ corporation then you may borrow 1 mil from bank or issue own bonds, but what to do if you are person and wants to borrow 1 mil to invest it to fixed incom municipal bonds???
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Tax considerations aside, if you want to borrow at an effectively lower rate than what the municipal bonds will pay so that you can pocket the difference, then your credit rating essentially needs to be better than that of the municipality in question. Is your credit rating better?
John- You seem to be describing some sort of credit arbitrage system. Two questions then arise: what rate do you expect to be able to borrow this money at? Finally, why cant your lender purchase the bonds him/her/its self and cut the middle man (you) out?
I just got a letter in the mail and apparently I have won an international lottery, i just need to pay the mandatory international transaction fee and the money is mine. If you will cover the fee, I will loan you the money in return?