Auction Rate Preferred’s, once viewed as an attractive cash alternative, have proved to not be a cash alternative…However, they present some very attractive value trading in the secondary market. Through sources like Second Market, you can buy them between 70-85 cents on the dollar, depending on the issues. Nuveen ARPS, trade on the higher end of the range due to increased efforts to redeem them for par (100 cents on the dollar). However, most firms are simply waiting to piggy back on whoever developes the first panacea (likely Nuveen). Here is a great resource to find out what is going on in the auction rate market. Auction Rate Preferreds.org
Here is a fine example of a smart investor taking advantage of ARPs trading on the cheap.