CEFs Continue to Advance; Real Estate Funds Surge

Summary: Closed end funds' (CEF) average fund types continued to advance the week ending 4/3/09. A pattern of price movement again emphasized investors’ willingness to assume greater risk—consistent with a 3.3% drop in the CBOE Volatility Index (VIX). Average price appreciation of 13 CEF fund types was 1.8% while the unweighted average for all 647 CEFs was 2.1%. (CEFs in the aggregate are up 6.0% YTD; Distribution Yield is 10.9%; Discount to NAV narrowed to 8.9%). Special Equity (real estate CEFs leading contributor, up 9.3%) and Preferred fund types led last week up 4.2% and 4.1%, respectively. For the week, CEF investors’ demonstrated confidence as average prices exceeded NAV by 0.5% (5.1% YTD).

For sake of weekly comparison, SPDR S&P 500 (SPY) was up 3.2% for the week. Vanguard Total Bond (BND) and iShares Muni fund (MUB)—for the fourth week in a row—was essentially flat, down 0.6% and up 0.1%, respectively. Gold (GLD) dropped an additional 3.4%, while oil, as measure by the US Oil ETF (USO), remained flat, down 0.6%. Commercial real estate, as measured by Vanguard Real Estate Investment Trust ETF (VNQ), spurted 17.2%. The demonstrated ability of REITs to raise equity capital to pay down debt spooked the shorts.

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Nuveen Real Estate Inc Fund (JRS) was one of the biggest CEF gainers for the week, up 24.9%. One of this week’s bigger losers was Gabelli Convertible & Income Fund (GCV), down 13.6%. GCV recently halved its quarterly managed distribution; it’s trading at an 8.3% distribution yield (5.0% based on net investment income), at par (average for CEF converts) and is in a sector that’s seen revived interest. GCV still burden by ARPS.

Disclosure: Author owns GCV, GLD, USO and SPY.

Comments

[nana1:]

This is an idiotic statement " ability of REITS to raise equity capital to pay down the debt".
Is this some invention to rise capital ?
What kind of idiots are these shorts or panic-idiots that do not understand capital structure.
I will give you basic lecture:
Public corporation have several ways to rise capital:
1. issue debt
2.issue additional stocks
3. Conbination of 2 at the same time.
Above capital could be used for paying old debt or general expenses or expantion or acquisitions.
people who do not understand that should never invest in any stock. Madoff is waiting for you. I recommend him as number 1 finacial advisor.
I made already more than 100% on these real estate ETF'S taking advantage of idiots.
Do not bet on banks that they will go to hell. Banks can also issue additional stocks and you will go to hell permanently as a short-brain.

Apr 05 03:38 PM

[Joe Eqcome:]

Nana 1

I’m always amused by people who resort to incensed name calling to defend their position. There is an old Chinese saying: “You can always tell which party is losing the argument by the one who strikes first.” Your strike is feeble, truly sophomoric and unprofessional. The only public lecture you’ve provided us is one regarding your poor upbringing and your inexperience in investing.

Let’s deal with the fact:

1. Real estate stocks didn’t go up last week because real estate prices when up;
2. The sharp move was especially in response to Kimco’s very successful public offering that demonstrated their ability to facilitate repayment of their debt. But don’t take my word for it, here’s a quote from the WSJ ("Research In Motion, Kimco Lead Stocks", April 3, 2009):

“Investors cheered Kimco Realty's sale of 105 million new shares to address its debt concerns, lifting shares in the owner of shopping centers 26%. The shares were sold at $7.10 apiece, or 5.2% below Thursday's closing price.

Kimco, which owns stakes in 1,950 shopping centers globally, gained $717 million from the sale. The New Hyde Park, N.Y., company was the third major REIT in recent weeks, behind mall owner Simon Property Group and warehouse REIT AMB Property, to pare its debt with a huge stock sale as the refinancing market remains prohibitively expensive.”

I’m happy that you’ve made money shorting “these idiots”, as you call them. However, judging from you comments, this may be the case of a blind squirrel occasionally finding an acorn.

Please, continue to short these stocks, we’ll all be happy to take your money because you’ve confused a bear market with brains.

Joe Eqcome

Apr 06 12:41 AM

[Gruber:]

Sounds like you’re the idiot


On Apr 05 03:38 PM nana1 wrote:

> This is an idiotic statement " ability of REITS to raise equity capital
> to pay down the debt".
> Is this some invention to rise capital ?
> What kind of idiots are these shorts or panic-idiots that do not
> understand capital structure.
> I will give you basic lecture:
> Public corporation have several ways to rise capital:
> 1. issue debt
> 2.issue additional stocks
> 3. Conbination of 2 at the same time.
> Above capital could be used for paying old debt or general expenses
> or expantion or acquisitions.
> people who do not understand that should never invest in any stock.
> Madoff is waiting for you. I recommend him as number 1 finacial advisor.
>
> I made already more than 100% on these real estate ETF'S taking advantage
> of idiots.
> Do not bet on banks that they will go to hell. Banks can also issue
> additional stocks and you will go to hell permanently as a short-brain.

Apr 06 12:48 AM

[DuffBeer:]

Gruber and Joe , Thanks for giving nana1 alesson is communication manners. One can disagree and still be civil . We are here to learn and what nana is teaching is a huge problem in todays world--
no respect for someone else's opinion.
John with the loss of my r/e income I am now setting up investment in various areas to generate monthly income. CEF"s is one I am now researching and guess who is a rookie in this area yep me. Thanks for your post and look forward to many more.
I am however not new to the many styles of beer !
Cheers DuffBeer

Apr 06 08:09 PM