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AlchemyOfFinance

 
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  • Exploring Potential Trades in the Specialty Bookstore Industry [View article]
    aaaand its bankrupt. good call, bill
    Feb 17 11:46 PM | 1 Like Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    hey borderite - yes, I do. I've retracted the BSP recommendation already, but cant do anything to change this article. sorry for wasting your time.

    incidentally, it should be worthwhile noting that my CEF-trading-as-futures theory works in reverse too - BSP's discount to NAV should increase over time as long as NAV continues to decrease.
    Dec 14 09:02 AM | Likes Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    hey gwailo,

    thanks for the working through the numbers to show how the distribution is untenable unless bill gross continues to be lucky. I will admit I was lucky I wasn't even planning on the swaps doing well. thats the argument from the income side.

    But my thesis wasn't that - it was on the asset value side. it was a bet on the NAV just rising in general due to credit spreads narrowing. As of Dec 09, the bond portfolio "total investments before options written?" was 1.35b. As you say in Sept 10 it was 1.5b. Would I be right to say that that rise in NAV contributed to some part of PHK's 30+% return over that time? and that if I expected NAV to continue rising in future I would bid up the price now before waiting for the NAV to actually rise, thereby producing a premium that is actually rational?

    that said, I didn't see it rising 40% more, so I've sold out. if you are right on the divvy cut if Gross does badly on those swaps, then its a real pity there aren't options on PHK.
    Dec 14 08:55 AM | Likes Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    yeah thanks Tom1 and zio for putting some real perspective. Also the YTD return shown on the chart is total return including those 15% div yields. So I made a huge error on this - wish I could edit or take down the article but I cant so I just hope people read the comments.

    Zio - have you tried CEFconnect? here is BSP on it: www.cefconnect.com/Det... it clearly shows that the current distribution is 2 times its actual earnings. hope that helps.
    Dec 14 08:37 AM | Likes Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    FAMCO,

    just on a broad level, you should be very clear that the conditions we faced from Dec 08 to March 09 are NOT the same conditions we are facing in Dec 10. if you are betting money on your 3 reasons, fine, but for certain the broad macro factors are different and less favorable. For example: www.bloomberg.com/news...

    also your first reason is questionable as a long thesis. it makes leveraged CEF more attractive AFTER the blood has been shed, not before. you want to worry about both that A) borrowing-cost-to-inco... as well as the B) market value of the bonds as well - which would surely fall if rates rise at the long end. so you're saying a small rise in A will offset a large fall in B. not happening in my view.
    Dec 14 08:31 AM | Likes Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    will take note, thanks
    Dec 14 08:26 AM | Likes Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    thanks R

    if I may try to describe the current environment - there are two forces at work here: Interest rate risk and Credit risk. if either of those risks go up, these bonds go down.

    Credit risk is measured as implied by the difference of yields between junk bonds and investment grade bonds or the difference of yields between investment grade bonds and "risk free" treasury bonds. These spreads are at three-year highs: www.bloomberg.com/news... which does not bode well for them going forward. Companies have been doing fine but there are individual pockets of credit risk you need to be wary of, for example as Saul mentions we are still in a giant hole of uncertainty regarding the proper evaluation of real estate-backed credit, so that disproportionately affects CEFs who happen to hold more of those kinds of credit risk.

    Interest rate risks are a different kettle of fish. The treasury yield curve is at all time lows, the market reaction to QE2 since November has been a giant collective "meh", and until QE2.5 or QE3 is announced sometime mid next year it is hard to envision any scenario in which it will go down more.

    In other words, with a 1-ish year horizon, it doesn't look at all good for junk bond investors. So why this article? as in the first para: you need to be able to sit around and wait for those 10-15% dividends, which WILL come for most of the CEFs listed here. If I had $500k now that means I could lock in a $50-$75k annual income, and all I have to monitor is whether the underlying bonds in my CEF are generating sufficient cashflow for it to deliver what it promises. Yes, my $500k principal will fluctuate every day, and yes it looks likely that it will go down over the next year, but thats part and parcel of being a dividend investor.

    i should probably disclose that i don't hold any CEFs at this point as I have a much more short term mentality; doesn't mean that I don't agree with the idea of dividend investing, or of learning more about it to keep an open mind.
    Dec 12 11:20 PM | 1 Like Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    Mike,

    I CANNOT believe I missed this! I have been so used to data services providing price performance data that I did not think to check if finviz's figures were based off total return or just price return. This entirely invalidates my BSP recommendation (obviously its a great buy if its PRICE only moved 0.44% ytd but still offered 15% div yield, but that was false); I would take this article back and delete that if I could. I hope everyone who reads this article reads your comment.

    With your help I will be able to churn out more accurate analysis in future. To me this was a terrible oversight, apologies to everyone.
    Dec 12 10:39 PM | 3 Likes Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    thats why I suggested long BSP - all those funds are crashing, and this guy is only down -0.66% and still offering 15% div yields. See table 1. i'd look deeper into the holdings before putting serious money on it, but on face value it does sound good don't it?

    the fact that these CEFs are crashing is due to the recent rise in treasury yields, but corporate credit risk hasn't actually increased in my view.
    Dec 12 12:15 PM | Likes Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    lol, yeah, except I can't buy bonds directly on my account. (I am not an institutional player)

    your reasoning is spot on, though. I don't see any reason why any institutional investor should ever buy closed end funds that trade at a premium to NAV since they can just get all the holdings for cheaper. the question is just how much capital you need to accomplish that.

    side note:
    although this wasn't a reason I considered in Jan, remember back then (and at various points along this year) we had waves of double dip worries. If I were institutional I might pay a bit of premium to NAV just to get that extra liquidity (imagine - you can liquidate an entire portfolio of bonds just like that!) if things turn bad. However, if my CEF-as-futures-on-NAV thesis was accurate, then the price of the CEF would drop faster than the NAV. So you could say in deciding between buying direct bonds or the bond etf (at zero or small premium) that you are making a tradeoff between liquidity and price volatility. Does this make sense?
    Dec 12 10:42 AM | 1 Like Like |Link to Comment
  • Top Silver Plays: Endeavour Silver, Hecla Mining and Mag Silver [View article]
    I second my fellow Objectivist on the need to hedge at this level. as I said in another comment above:

    you'd have to go back to 2006 to find the last time the gold-silver ratio was this low (see goldprice.org/gold...). Statistically speaking, silver is due for a period of underperformance vs gold, fundamentals be damned. The reason I did not choose to publish this view is because I don't want to fight a JPM short cover.

    The best way to use the data I have presented in this article is actually to long the suggested names AND short SLV, because the only thing I have forecast is that they will outperform SLV. Time will tell.

    Data is a little thin on all the other OTC/pink names mentioned on this threat (seriously I think the comments by everyone are real money) otherwise I'd redo the statistical analysis including all those names
    Dec 12 09:50 AM | Likes Like |Link to Comment
  • Top Silver Plays: Endeavour Silver, Hecla Mining and Mag Silver [View article]
    I like Smarty_Pants' answer below. I've looked at the TSX venture exchange before and his answer seems to make sense. I'd throw in regulatory friendliness compared to the SEC with that.

    bigger picture-wise, I really don't think it matters, unless Mexico somehow starts going into nationalization-mode or imposes capital controls on repatriation of profits. (is this actually illegal given NAFTA? I have no personal experience with NAFTA)
    Dec 12 09:44 AM | Likes Like |Link to Comment
  • Top Silver Plays: Endeavour Silver, Hecla Mining and Mag Silver [View article]
    you saved a few cents sir but watch the big picture - dollars will be made or lost here.
    Dec 11 02:54 PM | Likes Like |Link to Comment
  • Top Silver Plays: Endeavour Silver, Hecla Mining and Mag Silver [View article]
    mega like, i didn't even see that coming
    Dec 11 11:13 AM | Likes Like |Link to Comment
  • SmartHeat: Another Great Growth Story from China [View article]
    Hey TM,

    I wrote a followup to this article from one year ago. You might like to revisit your long play on this =)

    seekingalpha.com/artic...
    Dec 11 12:26 AM | Likes Like |Link to Comment
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