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  • Look Out Below! PIMCO Closed End Funds Suffer From Bill Gross Departure [View article]
    And I do believe that the PIMCO brand (which is linked to the Bond King brand) has a lot to do with that premium. I would be concerned that the brand is tarnished and the premium may soon be vanished.

    In the end investors will decide for themselves.
    Sep 28 01:32 PM | Likes Like |Link to Comment
  • Look Out Below! PIMCO Closed End Funds Suffer From Bill Gross Departure [View article]
    A quick screen shows that EDF EDI FAM EHI FHY are all taxable bond funds with distribution yields (on a price basis not nav basis) higher than any PIMCO fund other than PHK and all are trading at discounts currently. I am not recommending those funds per se (haven't done due diligence on them), but they make the point that many funds offer investors good distributions without the PIMCO premium...
    Sep 28 01:31 PM | Likes Like |Link to Comment
  • Look Out Below! PIMCO Closed End Funds Suffer From Bill Gross Departure [View article]
    It's not wise to invest at a premium because of a star manager. It's really not wise to hold the fund at a premium you bought because of a star manager after the star manager has left. As mentioned in other comments, PCI and PDI are clearly not in the same camp as PGP and PCK etc...

    Investing is in large part about timeframe. In a longer time frame many PIMCO funds may outperform (they may not too...) but my analysis is targeted at the shorter term outlook
    Sep 28 01:25 PM | Likes Like |Link to Comment
  • Look Out Below! PIMCO Closed End Funds Suffer From Bill Gross Departure [View article]
    I would definitely endorse dumping PTY and PCI is a reasonable fund, IMO. They are not similar in terms of portfolio holdings so make sure you're not wedded to the particular asset backed and municipal bond holdings that are more common in PTY
    Sep 28 01:21 PM | Likes Like |Link to Comment
  • Look Out Below! PIMCO Closed End Funds Suffer From Bill Gross Departure [View article]
    Correct, that seems like a reasonable holding, though I'm not currently long it
    Sep 28 01:17 PM | Likes Like |Link to Comment
  • Look Out Below! PIMCO Closed End Funds Suffer From Bill Gross Departure [View article]
    Agreed, that's one of the rare well-priced funds. I looked at his Form 4 reported transactions in that fund. He has been buying consistently since early April - reporting purchases on 40 trading days from April to August, but stopped on Aug 21st. Maybe he'll reverse course. I don't think he'll need to report form 4 once he's no longer a fund officer
    Sep 28 01:16 PM | 1 Like Like |Link to Comment
  • 7 MLP Closed End Funds On Clearance Sale [View article]
    Great point Taylorzr - thanks for adding that. Another hidden benefit of (the right kind of) ROC.
    Sep 26 10:58 AM | Likes Like |Link to Comment
  • 7 MLP Closed End Funds On Clearance Sale [View article]
    Point taken. It's all about your time frame.
    Sep 26 02:24 AM | Likes Like |Link to Comment
  • 7 MLP Closed End Funds On Clearance Sale [View article]
    Double taxation only occurs if the C Corp has taxable income. If they're able to successfully avoid getting much non-ROC income (as these seven clearly have done) there's no double taxation because the tax rate on ROC is 0%

    If the MLP winds down or shrinks, then I can see how the double taxation issue would come into play.
    Sep 25 11:50 PM | 1 Like Like |Link to Comment
  • 7 MLP Closed End Funds On Clearance Sale [View article]
    (1) It's not true that all distributions to unit holders are classified as RoC, only the distributions in excess of net income. In practice, I think most MLP managers try to ensure a large fraction of distributions are RoC because it's popular with their investor base.

    (2) You could invest directly in MLPs. Downside #1 is that you need to deal with more complicated tax preparation (vs. just getting it included in your 1099). Downside #2 is that you don't get the opportunity to buy the MLP fund at a discount such as is the case now. Downside #3, you don't get the cheap leverage that many of the MLP funds offer. Totally an individual call, you'll find people on both sides of the argument. I happen to prefer the CEFs but your mileage may vary.

    (3) Correct, they are generally classifying all of their distributions as ROC. See: http://bit.ly/1mww0du and click on the tab "Distributions" for a quick reference to the past several distributions and how they were classified across the four different distribution categories.

    (4) No preference.
    Sep 25 11:45 PM | Likes Like |Link to Comment
  • 7 MLP Closed End Funds On Clearance Sale [View article]
    It probably should have been in the universe for this analysis. I don't usually track the funds because the managers of Tortoise MLP (NTG) only report NAVs once a week making it more complicated to manage positions day to day. This discount is so prominent that intra-week variations don't matter as much.
    Sep 24 07:24 PM | Likes Like |Link to Comment
  • 7 MLP Closed End Funds On Clearance Sale [View article]
    You raise another good tax point, @anon. NAVs are reported with deferred tax liabilities already netted out, making the actual value of assets per share held greater than NAV, and the discount to NAV lower.

    As an example, the most recently reported deferred tax liability on the balance sheet of FEI was $2.44. As of 9/23, FEI reported a 23.51 per share NAV. However, this net value is actually assets of $25.95 less a DTL of 2.44 (ignoring all other liabilities like leverage debt here...). Thus, the published discount of 11.3% to NAV would actually be 19.7% to adjusted NAV.

    There are arguments that it's not proper to fully adjust NAV by adding back tax liabilities, which are reasonable. I prefer to think of the DTL as a sort of interest-free loan that allows the fund to accumulate more income producing assets without any (near-term) cost.

    Very good article here on the subject. http://bit.ly/1rked8n
    Sep 24 01:01 PM | 1 Like Like |Link to Comment
  • 7 MLP Closed End Funds On Clearance Sale [View article]
    @Anonymous - I was just about to direct you to the same article. Very well written. I did a quick check on the seven specific CEFs and found that all but TYG have reliably classified distributions as "Return of Capital" which effectively means that distributions are not taxed as paid but do have the effect of lowering your cost basis and therefore will be paid upon sale, which can be long-term gains if you're the buy-and-hold type.

    Ordinarily, RoC is an off-putting thing for CEF investors, and often pointed to as a scarlet letter of shame for a fund that can't sustain distributions. however, for funds that hold MLPs primarily, they are able to use accounting charges for depreciation of assets within the MLPs to lower net income, and therefore taxable distributions. I'm not a CPA, but after review I believe that the net tax impact is not dissimilar.

    And even if there were a tax preference for direct MLP investing vs. fund ownership, that is not new, i.e., nothing explains the recent decoupling in price and NAV
    Sep 24 12:02 PM | 2 Likes Like |Link to Comment
  • VIX Short-Term Futures ETNs Present Rare Opportunities [View article]
    "VXX is currently holding almost 50% of each month's future. This is important because the more expensive June future will not rise or fall as fast as the front month. So, if the VXX is heavily back-loaded or front-loaded with a majority of one month's future, it is far more susceptible to big moves up or down."

    Isn't the whole point of the rolling structure of the short term vol futures products (like VXX) is that they attempt to price at about the same point into the future, ie a month out, by keeping an ever shifting blend of front month and second month contracts that mimic a 30 day future expectation (assuming linearity between the M1 and M2 contracts?)

    Do you think that there is a non-linearity in the volatility of the futures such that you'd expect one of the following to be more volatile:
    100% in M1 with 30 days to expiry
    50% in M1 with 15 days to expiry and 50% in M2 with 45 days to expiry
    3% in M1 with 1 day to expiry and 97% in M2 with 29 days to expiry
    May 12 11:27 PM | Likes Like |Link to Comment
  • VIX Short-Term Futures ETNs Present Rare Opportunities [View article]
    "The best way to bet on VIX is to get long or short VIX futures" and "But just avoid time valued vehicles"

    seems like a contradiction to me. If futures aren't time valued, what is?
    May 12 11:18 PM | Likes Like |Link to Comment
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