Douglas Albo

Closed-end funds, investment advisor
Douglas Albo
Closed-end funds, investment advisor
Contributor since: 2010
Company: Capital Income Management, LLC
Ha! Sarcasm will get you everywhere. Go to CEF connect and just look under the distribution tab for Distribution History Since Inception.
Some funds may or may not have managed distribution plans. Some, like from PIMCO, are loathe to adjust their distributions even with deteriorating NAVs. PGP is a perfect example. One of these declaration days, owners of PGP are going to wake up and find they've lost most of their principal when PIMCO finally bites the bullet and slashes the distribution. What could go wrong with a $17.41 market price and a deteriorating $9.90 NAV? Just where do investors think those $2.20 distributions per year come from?
That sale would have been at a premium valuation to where EOI's NAV closed on Friday at $12.68, down -2.7%. EOI at a premium is very unusual but I was also glad to see it happen. I like volatility in these funds. They give you more opportunities.
ETJ's NAV was down a lot more than I expected on Friday. ETJ owns a lot of the high flyer/FANG stocks and hedges with the S&P 500, which wasn't down as much, but the -2.3% NAV drop was surprising. It could be the EV's counter party didn't update the S&P 500 options on friday since they are more esoteric and ETJ has a lot of moving parts in its option positions. I've seen that before in funds where the daily NAV given doesn't seem to correlate with how the fund performed that day. If so, it'll catch up over the next couple trading days.
It's easy? If that isn't the KOD*, I don't know what is.
* Kiss Of Death
Yes, they will use option writing as well. Their mandates and authorizations won't be that much different than THQ, which is already leveraged and selling individual options.
GRX is up today in an otherwise weak healthcare sector because its #4 position, Alere (ALR), is being bought by Abbott Labs for $56/share. ALR is currently up 45% at $54. This is just the latest in a long line of buyouts that I've seen with GRX's holdings. They seem to occur every few months actually.
No. You can use inverse funds from ProShares. Very effective for taxable or retirement accounts to hedge but I wouldn't use as a long term investment.
For the S&P 500, SH is 1X the inverse, SDS is 2X. I wouldn't go over 2X. For the NASDAQ-100, PSQ is 1X and QID is 2X. For the Dow Jones Industrials, DOG is 1X and DXD is 2X.
I wouldn't hedge more than 1/3 of your long positions unless you really think things are going to get bad.
I think you're exactly right Gary. Once you look past China and the collapse of commodities, you have to point the finger at the Fed for just walking away from this market. But at some point, there will be enough selling in which the markets adjust to such a world and the markets will eventually say, "Hey, we can stand up on our own!"
Because once you look past the fears of high yield debt in energy and a slowing China, you realize that things may not be quite as bad as everyone believes. I am frankly shocked at the depression in people's heads that the world is coming apart at the seams. Maybe things get worse from here for the markets due to the horrible sentiment but at some point, investors will start to notice that stronger employment means more money flowing into 401(k)'s and eventually, more money flowing into the market. Besides, who needs the Fed anyway?
ETJ had $1.116 in distributions last year, so...
(($11.15+$1.116) - $12.06)/$12.06 = 1.7% NAV total return
I think you'll find that beat the S&P 500, even with the $4.20586 in dividends that SPY had.
And what is my danger signal 12%? If you're talking about the NAV yield, ETJ's NAV yield is shown as 10.5% in the table.
I had the article removed because it was based on erroneous information from CEF Connect that was later corrected.
I actually responded right away but it didn't show as a response so its located below...
"Mainly because of their large distributions that are deducted but many are also eroding their NAVs in the process too. But just because a fund's market price is downward sloping from inception doesn't mean it is not performing well when you add back all of those large distributions."
NAV yields over 12% are a red flag and that is why they are shown in red in the tables above. PGP and the Cornerstone funds, CLM & CRF (table #2) are the worst offenders and yet they trade at premium valuations. Investors in these funds will learn someday that funds that cannot reasonably be expected to cover their distributions will eventually crater. Why? Because each distribution that cannot be covered reduces the NAV by that amount and that leaves that much less NAV to support the next distribution. 20%+ NAV yields are a recipe for disaster.
Mainly because of their large distributions that are deducted but many are also eroding their NAVs in the process too. But just because a fund's market price is downward sloping from inception doesn't mean it is not performing well when you add back all of those large distributions.
What's important is the NAV yield since that's what the fund has to cover to keep its NAV from deteriorating. So whereas a 9.8% NAV yield is relatively high for most equity CEFs, as you can see, its one of the lowest of the Voya funds.
A low option % should cover say, half the NAV yield and since dividends and interest will barely cover the fund's expenses, the other half really needs to come from appreciation or unrealized gains.
Not likely any time soon.
Please...tell me your understanding of ROC and why it is so bad. Before you answer, you might want to read these articles...
Well, let's put your two most important factors to the test then. Tell me where one of my long term favorites, ETV, ranks when applying your analysis and give me an example of a non-sector specific equity CEF that ranks highly according to your analysis.
That's because ETW is global whereas ETV and ETB are domestic.
I don't drip but if you don't follow these funds as closely as I do, then I think it makes sense.
I would look at SPXX as a more value S&P 500 alternative. ETV is more growth S&P 500 focused while ETW has similar top 10 holdings as ETV but has global stock positions as well, like in the Nikkei for example.
Don't really follow it...
No...all leveraged CEFs will be susceptible to a market pullback but I can't tell you to swap out of one EV leveraged CEF to go into another leveraged CEF that I recommend.
You're shouldn't be in CEFs if you are complaining about a small correlation difference (at market price even!) with its benchmark. That can change overnight with CEFs.
That said, I don't know you came up with your #'s. The DJIA was down -4.8% at year end from when I wrote the article on May 18th and DIAX is down only -2.1% at market price. Even if you compared DIAX with DIA, the SPDR ETF which includes dividends, the difference couldn't have been that much.
Yes, I've maintained that ETV and ETB should be core holdings but that doesn't mean you don't trade around them based on changing valuations and NAV performance. ETV deserves the premium it currently has while ETB does not. ETB just happens to be the more susceptible to valuation swings due to its small size.
I had a few stink-os myself, mostly in the energy MLP, gold and utility space.
ETY will capture more market upside than ETJ with its lower option coverage so if the markets are defensive then ETJ might make a good alternative but there would still be a lot more CEFs I would sell before ETY if the markets turn down. That said, ETY has a pretty volatile market price considering its large size.
Yes, BXMX has been on a roll!
Don't really invest in or follow pure fixed-income CEFs other than munis, thank God.
Not sure, but not waiting around to find out.
You may be referring more to ETFs than CEFs. CEF NAVs will generally follow the broader market or their sector focus closely, but what makes CEFs unique is that their market prices can trade completely independent of the broader market or their NAVs, at least in the short run.
I will...though these will not be in depth analysis.
I'm referring to a shorter term basis (up to 1 year) but even on a longer term basis, you would need to add back all distributions to see exactly how far back a CEF came since just comparing market and NAV prices today vs. before the financial crisis doesn't tell you the story.
CEFs fall somewhere in market price volatility (not NAV volatility) between individual stocks and ETFs, all else being similar. ETFs obviously will match the market moves while individual stocks can come down with the market and stay down. Citigroup is a good example despite being a $52 stock today. My point is that CEFs can lag in their moves but they won't stay down like an individual stock can when a market comes back. I'm also talking generally about CEFs. Obviously, if a CEF is heavily leveraged in a sector that is performing poorly then yes, of course, it won't bounce back like more diversified CEFs will.