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Douglas Albo  

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  • Equity CEFs: 9% Tax-Exempt Yields Being Given Away - The Greatest Story Not Being Told [View article]
    Expense ratios in option-income funds are similar to actively managed mutual funds. Considering their significantly higher yields, I don't think these funds have excessive expense ratios.

    Premiums/discounts can go in cycles. Many funds rose from -25% discounts in the fall of 2008 to lofty premiums just a year later in the fall of 2009. When you add in appreciation, it was not unusual to see 100% moves.
    Dec 18, 2012. 01:27 PM | Likes Like |Link to Comment
  • Equity CEFs: 9% Tax-Exempt Yields Being Given Away - The Greatest Story Not Being Told [View article]
    Happens sometimes when the bottom falls out of CEFs. By far the best time to buy these funds. Last occurred in early August, 2011. I even wrote an article on it this go round...

    http://seekingalpha.co...

    Best guess is that there was an unwinding of a carry trade by some institution. Not a bad strategy when you can borrow at 1% and own 10% yielding funds. Either the fiscal cliff, higher taxes or higher rates probably spooked them.
    Dec 18, 2012. 12:57 PM | Likes Like |Link to Comment
  • Equity CEFs: 9% Tax-Exempt Yields Being Given Away - The Greatest Story Not Being Told [View article]
    If you've read my articles in the past, I like most of the Eaton Vance option-income funds except for ETJ and I like most of the Nuveen funds. A lot of it depends on where you think the markets are going. For more defensive option-income funds, ETV and ETW are good picks and go ex-div on Thursday. EOI is also doing well though EOS has been disappointing frankly. From Nuveen, I like JLA & JPG but they all went ex-div last week.

    For more upside capture, INB, EXG, and DPO are my favorites, but only EXG has not gone ex-div yet. A big plus for Eaton Vance is that all of their option funds are converting to monthly pay beginning in 2013.

    Total return NAV performance over different time frames is the best way to rate these funds.
    Dec 17, 2012. 11:18 PM | 2 Likes Like |Link to Comment
  • Equity CEFs: 9% Tax-Exempt Yields Being Given Away - The Greatest Story Not Being Told [View article]
    Broker end of year 1099's will typically identify your ROC portion in Box 3 as non-dividend distributions, but they don't call it ROC.
    Dec 17, 2012. 07:28 PM | 3 Likes Like |Link to Comment
  • Equity CEFs: Searching For The Right Balance Of Income And Appreciation Funds, Part II [View article]
    You can't take the published UNII #'s and I'm not exactly sure where you are getting your ROC #'s since I don't see any SEC filing on JTD for 12/7. If you're getting that from CEFConnect, those ROC #'s are not correct since they are provisional (see below).

    Nonetheless, you have to dig deeper. Go to JTD's Semi-Annual report date 6/30/12. Go to page 21 and you'll see NII as $3,920,873. That's total dividend and interest minus all expenses, including interest expense. Now JTD paid out ($7,531,857) in distributions for the first 6-mos so it has to make up the ($3,610,984) difference via realized or unrealized appreciation. For the first 6-mos, JTD had $13,215,655 of realized and unrealized gains (bottom page 21) so obviously, it had way more than enough to pay for its distributions over the first 6-mos of 2012 so why were the distributions classified as mostly ROC? Go to page 28 and read this...

    "The distributions made by the Fund during the six months ended June 30, 2012, are provisionally classified as being “From and in
    excess of net investment income,” and those distributions will be classified as being from net investment income, net realized capital
    gains and/or a return of capital for tax purposes after the fiscal year end. For purposes of calculating “Undistributed (Overdistribution
    of) net investment income” as of June 30, 2012, the distribution amounts provisionally classified as “From and in excess
    of net investment income” were treated as being entirely from net investment income. Consequently, the financial statements at
    June 30, 2012, reflect an over-distribution of net investment income."

    This is a big reason why you have to follow a fund's NAV. If a fund's NAV is rising even while paying out its distribution, then there is no ROC per se, I don't care how they classify it. If a fund's NAV is depreciating while paying out its distributions, then that is true ROC. JTD's NAV started the year at $13.56. It's now $15.15, thus no ROC.
    Dec 9, 2012. 11:25 AM | Likes Like |Link to Comment
  • Equity CEFs: Searching For The Right Balance Of Income And Appreciation Funds, Part II [View article]
    Thank you. Please see above...
    Dec 8, 2012. 01:31 PM | Likes Like |Link to Comment
  • Equity CEFs: Searching For The Right Balance Of Income And Appreciation Funds, Part II [View article]
    And also see above...
    Dec 8, 2012. 01:30 PM | Likes Like |Link to Comment
  • Equity CEFs: Searching For The Right Balance Of Income And Appreciation Funds, Part II [View article]
    And thank you for your comment. It's responses like yours that makes this worthwhile.
    Dec 8, 2012. 01:30 PM | Likes Like |Link to Comment
  • Equity CEFs: Searching For The Right Balance Of Income And Appreciation Funds, Part II [View article]
    Just hedges. CEFs can be volatile and I use hedging to try and bring down volatility a bit. Don't usually hedge more than 1/3 of the total portfolio value and its currently a lot less than that.
    Dec 8, 2012. 01:26 PM | Likes Like |Link to Comment
  • Equity CEFs: Searching For The Right Balance Of Income And Appreciation Funds, Part II [View article]
    That's a good question. There's no K-1's which is a big advantage. You'll see your distributions on your year end 1099's identified in the 1099-DIV box as either ordinary dividends, which are reportable, or non-dividend distributions, which are not.
    Dec 8, 2012. 01:25 PM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    I don't consider 1% onerous. Equity mutual funds are about the same and they don't have near the yields of most equity CEFs. Then compare that to leveraged CEFs which can push the expense ratio over 2% because of borrowing costs.
    Dec 4, 2012. 08:57 AM | 2 Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Yes, I have longer term total return NAV performances I keep on most of these funds. I compare from the market top around the end of the 3rd qtr 2007 and from the market bottom at around the end of the 1st qtr. 2009. This essentially gives me a 3 year and 5 year though I believe the high/low periods are more revealing since the first covers the recovery period and the second includes the bear market period as well. This gives you a pretty good idea of how the funds perform over different market conditions.

    If you are just interested in total return market price performances, go to http://ycharts.com, hit Chart Creator, put in "total return" and put in your time period you want. This will give you total return market performance though it assumes reinvestment of all distributions. Personally, I'm more interested in NAV total return performances since the market prices are often prone to investor emotions and are often wrong. But that's where the opportunities are.
    Dec 4, 2012. 08:54 AM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Yes, a good explanation of how these funds work. In essence, you cash in potential gains in the portfolio with the distributions. This works well in a flat market because the fund sells options and options are time depreciating assets. So time works in your favor with these funds in a flat market. Then consider the discount the funds are at, which give you a windfall yield over and above what the fund actually pays, and the tax-advantaged income with the ROC, and option-income funds are by far the funds you want to own in a flat or a trendless up and down market.

    Of course, in a strong up market, you may give up potential gains in option-income funds. And that is why I recommended at the beginning of the year for investors to include and even overweight leveraged funds to take advantage of an up market. It's all a balance with these funds to try and maximize income and appreciation.
    Dec 3, 2012. 08:48 AM | 1 Like Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Undistributed Net Investment Income is a non-issue in option-income funds. Unlike leveraged funds and dividend harvest funds, option-income funds don't rely on dividend or interest income to cover their distributions.

    UNII is almost always negative in option income funds because UNII doesn't include option premium, only dividends and interest. In fact, net investment income (NII) doesn't contribute much to total return in these funds either, maybe 1% - 2% annually. Not that hard to figure out...assume 2% - 3% portfolio yield minus 1% annual expenses.
    Dec 1, 2012. 05:14 PM | 2 Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    "Tax-Managed" essentially means these option-income funds will try and limit capital gains by not allowing stock positions to get called away in a strong up market. They will close out their option-positions at a loss before they let stock get called away. This is why a lot of each distribution is able to be classified as ROC.

    "Risk Managed" essentially means the fund will also buy put options in addition to their covered-call option positions. IRR, an ING fund, is another "risk managed" fund. The problem with the "risk managed" funds is that they have very little NAV upside in a strong market.

    Though most of these funds are managed for tax advantaged income, I believe they are just as appropriate for retirement accounts. I don't know of any funds that are managed for non-taxable accounts.
    Dec 1, 2012. 05:05 PM | Likes Like |Link to Comment
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