Seeking Alpha
View as an RSS Feed

Douglas Albo  

View Douglas Albo's Comments BY TICKER:
Latest  |  Highest rated
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Thanks for your comment! You wouldn't by chance be....oh, never mind!
    Nov 30, 2012. 09:16 AM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Somewhat depends on the market. For a strong up market, EXG, ETY, EOI & EOS have the most upside because they don't sell as high an option coverage, around 50%. EOS I'm a bit disappointed with since it should be showing better NAV performance with the Russell 1000 doing so well (its primary benchmark). On the other hand, EOI is much improved and its now one of my bigger positions.

    For a more defensive market, ETV, ETB and ETW have about 95% option coverage so their NAV's will hold up better in a down market, though obviously, a bear market will not be good for any of these funds. ETJ is the only fund designed for a bear market though it has not really shown that it can maintain its NAV in ANY market environment so that's why its my least favorite of the EV funds.
    Nov 30, 2012. 09:12 AM | 1 Like Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    I have to put in that an investor would need to lower their cost basis by the ROC amount because that is what the IRS requires in a taxable account. Obviously, if you never sell the fund, this is not an issue but if you dividend harvest these funds by buying before the ex-div date and selling afterwards, you are required to lower your cost basis by the ROC amount for determining gain/losses on your returns.

    And yes, these funds have loss carryovers they can continue to use as well. I was using an example of how option-income funds can be managed to realize losses w/out assuming any carryover losses.

    And yes, I agree that the tax-advantages of option-income funds are not being fully appreciated by investors or the markets. Thanks for your comment!
    Nov 30, 2012. 09:00 AM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Thanks for your comment. Yes, the Clough leveraged CEFs trade at very wide discounts but there's a reason for that. They all short securities as part of their leverage and I just don't like funds that short securities because it complicates managing the fund. So instead of using straight fixed-income borrowings for leverage, they also short securities. This means they have to be right on their long positions as well as their short positions, which is tough for any manager. This also means their expense ratios go through the roof (3%+ according to CEFConnect) because they are also responsible for any dividend paying positions they are short.
    Nov 30, 2012. 08:43 AM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    That's BS and you know it. I went over all my articles (6 total) that recommended EXG beginning on 1/13/2011 and the only time you would not have made money was when I wrote about EXG on 4/28/11, not long before the overseas markets took a dive and actually very close to its $11 market price high. Even then, from EXG's market price high, you would not have had a significant loss if you had held onto the shares (-2.8% on a total return basis and -1.1% on a reinvested basis), which for a mostly global fund, is still significantly better than the most popular international ETF's like EFA or IEV.

    In fact, from about October 2011 on, you would have been better off in EXG than the S&P 500, so please...get your facts straight before you say you have "considerable losses."
    Nov 30, 2012. 07:52 AM | 6 Likes Like |Link to Comment
  • Equity CEFs: A New Utility CEF At An Attractive Discount [View article]
    BUI is a pure equity option-income fund whereas PDT is a mostly preferred fixed income leveraged fund. They're not really comparable and I did not even include PDT in my article so I don't know where this came up.

    As for ROC, option-income funds always have a lot of ROC because of how their option overlays are managed, but this is not necessarily detrimental to overall total return performance, i.e. the fund is not just handing back your investment. In fact, fund managers actually try and maximize ROC because of the tax benefits which may become a lot more valuable in 2013.

    You can read my articles discussing ROC in option-income funds which include white paper reports from Eaton Vance, in case you give more credibility to Eaton Vance. One article is fairly recent and the other I wrote back in January, 2011.

    http://bit.ly/TY6A5C

    http://bit.ly/GSgi5a
    Nov 21, 2012. 10:36 AM | Likes Like |Link to Comment
  • The Real False God Of Dividends [View article]
    I think the previous author would have made a more compelling argument if he compared dividend payments from stocks with interest payments from bonds. It's true, dividends reduce the price of a security when they go ex-dividend whereas interest payments do not. The previous author is technically correct that stocks must go down by the dividend amount. A stock at $24 that has a $0.50 quarterly dividend will be reduced to $23.50 on its ex-dividend date. The stock or security can trade up or down from there, but it will start the trading day at a price $0.50 lower than where it closed the session before. That is a fact.

    For those who think this is an insignificant difference with interest payments, one only has to look at equity CEFs that use a "dividend harvest" income strategy to see what the cost has been to their NAVs over time. "Dividend harvest" CEFs overweight paired stocks right before they go ex-dividend and then move assets to the next stock before it goes ex-dividend. This has fooled a lot of investors into thinking that the fund is generating lots of dividend income to pay for its distributions but over time, the fund's NAVs have been decimated as they take losses in their stock positions to free up assets. This is an extreme example, but its a big reason why CEFs that have bond income or even covered-call option income have NAVs that hold up much better.
    Nov 20, 2012. 12:14 PM | 2 Likes Like |Link to Comment
  • Equity CEFs: What To Do After The Bottom Falls Out [View article]
    See above comment. I'm leaning more towards the option-income funds at this point. Their high ROC in their distributions will make them that much more valuable for tax planning.
    Nov 18, 2012. 09:23 AM | Likes Like |Link to Comment
  • Equity CEFs: What To Do After The Bottom Falls Out [View article]
    See comment below on CHW. If the markets rebound, other leveraged funds to buy would be ETO, EVT & UTF. I also like INB & DPO as leveraged option-income funds. If the markets stall or head back down, all funds will probably move down as well though I don't believe with the same intensity as last week. In such a case, defensive option-income funds like ETV, ETB, ETW, JLA, JSN or JPZ will hold up best at the NAV but of course, the market price is subject to wherever investors take them.
    Nov 18, 2012. 09:22 AM | Likes Like |Link to Comment
  • Equity CEFs: What To Do After The Bottom Falls Out [View article]
    If the broader markets bounce, I like CHW here. Global equity leveraged fund with an NAV up a strong 10.6% YTD yet has 50% of its portfolio in US convertible and high yield bonds to bring down volatility. 9.4% yield paid monthly and raised its distribution in February. Compared to its sister fund CSQ and just about every leveraged high yield bond CEF, most of which trade at close to par or premiums, CHW is cheap at a -11.3% discount.
    Nov 18, 2012. 09:09 AM | Likes Like |Link to Comment
  • PIMCO Closed-End Funds On Sale At Lowest Premiums To NAV In A Year [View article]
    "The better CEFs tend to trade at a premium and the dogs tend to trade at discounts."

    Maybe with fixed-income CEFs, but not at all with equity CEFs. In fact, I would argue just the opposite. If you go by historic total return NAV performances, which should be the true test, the best performers are often at the widest discounts and the worst are often at premiums.

    The reason is because the worst performers tend to offer unrealistic distribution yields and so as investors chase uber high yields while the fund's NAVs continue to deteriorate, the end result is fund's often trading at premiums. AGD, CLM, CRF, EOD, NAI are all good examples (though some have recently moved to discounts).
    Nov 17, 2012. 11:20 AM | Likes Like |Link to Comment
  • PIMCO Closed-End Funds On Sale At Lowest Premiums To NAV In A Year [View article]
    PHK pays the same distribution now as when it went public in 2003 and yet its NAV has been about halved from $15 to $8.31. Since the $1.46/share/year distribution is derived from the NAV, how is PHK going to be able to support that distribution going forward with only half its NAV? The fund is relying more and more on portfolio appreciation to cover its distribution (half of each distribution is already ROC) and it can't rely on that forever, so its going to have to either up the risk on its portfolio or increase the leverage, both of which are dangerous.

    Obviously, the total return of the fund at market price (not necessarily NAV price) has been fantastic but I don't understand how PHK can continue to meet its distributions with only half its inception NAV in a near zero interest rate environment.
    Nov 16, 2012. 10:39 AM | 2 Likes Like |Link to Comment
  • Equity CEFs: The Best Return-Of-Capital Funds, Part II [View article]
    I believe it is just an added bonus to be able to buy high ROC funds in a taxable account so I wouldn't look at it as like buying tax-free muni bonds over higher yielding taxable bonds in a retirement account.

    The high ROC the fund sponsors try to maximize, or at least take advantage of, should not be affecting total return performance that much though that is hard to quantify since you have no idea what a funds total return would have been if the fund sponsors didn't close out options (to realize losses) vs. letting them just get exercised, which would have resulting in realized gains along the way and much lower ROC.
    Nov 11, 2012. 10:39 AM | Likes Like |Link to Comment
  • Equity CEFs: The Best Return-Of-Capital Funds, Part II [View article]
    Most all option-income funds came public around 9% yields so when they got to averaging 12%-15% NAV yields during the financial crisis, it was going to be difficult for them to sustain those distributions when the markets recovered because their NAVs don't move up when you're saddled with that high a yield. Then consider option premium has trended down over the past few years due to more competitive pricing and a zero interest rate environment. So the smartest fund sponsors realigned their distributions with their income early and over a series of cuts starting in early 2010. Most are well balanced now back to around 9% NAV yields. I wrote a couple articles discussing this very topic.

    http://seekingalpha.co...
    Nov 11, 2012. 10:11 AM | Likes Like |Link to Comment
  • If Bill Clinton Gave A Speech On Fiscal Responsibility In Equity CEFs [View article]
    Nope. Still think the Eaton Vance option-income funds are a much better buy than EOD, even with the distribution cut.
    Nov 9, 2012. 09:11 AM | Likes Like |Link to Comment
COMMENTS STATS
689 Comments
590 Likes