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Gwailo

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  • Investors Should Put Nuveen Mortgage Opportunity Term Fund On Their Watch List [View article]
    You say: "Will the Discount Gap Close? - This is the most important question every investor should consider..." The answer is right there in footnote 1 to the most recent semiannual report:

    "It is anticipated that Mortgage Opportunity Term (JLS) and Mortgage Opportunity Term 2 (JMT) will terminate on November 30, 2019 and February 28, 2020, respectively. Upon termination, the Funds will distribute all of their assets to shareholders of record as of the date of termination."

    How is it possible to intelligently analyze this fund without mentioning that it's a "term" trust, that is, one with a pre-set liquidation date five+ years from now? The name itself should be a clue.

    'Gwailo

    Jan 25 09:50 PM | Likes Like |Link to Comment
  • Doesn't Look Like It's A Buy On Central Securities Corporation [View article]
    You've missed the most salient reason for the large discount. Manager Wilmont Kidd, his family, and their family charitable foundation together own about 40% of the stock in CET. That means that there is no, zero, not any, chance that shareholder activists will succeed in closing the discount anytime soon -- and that's reflected in the price. CET is a long term play on getting the proverbial dollar's worth of earning power for 85 cents, but that dollar itself will only materialize in the pockets of the shareholders when Mr. Kidd -- or his heirs (he's 72) decide to make it happen.
    Jan 23 11:55 PM | 3 Likes Like |Link to Comment
  • Liberty All-Star Growth Fund: Give Me Liberty - Or Give Me Halloween [View article]
    Sorry the timeline wasn't clearer. Yes, KIM & Bulldog are both pretty much out of Liberty ASG now.
    Back in February 2012 Phil G wrote: "there is a good chance that [ASG's] management will initiate a value enhancing liquidity event in 2012. If that does not happen, [SPE] may participate in a proxy fight."
    The next 6 months saw "extensive discussions with the manager [ALPS] about the discount", leading up to ASG's partial tender offer last July. Bulldog saw 80% of its shares accepted, and: "Since we saw a low probability of further alpha by holding, we subsequently sold our remaining shares of ASG in the market at a single-digit discount."
    But since May 2 was the record date for the July 30 shareholder meeting (adjourned to August 22), Bulldog and KIM still got to vote shares they no longer owned, even the zombie shares that ASG had already bought back and cancelled.

    'Gwailo ("Be very, very afraid...")
    Nov 2 06:34 PM | Likes Like |Link to Comment
  • Speculators And Hit-And-Runs: An Indonesia Investing Reality Check [View article]
    My impression of Jakarta on a visit a few years ago was "Los Angeles on top of Bangladesh." Are there things about the Indonesian market or companies that make it relatively more attractive to invest there than in other "emerging markets"?

    'G
    Oct 24 02:55 AM | 1 Like Like |Link to Comment
  • Economic Investment Trust: A Canadian Closed-End Fund Worth Considering [View article]
    You can get more diversified exposure to Canadian equities in UNC, which is EVT's sister fund. Both funds, as well as E-L itself, Algoma, and the Bank of Nova Scotia, are controlled by the Jackman family interests. Which is fine, as long as their interests are your interests.

    'Gwailo ("Eh?")
    Oct 2 09:00 PM | Likes Like |Link to Comment
  • What's In A Name? The PIMCO Premium And Illusory Returns In PHK [View article]
    "I suspect that the shorts have not done well..."

    Alas, Bill Gross can stay lucky longer than the shorts could stay solvent. -'G
    Jan 24 07:13 PM | Likes Like |Link to Comment
  • Dramatically Changed Perspective On Liberty All Star Growth Fund [View article]
    You are quite right, Dan. The Karpus-DST deal stinks. DST is buying ALPS, ASG's adviser, for $250 million and needs a shareholder vote approving the deal. Karpus filed a preliminary proxy statement in opposition, but has agreed to drop it in exchange for DST buying $11 mm worth of ASG shares from Karpus at a price higher than any other shareholder would get on the open market.

    Hey, kids. Can you spell b-r-i-b-e? Can the SEC spell Sections 17a and 17d of the Investment Company Act? Should the Karpus deal have been disclosed *before* the voting was half-over? I wonder how Bulldog -- and the other hedge funds that together own @ 13% of ASG -- feel about being sandbagged by Big George?

    'Gwailo (Holds ASG, but maybe not for long.)
    Sep 20 06:24 AM | Likes Like |Link to Comment
  • Global Income Fund's Undeserved Discount [View article]
    Some closed-end fund trading discounts are there for a reason. GIFD is a relatively small (@$37 million) fund that trades in drops and driblets way over-the-counter. In the last two years or so it underwent a major shift in portfolio emphasis from global bonds to owning shares in other CEF's, and who knows what it will do next.

    Actually, the Winmills know. Octogenarian investor Bassett Winmill and his son Thomas run GIFD, as well as two other pocket sized CEF's (DNI and FXBY), the Midas group of open-end gold bug funds, and the oddly named Tuxis and Bexil holding companies -- both the remnants of funds of yesteryear. There's virtually no chance of activism to narrow the discount at GIFD -- it takes an 80% shareholder vote to elect a director over incumbent opposition.

    High expenses, self-serving nepotistic managers, abrupt changes in investment objectives ... the discount would have to be huge to make GIFD an attractive investment.

    'Gwailo ("Tilting at Winmills")
    Mar 24 12:35 AM | 4 Likes Like |Link to Comment
  • Central Securities: Value at a Discount for a Closed-End Fund [View article]
    It is *highly* unlikely that closed-end fund activists will target CET. The fund's long-time president and portfolio manager, Wilmot Kidd, together with his wife, owns or controls 11.6% of the stock according to Form DEF 14A filed 2/7/11. A schedule of recent share transactions for various Kidd family trusts is in an EDGAR Form 5 filing for CET on 2/2/11. An additional 33.5% of the stock is owned by the Christian A. Johnson Endeavor Foundation, a charitable "private foundation". Its president and treasurer is Julie Johnson Kidd (Wilmot's wife and Christian A.'s daughter), while another trustee bears the name "Christen L. Kidd." (Foundation tax returns are online at dynamodata.fdncenter.org.)

    It's cozy, to be sure, but legal -- as long as the Kidds and their foundation respect the limits that the tax code places on self-dealing by charities, and as long as CET qualifies for the Section 4943(d)(3) exception to the excess business holdings tax. [If you have to ask, you don't really want to know.]

    That said, CET is a decent midcap-blend long-term holding. It's internally managed with a low expense ratio, and its piece of Plymouth Rock is a gem, carried at a conservative valuation. Anyone who seeks to buy $100 worth of assets for $85 will likely be disappointed, since the discount won't close until and unless the Kidds want it to. Instead, CET is for the placid investor who wants to buy $100 of *earning power* for $85. A 6% annual return turns into 7.1% if bought at a 15% discount, and compounded over time it adds up. If the manager is competent -- and 69-year-old Wilmot Kidd has been running CET since he was 32 -- expenses stay controlled and there is no need for liquidity, Mr. and Mrs. Placid can just hold CET indefinitely, minimizing the tolls taken by brokers and tax collectors.

    'Gwailo ("And I'm not Kidd-ing.") Holds CET
    Mar 19 10:33 PM | Likes Like |Link to Comment
  • Adams Express: Growth Stocks at a 15% Discount [View article]
    The cage *is* being rattled. The annual meeting proxy that came out today (2/18/11) includes a shareholder proposal for a 50% self-tender. The proponent is the Gramercy Hedge Fund group, www.gramercy.com/About...
    and with a total 13F portfolio of about $259 million, including $24mm in ADX stock, they are in a position of some weight. Overall institutional ownership of ADX at 12/31/10 was 17%, up from 14% six months ago. Those adding to holdings recently, in addition to Gramercy, include Karpus, Lazard, 1607 Capital and Rockwood.

    Follow the money!

    'Gwailo (holds ADX)
    Feb 18 05:31 PM | 3 Likes Like |Link to Comment
  • 8 Stock Ideas for Sustainable High Yielding Dividends [View article]
    The attempt at "quantitative analysis" would be more effective if you understood the distinction between "distributions" and "dividends", and learned to read a balance sheet. IVR tripled in size because it raised @$340mm in public offerings this year on top of the @$170 mm from last year's IPO. It proceeded to gear up 4:1 thru short-term (30-day) repos at @ 0.67% p.a. and stock up on 5 year mortgage paper paying @ 5% p.a. Wow! "Forward annual dividend yield of 17%." Love that leverage. But Watch Out Below if the yield curve ever flattens, or if, per the 9/10 10-Q:
    "The concerns about deficiencies in foreclosure practices of servicers and related delays in the foreclosure process may impact our loss assumptions and affect the values of, and our returns on, our investments in non-agency RMBS."

    'Gwailo (Holds SLS as a short-term play. Wouldn't touch CFP. And prefers Vegas to IVR -- the food is cheaper and the shows are better.)
    Jan 21 03:50 AM | 1 Like Like |Link to Comment
  • Trading Ideas for High-Yield Bond Closed-End Funds [View article]
    Regarding PHK, admit it -- you were lucky. The most recent semiannual report on Edgar shows that as of 9/30/10 it held @$1.5bb in bonds +$200 mm in derivatives & receiveables yielding about $150 mm/yr, annualized. Subtracting $10mm for management, etc = $140mm. They have @$600 mm of leverage (reverse repos and preferred stock) linked to short term rates, so it's free as long as short term rates remain at zero. There are @120mm shares outstanding, so that's $1.15 per share/year or 9.6 cents/month net income to distribute.

    But in the first half of 2010 PHK distributed $87mm from net investment income of only $68mm. How could they pay the 12+ cents/month that kept the shares trading at a huge premium to NAV? See footnote 6: by taking a $12mm profit on *swaps*. The year before, PHK realized $47mm gain/income on *swaps*. So unless PHK keeps winning its bets with the big bank trading desks, sooner or later they will have to cut the divvy back to what the underlying portfolio can sustain. If that happens, watch out below.

    'Gwailo - No position. PHK short sellers have learned: "Bill Gross can stay lucky longer than you can stay solvent."
    Dec 13 04:39 PM | 1 Like Like |Link to Comment
  • FGF, FGI Latest Funds to Commence In-Kind Tenders [View article]
    > "I find your articles extremely insightful. You're obviously much more brilliant than your picture would suggest."
    Flattery, noun, "The art of telling people what they truly believe about themselves."

    To clarify: two different types of proration may apply here: (1) If more than 25% of FGI shares are tendered, the number accepted for repurchase is pro-rated. For example, if you tender 3,000 shares and overall 40% are tendered, then FGI would accept 1,875 shares from you [ = 3000 * 25/40]. (2) Whatever number FGI accepts, the payment will be in the form of a pro-rata share of FGI's portfolio holdings. If they take 1,875 shares, for example, you would get (approximately) 42 shares of Aetna, 11 shares of Amazon, etc, etc down thru the alphabet to 17 shares of Wynn Resorts. Awkward to hold, and expensive to sell.

    >"How are the activists getting out"?

    That's an excellent question. Exchange Act filings on Forms 13D and 13G report the combined percentage holdings of persons who are acting as a *group*. Bulldog's October 14 filing on FGI, for example, was actually made on behalf of "Bulldog Investors, Phillip Goldstein, Andrew Dakos and Brooklyn Capital Management LLC." They, like Karpus and Lazard, manage their investors' capital through a variety of partnership and LLC entities.

    The definition of "affiliated person" in Section 2(a)(3) of the Investment Company Act might not share this concept of "group". So as long as each member of the group holds less than 5%, it can be argued that none of them are "affiliates", so all can tender. (And in a pinch, one can always try to end a group by the simple expedient of agreeing not to agree with each other. See Bulldog's KEF filing on October 12, which "de-groupified" Phil G.)

    True, such logic has an odor of sophistry. Parsing the definitions in the ICA, one finds that "person" includes a "company", Sec. 2(a)(28), and "company" includes a partnership as well as "any organized *group* of persons whether incorporated or not", Sec. 2(a)(8). It's sufficiently uncertain that other CEF's proposing in-kind tenders have sought the SEC's permission for participation by affiliates. See ICA Release 29194 (Chile Fund, March, 2010) as well as ICA Release 25729 (Mexico Fund, September, 2002). FGI, however, will take the shareholder's word for it. And who is going to stop them?

    'Gwailo
    Oct 23 04:01 AM | 2 Likes Like |Link to Comment
  • Why CEF Managed Distribution Programs Should be Eliminated or Modified [View article]
    You're quite right -- at the heart of the problem is the semantic confusion between "distributions" and "dividends". It seems that one has to be a CPA or a CFA to understand that a "distribution" is a "dividend" only to the extent it is paid out of earnings & profits, and that a return *of* investment is not a return *on* investment.

    RoC benefits shareholders when there's a trading discount, so why not have a rule that permits funds to make RoC distributions only when they trade at a discount? Say, at least a 5% average discount over the last year?

    'Gwailo ("Ticker for the next Cornerstone fund: <PNZI>")
    Sep 8 03:30 PM | 2 Likes Like |Link to Comment
  • CEF Weekly Review: Something's Gotta Give [View article]
    I doubt that RIF and RAP are likely CEF activist targets, because:

    1) According to the most recent annual reports, their organization documents: "contain provisions which limit share ownership by any shareholder or group of shareholders who are affiliated or acting together to 9.8% of total shares outstanding". The only exception is for affiliates of the manager, RMR Advisors, an entity controlled by the Portnoy family.

    1a) This limit is purportedly there to avoid potential tax problems for the REITS in the funds' portfolios that might result from the related party attribution rules of the Internal Revenue Code. (The Easter Bunny also lays brightly colored eggs, and big-winged birds deliver babies to new parents.) The validity of the ownership rules has not been decided in court, because:

    2) Leading activist Phil Goldstein of Bulldog Partners had a litigious tussle back in 2006-08 with RMR's Hospitality Fund (RHR -- it was merged into RIF in 2009 following a 79% decline in the share price in 2008.) The lawsuit was settled on terms that preclude Bulldog from going after RMR's funds for the next 15 years.

    3) Royal Bank of Canada had owned 24% of RIF's auction rate preferred, but on 6/10/10 filed a Schedule 13G to report it no longer owned any shares. City of London's latest 13GA filing on 2/9/10 said it currntly held only 9.74% of RAP -- below the 9.8% mark.

    'Gwailo (Long SLS. No RIF-RAP.)
    Aug 15 04:57 PM | 2 Likes Like |Link to Comment
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