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Joe Eqcome  

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  • Proposed Dividend Tax Is As Uninformed As It Is Naive [View article]

    Approximately 4 million households make over $250,000 or approximately 3% of the tax returns. Since most of the household wealth increase with age that percentage would be higher for those over 55.

    However, you’ve missed the point completely! I think you ought to check out the graph in the article which shows that once the dividend tax was cut, dividends rose. The opposite will likely be true when dividend taxes are raised. So the revenues expected to be generated in terms of taxes will not materialize.

    Having a different tax rates for dividend and capital gains distorts capital flows and increase the risk that funds reinvested in a corporation will fuel executive compensation as rewards will be tied to return on investments which creates a "head I win, tails the shareholders' lose" situation. The whole mortgage mess was caused by a saving glut.

    Additionally, those reinvested funds will likely be recognized as a capital gain that will be taxed at a lower rate than dividends or other sources of income.

    I suggest you and Warren Buffett write personal checks to the government so someone can feed their spending habits, because there wouldn’t be as much revenues coming from the taxation of dividends.

    This dividend tax proposal is bad policy.
    Mar 1, 2012. 01:20 PM | 9 Likes Like |Link to Comment
  • My 2010 Investor Stupidity Award [View article]
    As opposed to whining about how stories are "placed to benefit shorts"--which you have impugned with no basis, why don't you provide some facts why the fundamentals of this story are so great? Do it is a bullet point fashion so we can all understand your investment logic in simple and clear terms.

    I have explicitly said for retail investors not to short the stock. All I’m recommending is an avoidance behavior with regards to the shares.

    The major shareholder will defend the stock price to protect its 5 million share holding, of which it’s already sold 4.3 million shares. I don’t see the price of the share declining for that reason.

    As far as the other commentator you mentioned, his position is simply don't be against the major shareholders. He doesn't make a case for the stock on the basis of fundamentals.

    So, I, and others, look forward to your articulated position on why retail investors should own the stock. Particularly, now your conspiracy argument has been punctured.
    Jan 7, 2010. 10:42 AM | 9 Likes Like |Link to Comment
  • 2 Closed-End Funds Worth Considering Now [View article]
    I don't think you'd buy either of these stocks for their distribution yield. Both have paltry yields (less than 2%). There are other alternative CEFs for the purpose of income investing.

    You buy either of these stocks for the purpose of capital appreciation.

    I prefer ADX, because in my estimation, it is a proxy for a large cap index and tracks SPY (S&P 500) fairly well over the past two years. So, I figure, rightly or wrongly, I'm buying the S&P 500 at a discount of 15% at approximately similar yields. The small relatively small management fee of 0.5% is a small price to pay for a 15% discount. It would take you 30 years to erode that discount.

    Additionally, in a recent interview in a trade publication its chairman acknowledged that ADX must address the discount as it is becoming gaping.

    He even made reference to considering alternatives such as converting to an active ETF (AcETF). Don't hold your breadth for this solution. To paraphrase Churchill’s remark regarding Americans: "They will do the right thing--after exhausting all other possibilities."

    ADX’s investment management has done a yeoman’s job of performance and the stock doesn’t deserve to be trading at this wide a discount, IMHO.

    I think this year will be a good year for ADX. For that reason I own it.

    On Dec 31 08:45 AM User 489779 wrote:

    > Why use any fund to hold blue chip dividend-paying stocks? However
    > small the fund expenses may be, they nonetheless erode returns.<br/>
    > Sheldon
    Dec 31, 2009. 11:36 AM | 8 Likes Like |Link to Comment
  • CEF Weekly Review: ETF Dividend Aristocrats [View article]

    With all due respect, why would you be reading these articles in the first place if you were to hold this opinion?

    If you were to stop reading such articles it would be a happy resolution for all involved.
    Mar 11, 2012. 11:59 AM | 7 Likes Like |Link to Comment
  • PIMCO's CEFs Trading At High Premiums: Is There A PIMCO 'Put'? [View article]
    Market Slave,

    Let me respond collectively to your multiple missives for the purpose of conservation.

    First of all, I don't have any dog in this fight. I could personally care less if PIMCO's CEFs share prices go up or down.

    As an analyst, I’m curious by nature. I just happen to be fascinated with PIMCO's numbers and their relative valuation compared to a very august peer group, that's all. I also felt that way about the Cornerstone sponsored funds where there was little “nutritional” value to their premiums.

    All I'm doing is just laying out the case as to what the numbers are saying recognizing there are multitude of factors impacting stock prices.

    While I view most investors as consenting adults, older investors seeking yield should realize that they’re paying up for it in terms of premium valuation. Think of it as a public service message.

    Anyhow, I think you should view this as an educable moment.

    Why don't you provide for us the logic behind your thinking so we can all benefits from your perspective? It would be helpful in you could provide some facts for your conclusion so we could swing from “clue to clue”.

    We’re all ears.

    Apr 12, 2012. 06:43 PM | 6 Likes Like |Link to Comment
  • CEF Weekly Review: Tug of War [View article]
    “The lady doth protest too much, methinks,”
    Shakespeare, "Hamlet, Prince of Denmark", Act III, Scene II
    Oct 17, 2010. 06:56 PM | 6 Likes Like |Link to Comment
  • CEF Weekly Review: Analysis of Risk Continues to Shift [View article]
    Mr. Plettner:

    It is my policy to never engage in a battle of wits with an unarmed opponent.

    Joe Eqcome
    Sep 19, 2010. 11:08 PM | 6 Likes Like |Link to Comment
  • My 2010 Investor Stupidity Award [View article]
    <IMG class=authors_reply src=""> Let me parse your comment.

    - Thank you for making my case you don’t have a clue regarding the investment merits of CFP. (If you had no case for CFP, why in the world would you comment on that topic?)

    - Secondly, your appeal to let “Mr. Market decide" should be based upon full disclosure of all the facts. To suggest one shouldn’t make a factual case--for or against--a particular stock go against the very fundamentals of an efficient market and the discounting of information into a stock price. The market can't discount the facts if it doesn't have them.

    - You also have a tendency to make assertions that have no facts to support them. What is your basis for “market wise” people beating a recommendation based on facts—you’re so called “intellectual. (As Mark Twain said, “I’ve never let school get in the way of my education.”)

    - Yes, I do have a clearly stated mission. To provide independent analysis on the CEF market segment. On this we may agree. I don't have a "chip on my shoulder" I'm just an ardent advocate for the retail investor.

    Now, since you’ve open yourself to personal attacks by attacking me with no basis, let me return the volley.

    First of all, you have no bio, no one follows your comments and you follow no one.

    If you did a modicum of research you could go to my website and pull off a report called: “The Mid ’09 Eqcome CEF Report Card” which reviews the performance of the recommendations. Not all are winners I assure you.

    Lastly, you should do some more basic homework before you comment on someone else work with essentially personal attacks. I believe you can do better than this diatribe.

    If not, you should go back to mowing grass and shoveling snow in the “suburbs” and leave investing to more serious people.
    Jan 8, 2010. 09:34 AM | 6 Likes Like |Link to Comment
  • My 2010 Investor Stupidity Award [View article]
    I’m not sure your comment could be more inane.

    If you disagree, then provide some factual evidence to the contrary.

    Please build the case why a retail investor should buy this stock! If you can’t, then don’t waste electron and readers’ time with this drivel.

    We’ll all be looking forward to your cogent response. Your failure to do so will reinforce the contention you have no clue.
    Jan 7, 2010. 05:45 PM | 6 Likes Like |Link to Comment
  • Proposed Dividend Tax Is As Uninformed As It Is Naive [View article]

    The back of the envelope analysis would be that there is approximately $7.5 trillion dollars in 401(k) and IRAs. Figure 50% is in equity. So, were talking about a $3.4 trillion commitment to equities against a U.S. Equity market of 17.5 trillion--so, about 20% of equities are in retirement accounts. (Figure two to three times the U.S. market capitalization if you're including global equities.)

    However, the more important point is displacement of investments in dividend paying stock to other forms of investments.

    If the tax proposal is passed, then money managers will just set up closed end funds--or other conduits--that have managed distribution programs that will pay out a certain percentage distribution of NAV in the form of capital gains distributions which will retain their tax character for the investors.

    So, in the final analysis, you'll pay the same taxes on your capital gains distribution as you would as a qualified dividend distribution.

    This proposal is a lot of heavy breathing for nothing--particularly if the capital gains tax rate is lower than the dividend tax rate

    Wealth people have a lot of smart advisors. This is really the Tax Lawyers' Relief Act than it is a source of revenues for the federal government.
    Mar 1, 2012. 02:45 PM | 5 Likes Like |Link to Comment
  • CEF Weekly Review: The Retirement Income Gap [View article]

    There are two major ways to internally fix social security: either by raising the retirement age or increasing the payroll tax deduction.

    I just think the politicians don't have the guts to suggest either. (If you think the riots in France were bad over increasing the retirement age from 60 to 62, just wait until to the riots come to your town.)

    The default solution is to float more government debt which isn't viable. A private solution may be the only reasonable alternative. It wouldn't be my first choice.

    I'd be interested in your recommendations.

    Joe Eqcome
    Oct 24, 2010. 03:45 PM | 5 Likes Like |Link to Comment
  • ETFs vs. CEFs [View article]

    Being what appears to be an ETF specialist, you may be somewhat myopic with regards to your assessment of ETFs vs CEFs.

    Let me address your bullet points regarding your thesis because they may be somewhat misleading if not inaccurate.

    Bullet Point 1: I believe an ETF trades on stock exchanges like stocks. While CEFs have initial public offerings, ETF effectively have a continuous offering which causes some ETFs never to obtain the size to become viable or cost effective. Additionally, ETFs are vulnerable to liquidation of its assets to satisfy redemptions and could be subject to a “run on the bank” which would severely depress the stock price for late comers.

    I think the more germane comparison is between ETFs and index mutual funds.

    Bullet Point 2: The average expense ratio for a CEF is about 1.5% the same as actively managed mutual funds. As the ETF market segment gravitates to active management the expense ratios will also increase.

    Bullet Point 3: With the exception of leverage, this has more to do with investment objectives than the investment vehicle.

    Bullet Point 4: I’m not sure the fixed number of shares is the cause of the discount in CEFs versus ETFs. It has more to do with the arbitrage process indigenous to ETFs that allow for the establishment and redemption of creation units. It is a totally different market mechanism of pricing the shares.

    Bullet Point 5: We may have exhausted all the legitimate indices and the trend is toward active management for ETFs.

    Bullet Point 6: This is inaccurate. Like corporations, CEF have authorized and issued shares. This year there have been a number of CEFs that have raised additional capital through follow-on offerings.

    I don’t disagree that there some deficiencies inherent in the CEF but the more malicious ones are those imposed by unscrupulous managements.

    The most offensive one is the ability to distribute a return-of-capital distribution after having exhausted earnings and capital gains. This inflates the stock price and causes unsophisticated CEF investors to trade the stock up to unrealistic premiums. I lay this on the doorstep of the SEC for allowing this abuse to continue.

    I think there are different investment for different investors and investment objectives. I don’t necessarily think an ETF is superior to a CEF—just different, although they maybe superior to most index mutual funds.

    Finally, I think PCEF is a legitimate alternative for unsophisticated CEF investors.
    Jun 1, 2010. 11:27 PM | 5 Likes Like |Link to Comment
  • How Taxes Diminish Long-Term Returns For Investors In High Yield Stocks [View article]
    Willie Sutton was asked why he robbed banks. To paraphrase his response, he said "that's where they keep the money".

    People who buy dividend stock have a different set of needs than people who buy growth stocks. Some are not trying to maximize value buy are more interested in paying for food, clothing and shelter.

    Additionally, there is the issue of risk adjusted returns for these various categories of stocks and the impact of portfolio diversification.

    This is the fundamental reason why Baskin and Robbins initially offered 31 flavors of ice cream (now more) and Ford motor company now offers car colors other than black.
    Feb 11, 2012. 11:39 PM | 4 Likes Like |Link to Comment
  • CEF Weekly Review: The Retirement Income Gap [View article]

    Thank you for your thoughtful response and your clear articulation on the issue.

    I share your concerns regarding the reliability of payments to seniors and believe your recommendations makes sense if we had any conviction that policymakers would take the initiative to seek rational change.

    My concerns over the inaction of policy makers to address these issues is unfortunately, well-founded and recently on display. In an article in the WSJ regarding the “Budget Deficit Commission” the author notes:

    “Changes to Medicaid and Medicare are unlikely to be recommended despite their looming presence in the U.S. budget. The Congressional Budget Office has estimated that if laws don't change, federal spending on health care alone will grow from 5% of gross domestic product in 2010 to 10% in 2035.

    Commission officials looked closely at making short-term changes to Social Security, but talks shifted in recent weeks toward incorporating those ideas into a longer-term plan.”

    Most government commissions are organized in haste after the crisis and later are dismissed with great thanks and praise by the organizers with little of the recommendations being enacted.

    Lastly, by delaying the solution you are back loading the costs to future generation where the dependency ratio of a “pay as you go system” falls on fewer contributors.

    I just think we’re going have to be shocked into action by an unpopular alternative such as privatization.

    I, like you, am not hopeful that a rational solution will be forthcoming. “Long-term solutions” are just a euphemism for “kicking the can down the road” with great thanks to the commission and little follow through.

    I’m not holding my breath either.

    Joe Eqcome
    Oct 25, 2010. 09:44 AM | 4 Likes Like |Link to Comment
  • Why CEF Managed Distribution Programs Should be Eliminated or Modified [View article]
    I agree with the concept of caveat emptor as long as the important information is at the point of sale. Similar to a warning on a pack of cigarettes that discloses it is “hazardous to your health”.

    Similarly, CEF investors should be notified that purchasing CEFs with MDPs that constitute a large return-of-capital component could be “hazardous to your financial health” as my research has shown few long-term investor in these types of CEFs has made any money.

    I guess the simple and most practical response to your comment would be: If any of the Cornerstone funds reported their investment yield as opposed to their managed distribution yield in the financial press, do you think their respective stocks would be trading at their current premiums 47% average premium?

    This is not a theoretical question. As I’ve suggested elsewhere, the SEC should declare a one year moratorium on MDP yields that include ROC and only post the yields supported by investment income (earning and gains). If after a year the SEC finds no difference in valuations—pre and post the moratorium—then the SEC would suspend the moratorium and allow the MDP CEFs to report their yields including ROC.

    This issue doesn’t need to be speculative. Let’s test it in real time.
    Sep 13, 2010. 10:43 AM | 4 Likes Like |Link to Comment