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Joe Eqcome
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Joe Eqcome is the pen name of Robert A. Frank, CFA, a Wall Street executive who has spent over 30 years as an investment professional. Mr. Frank is the founder of GrowthIncome Research & Management, LLC. GrowthIncome Research & Management, LLC’s business mission is focused on generating... More
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  • CEFs Week of 9/9/11: A Volcker Moment

    Outlook: The Keystone Cops were a series of silent film comedies about an incompetent group of policemen produced between 1912 and 1917. The films were funny because they were fictional. This may not be true of political policymakers on both sides of the Atlantic.

    Domestically: President Obama is likely to receive resistance on his $447 jobs program—of which half is geared to consumer stimulus through reduction in payroll taxes—which reduces cash flow to Social Security and Medicare programs. The funding of this additional deficit is through some vague reference to revenue enhancers (read, “tax hikes” on the almost wealthy) and the closing tax loopholes. For as many times as I’ve heard policymakers committed to closing of “loopholes” I’m astonished that there are any left to close.

    Europe: There appears to be no “playbook” for resolution of the European debt crisis as many countries are going their own ways.

    A Volcker Moment: In the early 1980’s when inflation was running out of control then Fed Reserve Chairman Paul Volcker made a painful decision to let it run its course by raising interest rates to nose-bleed territory. This precipitated a double dip recession that cleaned the system by wringing out the excesses.

    Maybe it’s time for Mr. Bernanke to allow this economy to take its natural course—as painful as that may seem. It appears that propping up the economy through monetary policy has not produced the desired results. In fact, it has probably contributed to an asset bubble in treasuries and commodities. This has led to a postponement and coordination of simultaneous debt crisis both here and abroad. The economy is a very sick patient whose fever we’re not allowing to “break” in an effort to keep the patient comfortable.

    We’re currently operating in an economic “make believe” where the laws of business physics have been suspended. This has made business and investing decisions almost impossible. Maybe it’s time we took the medicine and stop drinking the Kool-Aid.  

    CEF Weekly Review: On average, the 13 closed-end fund (NYSEMKT:CEF) types registered a share price decrease of 0.9% for the week ending 9/9/11. The high-low spread registered this week was +3.4% versus +3.1% the previous week on an average price change of -0.9% versus +1.6%, respectively. On an aggregate unweighted basis, the weekly average price change for the 600 plus CEFs in the GrowthIncome database was down 0.6%.

    The PowerShares CEF Income Composite (NYSEARCA:PCEF), an ETF that invests in taxable income CEFs, decreased 1.2% for the week. In another roller coaster week, the S&P 500 slumped another 1.7% after easing 0.2% the previous week. The S&P 500 extended its loss YTD to 8.2%.   

    (Click Here for YTD CEF Performance. See, “Research” Menu; “CEF Weekly Information” tab)

    The Eqcome CEF Fear Index increased modestly for the week on the downside. The average CEF unweighted price decrease was 0.6% and the average related NAV decreased 0.4%. Despite this week’s equity markets’ volatility, The VIX increased 13.6% to 38.52 placing it slightly below the high-anxiety level of 40 where it was hovering two weeks ago. 

    CEF Weekly Fund Type Performance: The CEF sectors for the week pretty much lined up as one would expect in an anxious equity market. Investors preferred fixed-income with equity oriented funds suffering. Munis continued to be favored with WrldEqFnds suffering under the weight of a potential of a Greek sovereign debt default.

    Positive PrcNAVSprds were recorded for InvGrdBndFnds and PrefStkFnds, i.e. share prices exceeded underlying NAV. This typically happens when you see investors rush into a sector based on macro factors—albeit, the NAV can lag in certain fund types given the difficulty and timing of valuing the underlying assets

    Economic & Earnings Outlook: (Click here [1] for next week’s economic calendar; click here [2] for earnings’ announcements and estimates.)

    ETFs: For a more detailed EFT performance by sectors, click here—see, “Research” Menu; “ETF Weekly Information” tab.)

    Insider Trading: The biggest trade so far in early September is a 400,000 shares acquisition in Equus Total Return (NYSE:EQS) at an average price per share of $2.75 per share for aggregate amount of $1,000,000 by its Executive Chairman, Alessandro Benedetti. This brings his holdings to 1,362,960 shares. Other directors were buying the previous month along with Versatile Systems, Inc., a 10% owner of EQS.

    EQS is a small BDC that is trading at $2.25 per share at a 43.1% discount. It has roughly $1.60 per share in cash. While its significant discount is a function of its small investments in obscure companies, over half the portfolio is in cash alternatives. It trades by appointment.  

    (Click here for a hyperlink to the Joe Eqcome’s CEF Weekly Insider Report—see, “Research” Menu; “CEF Weekly Information” tab.)

    CEF Distribution Announcements This Week: The following is a link to a table of CEF distribution announcements this week as well as the previous week’s with yet expired ex-dividend dates. The list is not intended to be inclusive. (Click Here for Joe Eqcome’s Weekly CEF Distribution Announcements—see, “Research” Menu; “CEF Weekly Information” tab.)

    Joe Eqcome (Owns a diversified portfolio of CEFs and ETFs and is long stocks in the CEFBig10™, CEFMuni10™ and CEFDisc10™.) 

    The first is a balanced equity-income portfolio (CEFBig10™), the second a tax-exempt income portfolio (CEFMuni10™) and the third a portfolio whose objective is capital gains with a secondary objective of current income (CEFDisc10™).


    [*] All things being equal, price and NAV should move in tandem. A price movement greater than the NAV generates a positive PrcNAVSprd and may be interpreted as negative on a near-term basis and indicate that the stock is overvalued relative to its NAV which in theory is the stock’s intrinsic value. The opposite would be true for a negative PrcNAVSprd.

    [1] http://www.bloomberg.com/markets/economic-calendar/
    [2] http://www.bloomberg.com/apps/ecal?date=20110502&strtpt=1&endpt=50&c=US
    http://www.youtube.com/watch?v=Sx9Tovevx6w

     

     

     

    Disclosure: I am long PCEF.
    Sep 10 12:01 PM | Link | Comment!
  • Eqcome CEF Prem/Disc Eases in Aug (9/1/11)
    The Eqcome CEF Price Index declined 2.1% for the month of August and the Eqcome CEF NAV Index over twice as much to 4.3% causing the Premium/Discount to narrow to 3.8% from 6.0% the previous month

    The biggest drop in the premium/discount was for muni CEFs declining almost three-quarters from 3.98% to 1.06% as it was the only CEF fund type that saw an increase in average price. The Eqcome CEF Fear Index turned down while the VIX moved up. (See "CEF Index" tab, "Research" menu)  

    Joe Eqcome
    Sep 01 12:08 PM | Link | Comment!
  • CEFs Week of 8/26/11: Investor Fatigue (Revisited)

    Revised
    Note: This is the revised weekly as the originally published weekly was the text of last week. Apologize for the error

    CEF Weekly Review:
    On average, the 13 closed-end fund (NYSEMKT:CEF) types registered a share price increase of 1.6% for the week ending 8/26/11. The high-low spread registered this week was +3.4% versus +4.4% the previous week on an average price change of +1.6% versus -1.2%, respectively. On an aggregate unweighted basis, the weekly average price change for the 600 plus CEFs in the GrowthIncome database was up 1.4%.

    The PowerShares CEF Income Composite (NYSEARCA:PCEF), an ETF that invests in taxable income CEFs, increased 2.5% for the week erasing most of last week’s loss of 2.7%. The S&P 500 rose 4.7% cancelling out last week’s decline of a similar amount. The S&P 500 narrowed its loss YTD to 6.4%.  

    Trading Volume: The average daily volume for the S&P 500 (Pending:GSPC) rose to 5.3 billion shares, up 19.9% from its previous week on top of a 14.5% increase the week before. Volume has ratcheted up in August as volatility has spiked. We’ve seen the S&P 500 average monthly volume escalate sequentially from a low of 3.2 billion in February this year.  (See “Outlook” section above) (See, “Uptick, Downtick” below.)

    (Click Here for YTD CEF Performance. See, “Research” Menu; “CEF Weekly Information” tab)

    The Eqcome CEF Fear Index eased materially for the week on the upside. The average CEF unweighted price increase was 1.4% and the average related NAV increased 0.1%. The VIX after surging for four weeks finally eased 17.3% to 35.59. This is below the high anxiety level of 40 where it was hovering at the end of the previous week.

    CEF Weekly Fund Type Performance: The CEF fund types much lined up pretty as one would anticipate in a broad-based equity markets advance: equity-oriented CEFs advanced and fixed-income CEFs registered below the CEF market sectors’ average.  

    There were several curious exceptions. WrldIncFnds advanced 2.3% and HiYldBndFnds rose 1.7%. In each case while the average share price increased their respective NAV’s declined. WrldIncFnds are still shadowed by the uncertainty of the sovereign debt turmoil and the financial institutions that hold such paper. In the case of HiYldBndFnds, junk bonds have recently seen their worst rout since the financial meltdown. The Barclays Capital High Yield Index over Treasuries has widened to 7.7% from 5.9% since the end of July.  The highly leveraged HiYldBndFnds may be benefiting from the low interest cost on their leverage.

    Economic & Earnings Outlook: (Click here [1] for next week’s economic calendar; click here [2] for earnings’ announcements and estimates.)

    ETFs: For a more detailed EFT performance by sectors, click here—see, “Research” Menu; “ETF Weekly Information” tab.)

    Insider Trading: Insider trading continued at a robust pace in the in the fourth full week of August with an additional $6.5 million in stock purchases.

    The biggest contributor to this total was again William H. Gates, III, of Microsoft fame. Mr. Gates added an additional 856,661 shares for capital outlay of $6.2 million in Western Asset/Claymore Inflation-linked Opportunities & Income Fund (NYSE:WIW). Mr. Gates has now accumulated 8,553,464 shares of WIW and is a 13.1% owner. Additionally, First Trust Portfolios, LLC owns 16.8% and Wells Fargo owns 7.6% of WIW.

    A director at Equus Total Return Fund (NYSE:EQS), Robert Knauss, purchased an additional 20,000 shares at a price of $2.32 per share bringing his total holdings to 15,870 shares

    (Click here for a hyperlink to the Joe Eqcome’s CEF Weekly Insider Report—see, “Research” Menu; “CEF Weekly Information” tab.)

    CEF Distribution Announcements This Week: The following is a link to a table of CEF distribution announcements this week as well as the previous week’s with yet expired ex-dividend dates. The list is not intended to be inclusive. (Click Here for Joe Eqcome’s Weekly CEF Distribution Announcements—see, “Research” Menu; “CEF Weekly Information” tab.)

    Joe Eqcome (Owns a diversified portfolio of CEFs and ETFs and is long stocks in the CEFBig10™, CEFMuni10™ and CEFDisc10™.)  

    The first is a balanced equity-income portfolio (CEFBig10™), the second a tax-exempt income portfolio (CEFMuni10™) and the third a portfolio whose objective is capital gains with a secondary objective of current income (CEFDisc10™).


    [*] All things being equal, price and NAV should move in tandem. A price movement greater than the NAV generates a positive PrcNAVSprd and may be interpreted as negative on a near-term basis and indicate that the stock is overvalued relative to its NAV which in theory is the stock’s intrinsic value. The opposite would be true for a negative PrcNAVSprd.



    Disclosure: I am long PCEF, WIW.
    Aug 29 11:21 AM | Link | Comment!
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