"if this were always a profitable trade then someone would be arbitraging CH to death and making a killing. "
That someone has been me. It's worked very nicely. Management can't account for much since the CH and ECH portfolios are pretty much identical -- even more so than MXF and EWW (which have the AMX difference discussed above).
What was the old Friedman line? "That couldn't be a real $5 bill on the ground. If it were, someone would have picked it up!"
If You Want To Know Where Stocks Are Headed, Don't Ask The Economy [View article]
"causation statistics (r-squared)"
r-squared is a "causation statistic?" Really? Some people might mistakenly imply that at times, or at least throw in some factor analysis to justify it. But nobody actually claims that.
Somewhere a statistics teacher is rolling in his grave.....
I didn't misunderstand. MXF's recent NAV performance is indeed better as you say (up to 3 years). Beyond that, it converges. It looks like the recent outperformance is mostly due to MXF's lower weight in AMX, which has underperformed the broader market by about 40%. This one stock shifts the blend rather significantly.
So I suppose you could argue along Fama-French lines that value (MXF) outperforms large-blend (http://bit.ly/12abwrI). That is why I favor DGS, DEM, and EEMV over VWO and EEM. But the 10+ year performance doesn't bear that out for MXF and EWW.
You understate MXF's performance. It has returned almost 26% YTD. The problem is you're not buying MXF at NAV. You're buying it at the market price, which is a lot higher. So yesterday's outperformance will contribute to tomorrow's underperformance.
As you must know from the M* stats, the total returns on the NAV of MXF and EWW have been almost identical over the long run. So why would you pay a premium for one over the other?
For my part, I have owned both CH and MXF in the past, but will only buy them at a discount. When the premium reaches a sigma, I go the other way. I do not know of any country CEFs that have held significant premia over the long run. Most run chronic discounts.
Right. I have no problem buying at a discount. Though I would make sure it's more than the historic average to be safe.
In any case, the premium is rapidly eroding since the article posted. EWW is has gone up about half a percent; MXF has gone done by 4.6%. Like I said, it's a great hedge. It goes down even as the Mexican market goes up.
"MLP, how do you explain the fact that the NAV is growing?"
Of course it's growing. The Mexican stock market has been going up. The problem is, the price of MXF has gone up a lot faster than the NAV. I encourage you to consult cefconnect.com or Morningstar to see MXF's NAV and portfolio.
Hoisan, here's a question for you: how do you justify spending $1.13 to buy $1.00 worth of assets? Do you think the managers have some special brilliance that you're willing to pay a huge premium for in addition to a hefty annual expense of 1.5% (keeping in mind that their portfolio is almost identical to the index fund)? Seems like a good way to lose money to me.
"An implicit assumption is that there is a premium that is not warranted."
That's not an assumption, it's just plain common sense. You can own all of these stocks at 0 premium. Why would any rational investor pay 13% extra just so they can collect a phony dividend that's just your own capital being paid back?
You only need to look at the history of CEFs like this. Eventually, the silly premiums turn into discounts. And the irrational dividend chasers get burned.
It's an OK buy at a discount. But why would anyone buy it for $1.13 on the dollar? Particularly when you lose an extra 1.5% each year to expenses?
The "dividend" is an illusion. You're just getting back capital gains. You would do better to own EWW and just sell a little from time to time, if you want the income.
Eventually, investors realize the emperor has no clothes and these inflated CEFs collapse. Just like the Aberdeen Chile fund (CH) did.
Using CH as a pattern, I would expect MXF to drop to a discount on the downside, maybe 5%. That's still only half the historic discount. But even that means about a 17% decline from here....
EV Energy: Utica Acreage At Firesale Prices [View article]
No, not exactly the firesale you might be hoping for. Instead of getting the $10k/acre they've been talking about, they settle for $5k because it's the lesser of two evils (the other being an equity offering at rock-bottom prices).
They sell one county for $200 million. But the market is valuing the ENTIRE Utica holdings at only $180 million. So the sale of one county (out of 13) for more than that will set off one of the most spectacular short squeezes in recent history. Will be fun to watch.
Note that the short interest shown above is only up to April 15. The end-of-month short interest will be reported on May 9. With the Hedgeye focus, I would not be surprised if it has doubled (i.e. 10 days to cover). The risk for shorts going into the earnings CC is pretty extreme.
EV Energy: Utica Acreage At Firesale Prices [View article]
I was sitting about 10 feet away when he gave his presentation and heard that too. I was looking around to see if it registered with anyone else. It didn't seem to. Lots of people on their iphones at these events....
Grupo Bimbo (GRBMF.PK) plans to launch knock-off Hostess products before the well-known brands can be brought back to the market by Apollo Global Management (Twinkies, Ho Hos, Ding Dongs) and Flower Foods (Wonder Bread, Nature's Pride) from the bankruptcy bin. The new snack products could be on the market within a month or two. [View news story]
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
I don't hate gold. But I can say that my stocks make money, mostly by selling things that people actually have to have. Any doubts are allayed as they give some of that money back to me each quarter.
Mr. Bondfinger says: "I don't expect you to talk Mr. Gold, I expect you to die! Bwahahahahah."
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
The price of gold, like the price of Internet stocks, is mostly speculation. Yet you're surprised that it takes wild swings and can be manipulated overnight?
Finding Value In Brazilian Utilities [View article]
I'm amazed that you can write an entire article on Brazilian utilities without once mentioning Dilma Roussefs plan to force rate cuts on them.
Like Petrobras, these utilities are viewed by the Brazilian govt. as a means of currying political favor. As long as that's the case they will be a very poor and very risky investment.
A Great Hedge For Mexico Exposure [View article]
That someone has been me. It's worked very nicely. Management can't account for much since the CH and ECH portfolios are pretty much identical -- even more so than MXF and EWW (which have the AMX difference discussed above).
What was the old Friedman line? "That couldn't be a real $5 bill on the ground. If it were, someone would have picked it up!"
If You Want To Know Where Stocks Are Headed, Don't Ask The Economy [View article]
r-squared is a "causation statistic?" Really? Some people might mistakenly imply that at times, or at least throw in some factor analysis to justify it. But nobody actually claims that.
Somewhere a statistics teacher is rolling in his grave.....
A Great Hedge For Mexico Exposure [View article]
So I suppose you could argue along Fama-French lines that value (MXF) outperforms large-blend (http://bit.ly/12abwrI). That is why I favor DGS, DEM, and EEMV over VWO and EEM. But the 10+ year performance doesn't bear that out for MXF and EWW.
A Great Hedge For Mexico Exposure [View article]
As you must know from the M* stats, the total returns on the NAV of MXF and EWW have been almost identical over the long run. So why would you pay a premium for one over the other?
For my part, I have owned both CH and MXF in the past, but will only buy them at a discount. When the premium reaches a sigma, I go the other way. I do not know of any country CEFs that have held significant premia over the long run. Most run chronic discounts.
A Great Hedge For Mexico Exposure [View article]
Right. I have no problem buying at a discount. Though I would make sure it's more than the historic average to be safe.
In any case, the premium is rapidly eroding since the article posted. EWW is has gone up about half a percent; MXF has gone done by 4.6%. Like I said, it's a great hedge. It goes down even as the Mexican market goes up.
A Great Hedge For Mexico Exposure [View article]
Of course it's growing. The Mexican stock market has been going up. The problem is, the price of MXF has gone up a lot faster than the NAV. I encourage you to consult cefconnect.com or Morningstar to see MXF's NAV and portfolio.
Hoisan, here's a question for you: how do you justify spending $1.13 to buy $1.00 worth of assets? Do you think the managers have some special brilliance that you're willing to pay a huge premium for in addition to a hefty annual expense of 1.5% (keeping in mind that their portfolio is almost identical to the index fund)? Seems like a good way to lose money to me.
A Great Hedge For Mexico Exposure [View article]
premium that is not warranted."
That's not an assumption, it's just plain common sense.
You can own all of these stocks at 0 premium. Why would any rational investor pay 13% extra just so they can collect a phony dividend that's just your own capital being paid back?
You only need to look at the history of CEFs like this. Eventually, the silly premiums turn into discounts. And the irrational dividend chasers get burned.
A Great Hedge For Mexico Exposure [View article]
The "dividend" is an illusion. You're just getting back capital gains. You would do better to own EWW and just sell a little from time to time, if you want the income.
Eventually, investors realize the emperor has no clothes and these inflated CEFs collapse. Just like the Aberdeen Chile fund (CH) did.
Using CH as a pattern, I would expect MXF to drop to a discount on the downside, maybe 5%. That's still only half the historic discount. But even that means about a 17% decline from here....
EV Energy: Utica Acreage At Firesale Prices [View article]
They sell one county for $200 million. But the market is valuing the ENTIRE Utica holdings at only $180 million. So the sale of one county (out of 13) for more than that will set off one of the most spectacular short squeezes in recent history. Will be fun to watch.
Note that the short interest shown above is only up to April 15. The end-of-month short interest will be reported on May 9. With the Hedgeye focus, I would not be surprised if it has doubled (i.e. 10 days to cover). The risk for shorts going into the earnings CC is pretty extreme.
EV Energy: Utica Acreage At Firesale Prices [View article]
I was sitting about 10 feet away when he gave his presentation and heard that too. I was looking around to see if it registered with anyone else. It didn't seem to. Lots of people on their iphones at these events....
Grupo Bimbo (GRBMF.PK) plans to launch knock-off Hostess products before the well-known brands can be brought back to the market by Apollo Global Management (Twinkies, Ho Hos, Ding Dongs) and Flower Foods (Wonder Bread, Nature's Pride) from the bankruptcy bin. The new snack products could be on the market within a month or two. [View news story]
So a Bimbo is going to make Ding Dongs!
Weekly Jobless Claims Continue To Decline [View article]
Huh? They were up 4000 this week, above consensus. The 4-week moving average is also up to 361,000.
http://bloom.bg/itq0bI
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
Mr. Bondfinger says: "I don't expect you to talk Mr. Gold, I expect you to die! Bwahahahahah."
http://bit.ly/117srfx
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
Finding Value In Brazilian Utilities [View article]
Like Petrobras, these utilities are viewed by the Brazilian govt. as a means of currying political favor. As long as that's the case they will be a very poor and very risky investment.