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CEF November ’10 Flash Results

|Includes:The Adams Express Company (ADX), GDV

Summary: November was a dismal month for closed-end fund (NYSEMKT:CEF) investors. The average month-end price change for the 13 CEF fund types declined 1.8% versus a flat price performance for the S&P 500.

More Bad: However, in the aggregate, the 600 plus CEFs declined a more devastating 2.7% as both state and national muni bonds—making up almost 40% of the CEF market segment—plunged 5.0% for the month.

The 5.0% average price decline in CEF muni funds was in contrast to a 3.1% iShares S&P National AMT-Free Muni Bond ETF (NYSEARCA:MUB). (MUB typically doesn’t employ leverage where muni CEFs on average employ approximately 34.0 % leverage.)

Muni Concerns Highlighted: Concerns regarding the CEF muni sector was highlighted in a late-October published article entitled, “Are Muni CEFs Rolling Over?[1] (10/28/10). (Read article for further details.)

Best CEF Performers: The best performing group was the SpecEqFnds which advanced 1.2%. Most of this gain was driven by commodity related CEFs in the energy/natural resources and precious metals sectors.



Flash Assessment: While November is only a single month from which to generate a forecast, the decline in the fixed income fund types—particularly leveraged funds—and the rise of the more commodity oriented specialty funds would indicate that investors are getting a whiff of inflation and the potential for higher interest rates. Whether this is a correct interpretation of the data and whether it will become a trend is something about which investors should keep their noses to the wind.

Stock Sentiments: I continue to believe that we’re in the early stage of a corporate dividend cycle and that those CEFs that focus on large-cap, dividend-paying corporate stocks would be a beneficiary. I own both The Adams Express Company (NYSE:ADX) and Gabelli Dividend & Income Trust (NYSE:GDV) for that reason. (See, “CEF Focus Stock(s) for the Week” section in “CEF Weekly Review entitled: Santa Rally Underpinnings and CEF GDV in Focus[2]” 11/22/10).

Additional CEF November Performance Information: Additional November ’10 monthly information can be found at my website in the “CEFIndex[3]” tab.

Joe Eqcome (Disclosure: owns a diversified portfolio of CEFs and ETFs, and the Eqcome CEF Portfolios™ as well as specifically both ADX and GDV, both mentioned in this article.)


[1] http://joeeqcome.web.officelive.com/Documents/JoeRschRptMuniDownGrade_102810.pdf
[2] http://seekingalpha.com/article/237997-cef-weekly-review-santa-rally-underpinnings-and-cef-gdv-in-focus

Disclosure: owns a diversified portfolio of CEFs and ETFs, and the Eqcome CEF Portfolios™ as well as specifically both ADX and GDV, both mentioned in this article
Stocks: ADX, GDV