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panda317
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High Yield Dividend Portfolio; I target a minimum 30% return on stock price *and* a minimum 7% for dividend yield. Early retiree, father, and grandfather. Seeking alpha n00b. Opinionated SOB. Radical liberal conservative libertarian (I VOTE FOR NONE OF THE ABOVE!). I'm actually a Marxist - of... More
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PandA Trader - High-Yield (7%+) Dividend Stocks with High Annual Return (30%+) & Other Adventures in Trading the Day
  • $CEFL & $MORL, And Why I Add Them To My Holdings. $STUDY 3 comments
    Apr 27, 2014 2:57 PM | about stocks: CEFL, MORL

    I recently started investing in a couple of double-leveraged ETN's, where I had never invested in any ETNs before. I had read an article on Seeking Alpha about CEFL and that initially picqued my interest. I looked on stocktwits for more info on the 2 ETNs that were mentioned; CEFL and MORL, but there were no comments yet with the first comment on April 15th on stocktwits regarding CEFL by @regnard: "$CEFL Any comment on this ETN?". As of this writing, there are a total of 4 comments, all from that same day, from the original poster and myself. There were many more comments on MORL started on Dec. 23rd by @mREITlover (Bill Schultz): "$MORL is an Exchange Traded Note (UBS vehicle) providing Monthly compounded 2x leveraged exposure to the $MORT Index, less fees." (his 3rd comment within 3 minutes). Since stocktwits provided very little in the way of discourse on these double-leveraged ETNs, I turned to Seeking Alpha, knowing full well that some of the commenters/'authors' there have very little if any qualification to opine on any subject. Nevertheless, I decided to heed the advice of Prof. Lance Brofman and the anonymous 'Left Banker' as Prof. Brofman's curriculum vitae on Seeking Alpha deemed him a valid source, and 'Left Banker' spoke with quite a bit of reason and imparted some knowledge as well. My thanks to both of them for their freely imparted wisdom.

    I read the articles on Seeking Alpha on both ETNs (and comments, of course, of which they are both varied and voluminous!). The articles and comments provided quite a learning experience, with many opinions and facts offered in the process. There have been some wild accusations and some well thought out responses, and it was very hard for this neophyte to discern which was which. But, after reading all the articles and comments on Seeking Alpha through April 2nd I had made my mind up; I would invest in a starter position in both of these ETNs, so I ponied up my $49 for each one and plugged in my choices in my sharebuilder Roth IRA AIP (Automatic Investment Plan). I invested the same amount for 2 weeks, and then also added them to the other Roth IRA in our portfolio with cash from the sale of stock for a total investment to date of $1,757.00 for each ETN. Only my initial investment of $49.00 for each ETN in the first Roth IRA was before the ex-dividend date of April 9th. On April 22nd, CEFL paid $1.06 (a 25.96% annual return) and MORL paid $2.26 (a 55.35% annual return) on initial investments of $49.00 (made one day before the ex-dividend date). I intend to further invest no more than 2-5% of our total portfolio value in these ETNs, but only in our Roth IRAs. Currently, we have less than 1.5% invested and investment will be ongoing on an irregular basis until that threshold is reached.

    Now, a word on why I will only invest in these monthly paying ETNs in our Roth IRAs; since the dividends are taxed as 'ordinary income' it only makes sense to invest in the account(s) where the consequences of taxes has no bearing, i.e. our Roth IRA accounts. In any other account the tax consequences would be too high, and that would add to the already high implied risk with these double-leveraged ETNs.

    Please don't misconstrue this article as investment advice, because I am not qualified to offer same. I defer to more qualified sources. Do your own due diligence, and seek the advice of a qualified professional.

    Disclosure: I am long CEFL, MORL.

    Themes: ETN, dividends, retirement, Roth IRA Stocks: CEFL, MORL
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Comments (3)
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  • Urbannek
    , contributor
    Comments (560) | Send Message
     
    Hi I subscribe to your blog. Tried to comment there a few times but it never gets published so I kind of gave up on it. We seem to invest in the same stocks to quite some degree which is why I was reading your blog. Bought both MORL and CEFL early in 2014. Like you I don't want a very large position in either now. Maybe I will get more comfortable with them later. Definitely the first thing I would sell if I was expecting a recession, however from what I am seeing the USA may finally be recovering from the great recession of 2008 at least to a significant degree.
    28 Apr, 08:24 PM Reply Like
  • Urbannek
    , contributor
    Comments (560) | Send Message
     
    From your profiile " Radical liberal conservative libertarian". Gee I finally found someone else with the same politics as me. I do get your point that our politicians are really marxists of the Groucho variety because they sure do behave like a bunch of clowns in most instances.
    28 Apr, 08:27 PM Reply Like
  • panda317
    , contributor
    Comments (29) | Send Message
     
    Author’s reply » Thanks! You should be able to leave a comment, but I do require a name and email. There are 103 comments on my blog right now. Anyway, the point I was trying to make with this post was that it seemed right for my Roth IRA, but not my traditional IRA or regular account. I'm just not comfortable with a large position right now, until I get more comfortable with it and understand them a bit better. Thanks for the kind words and Happy Investing!
    29 Apr, 05:43 AM Reply Like
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