Conclusion: Closed end funds’ (CEFs) stock volume trading patterns may indicate that the CEF market segment may be heading towards a period of moderately sustained price appreciation.

Volume Counts: Price and volume are two basic building blocks of technical analysis. Non-technical investors have a tendency to focus mostly on price changes and give share volume short shrift. This article reviews the volume characteristics of the CEF market segment for any clues with respect to its price direction.

The Eqcome CEF Big 10 Portfolio is a simple, inexpensive and self-directed way for retail investors to own a diversified CEF portfolio representative of this market segment. The portfolio consists of 10 CEF stocks. Each stock represents one of the largest within the 10 major CEF fund types (see chart below) and has been in continuous operation since Oct ‘04. The CEF Big 10 portfolio was off 3.9% during the period versus the S&P 500 (SPY) off 11.8% and Claymore CEF Index off 37.9%.

Investment Management Underperformance: Seventy percent of large cap fund managers failed to beat the S&P 500; 85.5% of small cap managers failed to beat S&P 600 (small cap); 80% of bond fund managers failed to beat benchmarks (excluding High Yield) (WSJ 4/22/09). It makes you wonder, for what purpose are we paying investment managers? The privilege to lose our money!

2008 was a year filled with ups and downs: market down big time; bankruptcies, job losses, mortgage foreclosures up big time.

All in all, a year of infamy filled with surprise bailouts, re-counted elections (still counting), and a world record ponzi scheme still unraveling. Now what will 2009 bring?

Roger Nusbaum submits: I got to thinking it might be interesting to see how some of the low beta, high yielding, defensive investment products came through the recent dip. The following list is not comprehensive; feel free to add any of your own.

• Claymore Sabrient Defender ETF (DEF) was down 3.00% on February 27 and from the close on 2/26 to the close on March 5 it was down 4.97%
• Claymore Yield Hog (CVY) was down 2.33% on February 27 and from the close on 2/26 to the close on March 5 it was down 5.52%
• iShares Dividend Select ETF (DVY) was down 3.21% on 2/27 and from the close on 2/26 to the close on 3/5 it was down 5.15%
• SPDR S&P Dividend ETF (SDY) was down 2.26% on 2/27 and for the same week as the others it was down 4.81%
• WisdomTree High Yielding Equity ETF (DHS) was down 2.80% on 2/27 and down 4.95% for the week measured as above
• Madison Claymore Covered Call Fund (MCN) was down 0.93% on 2/27 and down 1.73% for the week
• S&P 500 Covered Call Fund (BEP) was down 3.80% on 2/27 and down 5.56% for the week
• First Trust Covered Call Fund (FFA) was down 1.60% on 2/27 and down 3.98% for the week
• NFJ Div, Int, Prem Strategy Fund (NFJ) was down 2.91% on 2/27 and down 3.58% for the week
• Macquarie Infrastructure Trust (MIC) was down 1.52% on 2/27 and down 6.0% for the week
• Eaton Vance Enhanced Equity Income Fund (EOI) was down 2.15% on 2/27 and down 3.66% for the week
• Eaton Vance Tax Managed Diversified Equity Income Fund (ETY) was down 0.06% on 2/27 and down 2.35% for the week
• Alpine Global Dynamic Dividend Fund (AGD) was down 3.28% on 2/27 and down 6.26% for the week.
• DB Currency Harvest ETF (DBV) was down 1.75% on 2/27 and down 3.70% for the week.

Many income investors are looking for monthly dividend payments to support their income during retirement. Other pre-retirement investors want monthly dividend stocks for their IRAs for faster compounding.

This list is now up to 150 different stocks, CEFs, REITs, floating rate funds, and oil income funds [such as Canadian royalty trusts], all of which are traded on the New York Stock Exchange or the American Stock Exchange. I've added over twenty new securities since the year-end update, reposted the yields, kept the readers' recommendations of sorting by yield with the highest first, and identifying the Canadian companies [due to tax withholding issues].

Due to requests from readers, I have sorted the list by yield, from highest to lowest. In addition, I have identified the Canadian trusts due to the tax withholding issue which can significantly affect the yield, especially with regard to holding these Canadian Oil Income Trusts in retirement plans (they all trade in the U.S.). The list shows the name of the stock, the stock market symbol, the yield, and if the stock is Canadian.

For anyone who researches their own investments, the closed-end funds would probably be preferable because they won’t have the big sales charge and the recurring 12b-1 fees of the Van Kampen fund. Plus, once again, closed-end funds have the advantage of a stable asset base on which the calls can be written.

Nature of the beast: Closed-end funds are offered at a premium to NAV at their IPOs; the premium represents the compensation to the underwriters, although few retail buyers understand this. Afterward, closed-ends frequently fall to discounts in the aftermarket.

Lack of investor understanding: Wachovia Securities analyst Mariana Bush says, "We think investors are selling their funds regardless of their NAV performance, to get rid of holdings whose behavior they cannot fully understand."

Wall Street maneuvers: A 1994 study by the Wharton School of Finance suggested that "enterprising" pros sell these funds to a "less informed" public. More often than not, these premiums disappeared when the underwriters withdrew so-called price support techniques after the offering, leaving the small investors holding the bag... Thomas J. Herzfeld places the blame for the current depressed prices squarely on Wall Street. "The underwriters pumped out whatever they could sell leaving no demand for these shares in the aftermarket."

Overly-high risk in pursuit of high yields: "Most of these funds have little or no chance of returning their eight, nine, ten percent yields without depleting their respective net-asset values," says another Chicago options trader.

My wife spent Friday night at a family function that I got out of because our new puppy needs a human present most of the time. So for fun I watched the Diamondbacks game and plugged the term covered call funds into Yahoo Finance to see what I would find.