5 Reasons Why I Am Shorting The Market [View article]
I prefer leveraged short funds with high volume like SPXS to index puts since the option decays over a short time and eventually has to be rolled into new positions. This seems very expensive to me.
When I feel the need, like now, I take a small part of my cash allocation (which pays nothing) and gradually "dollar cost average" into rallys. J L Livermore called this type of position a "probe". Skin in the game but not too much. As time unfolds and the crisis becomes clearer I add more to the position or close.
I could use a good short stock fund that pays great dividends! Just a thought.
10% Return In Q1 For 'Savvy Senior' IRA - Now What Do We Do? [View article]
Agree that the 13.76% distribution yield is net of expenses. A YOY chart with distributions shows quarterly 0.55 payments or $2.20 for the year. $2.2/$15.984 (todays close) = 13.76%.
10% Return In Q1 For 'Savvy Senior' IRA - Now What Do We Do? [View article]
Many thanks for this valuable post. I have OXLC in my floating rate allocation. I am adding to the floaters on weakness. The average CLO maturities seem to be in the 7-12 year range as given by cefconnect.com and last semiannual report. The OXLC website is not too helpful in this regard. Any ideas about average maturity and duration?
Why Muni Bonds And Muni CEFs Have Been Falling [View article]
Has the author encountered an asset class which would act as a hedge against a municipal bond fund CEF decline? I see a mild inverse relationship over last three years with my sentinal leveraged muni IIM in floating rate bond funds. Nuveen has a short dollar/floating rate emerging market currency CEF which also has an inverse relationship. Inverse US treasury bond funds track as well as floaters or better but don't pay distributions.
I have had a sizable buy and hold allocation for about 25 years in muni CEF's and anticipate another "waterfall selloff" when the FED jacks up rates again (I agree that is an unlikely event at this time).
Thanks for the AA review. My allocation has only 6 categories, I have been thinking about expanding it and your model looks very good. I have a position in all of your categories except US government bonds.
Where would you place floating rate bonds in your allocation?
5 BDCs To Buy For Up To 11.7% Dividend Yields [View article]
I also own BDCL. Formerly owned TCAP, a stellar performer as well as KCAP, PSEC and TICC but trailing stops kept triggering after rights offerings. BDCL dosen't appear to be as volatile as its leveraged status would suggest and now I just watch it.
The Inflation Investment You've Never Heard Of [View article]
outcast
Going over my comment I fail to see the word "only". I disregard admin costs if they are offset by performace, market condition, total return and favorable entry point. Granted, performance and admin fee leaves something to be desired here but the other attributes look good and so far I am doing well.
High admin fees (over unmanaged ETFs) are characteristic of CEF's. For the CEFs I own their total return must exceed their benchmark ETF return over time. It appears that high admin fees are sometimes justified.
The jury is out whether OXLC will fall into this category but it is worth the risk and a trailing stop is in the works.
I aim to make money on this trade or investment, whichever it turns out to be. My criteria is to make money. Whats your criteria??
Without risk there is no reward. You sound like you should best stick to Vanguard ETFs.
The Inflation Investment You've Never Heard Of [View article]
I am long NSL JRO JQC. Recently added OXLC (yield 13.5% on 3/8/2013) which cefconnect.com lists as a floating rate fund - all of the above are CEF's. OXLC is almost exclusively in CLO's - collateralized (bank) loan obligations fairly heavy in BDC loans. The maturities are in the 5-10 year range but I do not know the duration, yet.
The floaters are starting to get expensive (going to premiums)...caution. I'll buy more on a pullback, all other things being equal. My present allocation to floaters is 4.5%, will go higher as they seem to be a hedge over the last 2 months, against my large muni allocation, presently 35% and under pressure.
Floating rate funds represent one of the few inflation hedges which pay you to be in them and, as you point out, the correlation with inflation is better with this class of asset than the other usual suspects.
I was attracted to these funds by their performance and total return. I have no contact with any of the sponsors.
Navios Partners: Strong Management And Fleet At 20% Discount [View article]
Excellent comment!
I am presently about 20% underwater with NMM and am looking to buy more as I throw the bones on global shipping prospects. Other things being roughly equal , its the talent behind the plan and hardware that determines the outcome of an enterprise like this. NMM and TOO are part of my core LP holdings.
How One Retiree Is Muddling Through Dividend Investing: Part IV - What Now? [View article]
Martin
In defense of CEF's I would offer the following guidelines:
1. Never, ever buy a CEF IPO. There may be a CEF which went up after being touted as the greatest IPO since MSFT but it is a rare bird. Wait at least one year until the hype clears and the price bottoms.
2. Like all securities there are the good, bad and ugly CEF's. Use chart comps with index unmanaged ETF's - NAV to NAV - to uncover superior performance.
3. Analyze ROC. Is it simply getting back your capital or is it unrealized cap gains, unexpired option premiums or cash from some other yet unsettled source? There is a lot of money to be made writing covered options and most expire worthless (to the benefit of the CEF), The quality of the management team will be reflected in the charts. In this respect I have found that future performance is based on the past. Doug Albo has written extensively on ROC in SA and is a great source. Its a murky subject but not altogether impenetrable.
4. Forget about expense ratios unless they are greater than 3% (unusual). The 9% return in GAB is the return after expenses. I use the benchmarks ETFs SPY and IOO for GAB. The benchmarks yields are slightly over 2%. The excess GAB distribution is the value added by management. There is little daylight between GAB and its benchmark NAV/NAV charts over the last 4 year bull market, suggesting that ROC is not coming from investment capital. You can also get GAB at a discount - sometimes.
5. Yes, CEF's are leveraged. I held all of mine through the 2008-09 financial collapse. One skipped a distribution for one month. Several others actually increased distributions into early 2009. For the years 2008 and 2009 the total income remained stable. The market value dropped 18% but came back to precrash levels by early 2011. Tough, but not as bad as the major indices. Stick with the big houses: Nuveen, Invesco, Cohen and Steers, Blackrock, Gabelli.
6. Pick a good entry point. A judgement call requiring patience for sure but don't buy at 52 week highs or if you have money burning a hole in your pocket.
I, too was burned initially by poorly performing CEF's until I took a systematic and disciplined approach. I have found over the last two cyclical bear markets that a quality diversified portfolio of CEF's, hedged with cash (20% for me right now), with open trailing sell stops (5%) on the riskiest investments and rebalanced using a counter-emotional tactical strategy provides a steady safe stream of cash - with a cap gains Christmas present at the end of the year!
How One Retiree Is Muddling Through Dividend Investing: Part IV - What Now? [View article]
Martin
Thanks for the article,your program is very similar to my allocation except I am a closed end fund fan.
My mission, like most of us old timers is income + capital gains = total return. The allocation is 35% bonds (almost all municipal + floaters), 15% each in stocks (including BDC's and MLP's), commodities, real estate (equity+mREITS) and foreign stock and bond funds with currency exposure. 5% cash. This is the fully invested portfolio, I now have 20% cash, with underweight positions in all but the bonds. I don't trade (speculate) but do reallocate when funds go to unreasonable premiums or discounts or when the sectors do the same.
My affinity for CEF's comes out of their occasion to sell at a discount or premium, their design as income vehicles and active management. I have come to realize that their high expense ratios are insignificant relative to the high total returns. Their drawbacks are ROC and poor performance with benchmark indexes or unmanaged ETF's. I have found that there are CEF's in all categories which perform in line with unmanaged ETFs and outperform open end managed funds with yields in the high single digits. Research is the key.
I am also starting retirement with an interest in personal investing propelled by the 1987 crash which collapsed my life savings by 40%. Since 2008 and with retirement around the corner, I started working harder. My plan is based on the above allocation, which I ruthlessly review for performance and reallocation. I have no security greater than 5% of the total and no difficulty in following 30+ funds. Funds do not go to zero as enron and worldcom did and you can leave them for days or weeks at a time. They often do better if you do.
Right now I need serious work on the research engine. I get distracted and start woolgathering when I should have a checklist and be discliplined. There is a lot to read out there, and I never miss SA.
I enjoy it, it is a lifelong avocation and I will get there, although it will never finish. Since '87 my performance has improved considerably and I believe I am on the right path, thanks to the very wise and generous investors who comment on this site.
The Housing Market "Recovery" Is A Complete Myth [View article]
Dave, what has not been mentioned - maybe I missed it - is the effect of QE3 on non-GSE or low-dose GSE mREITs. NCT comes to mind. I belive species of this type have a good outlook but should be collared with a conservative sell stop.
Why You Must Change Your Strategy For 2013: Here's How... [View article]
Many thanks to Joe and Southgent for their comments.
The ROC issue is a thorny one for me. It may be reported as cashed out return of NAV to meet distributions but it could also reflect unrealized cap gains, unexpired option premiums, proceeds from futures contracts, swaps and other ingredients (tax credit carryovers?) not expired at the time of filing and placed in the ROC pot for possible shareholder tax benefit. There appears to be some accounting discretion in the assignment of ROC. Unfortunately CEF investors must pour over filings and do some guessing to tease out sources of "return of capital".
There is another way.
I used chart comparison of CEF and benchmark ETF for portfolio selection --- GAB with SPY over the period of the latest bull market (4 years to date). If you do this you will see that there is little daylight between GAB and SPY (also IOO and DVY)charts. If GAB is returning significant NAV capital to me over this time there should be a negative GAB NAV chart divergence with its ETF benchmark market price as ETF market price roughly equals its NAV.
If there is no negative divergence and the CEF has a greater distribution than its benchmark ETF, the difference in CEF distribution and ETF distribution represents the value added by active management, ROC notwithstanding, IMHO. If the CEF shows a positive divergence and has a greater distribution than its benchmark, that is a 4 bagger. I haven't seen this in enhanced income equity CEF's.
GAB also outperforms (slightly) ADX market price to market price over this period. This is a valid comparison since ADX discount hasen't changed much and GAB has wobbled slightly from small premium to small discount. I have followed ADX a long time and a 12-15% discount is the norm. I like GAB's 9 vs 6% distribution as I hold for long periods - and you don't have to wait for the end of the year to get them.
Use Caution With Double Digit Yield ETFs [View article]
I have migrated to MORT after being in several individual mREITs. I use stop loss orders to manage risk in securities like this.
I am increasingly worried about flash crashes like the one this month. Not much I can do except write strong emails to the SEC.
regards
rustic06
5 Reasons Why I Am Shorting The Market [View article]
When I feel the need, like now, I take a small part of my cash allocation (which pays nothing) and gradually "dollar cost average" into rallys. J L Livermore called this type of position a "probe". Skin in the game but not too much. As time unfolds and the crisis becomes clearer I add more to the position or close.
I could use a good short stock fund that pays great dividends! Just a thought.
Greatly enjoyed and appreciated your article.
regards
rustic06
Does Momentum Investing Actually Work? [View article]
10% Return In Q1 For 'Savvy Senior' IRA - Now What Do We Do? [View article]
Thanks to Mr Bavaria for the links.
10% Return In Q1 For 'Savvy Senior' IRA - Now What Do We Do? [View article]
regards
rustic06
Why Muni Bonds And Muni CEFs Have Been Falling [View article]
I have had a sizable buy and hold allocation for about 25 years in muni CEF's and anticipate another "waterfall selloff" when the FED jacks up rates again (I agree that is an unlikely event at this time).
regards
rustic06
Rebalance Periodically, Review Frequently [View article]
Where would you place floating rate bonds in your allocation?
rustic06
5 BDCs To Buy For Up To 11.7% Dividend Yields [View article]
regards
rustic06
The Inflation Investment You've Never Heard Of [View article]
Going over my comment I fail to see the word "only". I disregard admin costs if they are offset by performace, market condition, total return and favorable entry point. Granted, performance and admin fee leaves something to be desired here but the other attributes look good and so far I am doing well.
High admin fees (over unmanaged ETFs) are characteristic of CEF's. For the CEFs I own their total return must exceed their benchmark ETF return over time. It appears that high admin fees are sometimes justified.
The jury is out whether OXLC will fall into this category but it is worth the risk and a trailing stop is in the works.
I aim to make money on this trade or investment, whichever it turns out to be. My criteria is to make money. Whats your criteria??
Without risk there is no reward. You sound like you should best stick to Vanguard ETFs.
rustic06
The Inflation Investment You've Never Heard Of [View article]
The floaters are starting to get expensive (going to premiums)...caution. I'll buy more on a pullback, all other things being equal. My present allocation to floaters is 4.5%, will go higher as they seem to be a hedge over the last 2 months, against my large muni allocation, presently 35% and under pressure.
Floating rate funds represent one of the few inflation hedges which pay you to be in them and, as you point out, the correlation with inflation is better with this class of asset than the other usual suspects.
I was attracted to these funds by their performance and total return. I have no contact with any of the sponsors.
Thanks for the insights!
rustic06
Navios Partners: Strong Management And Fleet At 20% Discount [View article]
I am presently about 20% underwater with NMM and am looking to buy more as I throw the bones on global shipping prospects. Other things being roughly equal , its the talent behind the plan and hardware that determines the outcome of an enterprise like this. NMM and TOO are part of my core LP holdings.
rustic06
How One Retiree Is Muddling Through Dividend Investing: Part IV - What Now? [View article]
In defense of CEF's I would offer the following guidelines:
1. Never, ever buy a CEF IPO. There may be a CEF which went up after being touted as the greatest IPO since MSFT but it is a rare bird. Wait at least one year until the hype clears and the price bottoms.
2. Like all securities there are the good, bad and ugly CEF's. Use chart comps with index unmanaged ETF's - NAV to NAV - to uncover superior performance.
3. Analyze ROC. Is it simply getting back your capital or is it unrealized cap gains, unexpired option premiums or cash from some other yet unsettled source? There is a lot of money to be made writing covered options and most expire worthless (to the benefit of the CEF), The quality of the management team will be reflected in the charts. In this respect I have found that future performance is based on the past. Doug Albo has written extensively on ROC in SA and is a great source. Its a murky subject but not altogether impenetrable.
4. Forget about expense ratios unless they are greater than 3% (unusual). The 9% return in GAB is the return after expenses. I use the benchmarks ETFs SPY and IOO for GAB. The benchmarks yields are slightly over 2%. The excess GAB distribution is the value added by management. There is little daylight between GAB and its benchmark NAV/NAV charts over the last 4 year bull market, suggesting that ROC is not coming from investment capital. You can also get GAB at a discount - sometimes.
5. Yes, CEF's are leveraged. I held all of mine through the 2008-09 financial collapse. One skipped a distribution for one month. Several others actually increased distributions into early 2009. For the years 2008 and 2009 the total income remained stable. The market value dropped 18% but came back to precrash levels by early 2011. Tough, but not as bad as the major indices. Stick with the big houses: Nuveen, Invesco, Cohen and Steers, Blackrock, Gabelli.
6. Pick a good entry point. A judgement call requiring patience for sure but don't buy at 52 week highs or if you have money burning a hole in your pocket.
I, too was burned initially by poorly performing CEF's until I took a systematic and disciplined approach. I have found over the last two cyclical bear markets that a quality diversified portfolio of CEF's, hedged with cash (20% for me right now), with open trailing sell stops (5%) on the riskiest investments and rebalanced using a counter-emotional tactical strategy provides a steady safe stream of cash - with a cap gains Christmas present at the end of the year!
HAPPY INVESTING!
rustic06
How One Retiree Is Muddling Through Dividend Investing: Part IV - What Now? [View article]
Thanks for the article,your program is very similar to my allocation except I am a closed end fund fan.
My mission, like most of us old timers is income + capital gains = total return. The allocation is 35% bonds (almost all municipal + floaters), 15% each in stocks (including BDC's and MLP's), commodities, real estate (equity+mREITS) and foreign stock and bond funds with currency exposure. 5% cash. This is the fully invested portfolio, I now have 20% cash, with underweight positions in all but the bonds. I don't trade (speculate) but do reallocate when funds go to unreasonable premiums or discounts or when the sectors do the same.
My affinity for CEF's comes out of their occasion to sell at a discount or premium, their design as income vehicles and active management. I have come to realize that their high expense ratios are insignificant relative to the high total returns. Their drawbacks are ROC and poor performance with benchmark indexes or unmanaged ETF's. I have found that there are CEF's in all categories which perform in line with unmanaged ETFs and outperform open end managed funds with yields in the high single digits. Research is the key.
I am also starting retirement with an interest in personal investing propelled by the 1987 crash which collapsed my life savings by 40%. Since 2008 and with retirement around the corner, I started working harder. My plan is based on the above allocation, which I ruthlessly review for performance and reallocation. I have no security greater than 5% of the total and no difficulty in following 30+ funds. Funds do not go to zero as enron and worldcom did and you can leave them for days or weeks at a time. They often do better if you do.
Right now I need serious work on the research engine. I get distracted and start woolgathering when I should have a checklist and be discliplined. There is a lot to read out there, and I never miss SA.
I enjoy it, it is a lifelong avocation and I will get there, although it will never finish. Since '87 my performance has improved considerably and I believe I am on the right path, thanks to the very wise and generous investors who comment on this site.
rustic06
The Housing Market "Recovery" Is A Complete Myth [View article]
Regards,
rustic06
Why You Must Change Your Strategy For 2013: Here's How... [View article]
The ROC issue is a thorny one for me. It may be reported as cashed out return of NAV to meet distributions but it could also reflect unrealized cap gains, unexpired option premiums, proceeds from futures contracts, swaps and other ingredients (tax credit carryovers?) not expired at the time of filing and placed in the ROC pot for possible shareholder tax benefit. There appears to be some accounting discretion in the assignment of ROC. Unfortunately CEF investors must pour over filings and do some guessing to tease out sources of "return of capital".
There is another way.
I used chart comparison of CEF and benchmark ETF for portfolio selection --- GAB with SPY over the period of the latest bull market (4 years to date). If you do this you will see that there is little daylight between GAB and SPY (also IOO and DVY)charts. If GAB is returning significant NAV capital to me over this time there should be a negative GAB NAV chart divergence with its ETF benchmark market price as ETF market price roughly equals its NAV.
If there is no negative divergence and the CEF has a greater distribution than its benchmark ETF, the difference in CEF distribution and ETF distribution represents the value added by active management, ROC notwithstanding, IMHO. If the CEF shows a positive divergence and has a greater distribution than its benchmark, that is a 4 bagger. I haven't seen this in enhanced income equity CEF's.
GAB also outperforms (slightly) ADX market price to market price over this period. This is a valid comparison since ADX discount hasen't changed much and GAB has wobbled slightly from small premium to small discount. I have followed ADX a long time and a 12-15% discount is the norm. I like GAB's 9 vs 6% distribution as I hold for long periods - and you don't have to wait for the end of the year to get them.
best regards & happy investing
rustic06