SMID-Caps: Where The Real Chance For Alpha Lies [View article]
It would be helpful if the author would indicate what SMID means rather than just starting the article by using an acronym without any explanation. Not all of the readers may know.
Plus, many readers may have come specifically to this article with the hopes of increasing their knowledge of small cap stocks, only to puzzle over the many references to "SMID".
Otherwise, a great piece of research that brings a lot of value to readers wanting to know more about this subject.
Bond Play: A Look At Federal Furloughs [View article]
Jari,
Thank you for this well researched article on why bonds will continue to perform well. This is a great example of why some investors have done very since 2008 while others have not, on a risk adjusted basis or otherwise.
The "sell bonds now!" gang may grasp the elementary fact that bonds underperform when rates begin to rise, but they have, for over five years running, failed to understand why rates are not going up anytime too soon.
Start with jobs. Since 2009 unemployment is well above 7 per cent. In no prior recession has it continued this high for this long. We face structurally high unemployment, in part because the it is taking longer to come out of this recession. Most recoveries, as evidenced by normal employment rates, begin three quarters after a recession. We are now three years without any such data.
There are other reasons for this sustained higher level of unemployment. Primarly, our decades long investment in technology has permanently altered rates of employment. Technology driven efficiency means fewer jobs.
No surprise there, but the "sell bonds now!" gang needs to understand that as a result of technology's efficienies, we may never get below 7% unemployment. That has significant implications to the equity market (negative) and bond market (positive).
Entitlement spending, or "transfer payments" as a per cent of the government outlays has grown in the 90's from 20% to over 60%. This did not happen because we have three times as many people requriing entitlements and transfer payments.
This happened because our political decision making allocated more funds to transfers. That money actually comes from somewhere, taxpayers, and as a result does not go somewhere else, investments. So it is hard to see how investment flourshes at the same time it is being choked off.
Finally, while equities may be cheap compared to bonds, that does not mean equities are a good investment. As the entire "sell bonds now" gang should themselves know best, bonds are very overvalued. But equities being cheap to bonds when bonds are overvalued is not a ringing endorsement to sell your bonds and buy stocks.
More than anyone, I would like the equity market and all the benefits it confers, to flourish. But the last four years' outperformance of bonds over stocks is what you can expect going forward with a government policy of zero interest rates, multi billion dollar monthly bond buy-backs and higher taxes on capital gains to discourage investment in the capital formation needed to drive the equtiy markets.
Investors who will be successful are looking 18 months out and not simply betting on which index makes its next new high.
Commercial Banking Industry Continues To Shrink [View article]
It's not that much of a stretch to understand why loan growth is falling in the small and medium sized commercial banks versus large banks where loan growth is growing.
First, there is an issue of economies of scale. The cost to acquire a dollar of assets needed to comply with regulatory matters at a small or medium bank far exceeds that of the large commercial banks.
SBA loans provide a perfect example. In spite of the little black and white logos seen at every teller station, most small and medium banks do not have the trained staff needed to market, fulfill and process SBA loans. As a result they lose that business to the large banks.
Then, the exponential factor kicks in as the large banks will only originate SBA loans at dollar levels that far exceed those of the smaller banks who actually can and do offer SBA loans. If you think Bank of America will write a $25K SBA loan to help your uncle's small engine repair shop, think again.
The same issues with "scale" hold true with many retail-based lines like car leasing, mortgage lending and student loans where the regularory bar gets higher every year.
If you want to succeed as a commercial bank and trust company. you need to scale up. Twenty five years ago, a young lawyer who served as outside legal counsel for Rhode Island Hospital Trust developed a model for scale that led to the creation of today's Bank of America. Are we better off today as a result of that scaling up?
The concept of scale has not only hurt small business but has also led to some of the most disasterous practices by the large banks. The legacy we are left with is TBTF. More concerning, as the author notes, scale has led to small and medium sized banks closing a consistently high rates...the unforseen consequence being that small businesses are unable to obtain the credit they need to grow.
Is The Fed's QE3 Liquidity Finally Starting To Flow? [View article]
So what. Trading of any type, currency or otherwise, has nothing to do with the balance sheet or the income statement which is what this article is all about.
Your comment makes about as much sense as the author's point that the increased balance sheet is somehow a good sign without indicating any understanding whatsoever whether the income statement increased or decreased.
Apparently you both feel that numbers without context mean something.
Is The Fed's QE3 Liquidity Finally Starting To Flow? [View article]
Three points to consider:
First, it's a balance sheet. Asset must match liabilities.
Second, the assets, loans being US Treasury issued, are offered at the lowest rates in any measure of recent history.
Third, the liabilities, QE's being purchased: mortgage-backed and agencies, are all issued with much higher coupons US AAA-rated securites, (which is why people buy them in the first place versus US treasuries).
If you are still with me, increasing the balance sheet means nothing as a metric without understanding the corresponding increase or decrease in the income statement. If you have increasing income, an increasing balance sheet is manageable. An increasing balance sheet with decreasing income is not manageable and not sustainable.
If the income we receive from assets does not at least match or exceed the debt service we owe on the liabilites, then those assets will be written down. Forgive me if I sound patronizing, but this is how every business works.
It is a misrepresentation, at best, to imply that an increase in the balance sheet somehow represents a good sign unless income also increases.
PCEF: How Marginal CEF Investors Can Avoid Being 'Gamed' [View article]
If you are willing to do your own work by researching the discounts, management fees and portfolios at websites like etfconnect.com, you will be doing as much, if not more, than the managers at PCEF.
Moreover, where the strong researchers on Seeking Alpha like Doug Albo and others will help you develop a better understanding of the values available, why would you buy PCEF that allows management to buy CEF's that trade at levels of 20% plus premium to NAV?
A good CEF portfolio typically starts with a screen which requires discounts to NAV, not premia. That being the case, read more of the writers here, and save yourself the fee-upon-fee structure and take some satisfaction by knowing that you have the tools to build a good CEF portfolio on your own rather than rely on others whose interests are not aligned with yours.
Your interests are much better served doing your own research than by investing with management whose compensation is based upon over-valued assets. PCEF's mission is not aligned with that of its investors.
JPMorgan Loss Could Be Next 'Shock' Event [View article]
As long as the author wants to assign a 5% chance to JPM having a $100BB trading loss (which assumes a complete wipe out of the entire notional value of their derivative portfolio) why not just assign some equally random percent chance to a $100TT trading loss. Makes as much sense.
Or why not just write an article titled "The Sky is Falling!"?
Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
If I understand this correctly, rates at the long end of the yield curve are rising because the anticipation of inflation hits this area the hardest. Look at TLT and you can see that the selling on the long end was directly related to the now seriously dialed in prospect of inflation.
Not unsurprisingly, there was an offsetting and incredible amount of buying on the short end. If you look at the ETFs BOND and MINT, you see a hugely positive move in short maturity portfolios.
The short term, however, has a way of becoming less significant as time passes, which is the point Stuber makes by referring to the Japanese experience.
For anyone whose job involves the allocation of cash, whether you are a prop trader at a global bank or the CFO of a Fortune 1000 global company, if you cannot find a good return of your own cash , it's probably pretty clear that additional cash from the government is really not going to help much either.
While I am not an overly insightful person, I will say that the Japanese political culture and collective national traits have allowed them to withstand the last two decades of a paralyzed economy in a way that would be unthinkable to the occidental world here in the US.
The fact that the architects of QE3 most likely understand this, but for some inexplicable reason, have gone the same direction, belies the sad fact that there is no real ammunition left to fight with.
After a 72% Y/Y rise in the XHB, the housing recovery rates the cover at Barron's. "We're in the early stages," says Lennar (LEN) President Rick Beckwith. The industry could triple in size to 1.8M housing starts in the next 3-4 years, says Ivy Zelman, who thinks Lennar could earn $5.30/share in FY15 vs. $0.48 last year. A more speculative play is Beazer (BZH), which isn't yet profitable, but has eased short-term liquidity fears with recent capital raises. [View news story]
Tack,
You are the one who used a 85 to 90% number of people who are "just fine" , not me.
The drop in home values at 40% since 2007 is completely accurate.
The rest of my calculations about what a person has really lost in spite of the recent 7% increase are basic math. If you lose 40% of your value in the investment and then it goes up 7%, you are still down 35.25% from your starting point.
I am not relying upon the media. To use your phrase "It's that simple".
After a 72% Y/Y rise in the XHB, the housing recovery rates the cover at Barron's. "We're in the early stages," says Lennar (LEN) President Rick Beckwith. The industry could triple in size to 1.8M housing starts in the next 3-4 years, says Ivy Zelman, who thinks Lennar could earn $5.30/share in FY15 vs. $0.48 last year. A more speculative play is Beazer (BZH), which isn't yet profitable, but has eased short-term liquidity fears with recent capital raises. [View news story]
Isn't the media going completely positive right now? All we are hearing about this week is the 7% increase in home prices this year. Even Barron's, the most pessimistic of all financial mainstream media, is now on the 7% "everything is great" bandwagon.
The math is less than inspiring. If housing prices are down about 40% since the five year period beginning 2007, then a 7% increase this year means owners from 2007 are really up only 4.2% since the trough.
What that means to those homeowners is that you are still down 35.75%, a significant amount below your purchase price. This is why the majority of mortgages are still deeply underwater. This has been widely reported in August, but with September's newly announced 7% increase, apparently now everything is okay.
In the meantime, for that 85-90% for whom "things are just fine"... at the current rate of "improvement", they will need over 25 years to break even on the largest investment of their lives.
This Fund Offers Berkshire Hathaway At A Discount, But With A Catch [View article]
Over the last year, a group of posters in the ETF/CEF Seeking Alpha site have consistently and relentlessly promoted PCEF as an attractive CEF investment, no matter how irrelevant it may be to the particular article or comment thread.
This case appears to be no different. PCEF is an income fund that buys income producing CEF's. George Spitzer's article clearly states that BIF is an investment company that buys equities, not fixed income insturments and not other income producing CEF's. BIF as George notes is not an income producing fund in any sense of the word. So why does gcmagone introduce PCEF into this discussion?
Furthermore, readers of the ETF/CEF article know that authors like Albo. Spitzer and others have consistently focused upon funds that sell at discounts to Net Asset Value (NAV), not funds that sell at a premium to NAV.
It is well understood by the SA community that the investment mandate of PCEF allows management to purchase CEF's at a premium of 20% to NAV. As recent SEC filings have shown, they have done exactly that.
To my original point, I do not understand why anyone posting in this thread would be solicitous of PCEF unless they had an incentive.
Given the marketing dollars that are now spent on digital communication to reach specifically targeted networks, like Seeking Alpha readers, it would not surprise me to learn that many writers flogging PCEF have incentives to do so.
FAMCO
Disclosure: I have no long or short position in PCEF and have no intention to enter into any transaction in this security over the next 72 hours, or the next 72 years for that matter.
The bears are still piling in to Facebook (FB), the number of shares on loan to short sellers standing at 97M, up from 63M a month ago. One reason could be lockup expiration - an additional 2B shares will become eligible to sell between now and next May, adding to the current float of 421M. [View news story]
TB,
I am not sure I understand this comment "the tolling period (two years generally) is put on hold while the shares are not at risk". There are two parts to this statement that I question.
First, the tolling period for shares acquired through a restricted transaction are never put "on hold." The actual physical certificates have a restricted legend printed in red ink that states the shares cannot be sold until a letter from counsel indicates the tolling period has expired.
Secondly, you state that the tolling period is put on hold while the shares "are not at risk". There is no SEC enforcement mechanism based upon whether shares are or are not at risk that in any way mitigates either the lock up period for restricted shares or the tolling period for restricted transactions under the Rule 144.
The bears are still piling in to Facebook (FB), the number of shares on loan to short sellers standing at 97M, up from 63M a month ago. One reason could be lockup expiration - an additional 2B shares will become eligible to sell between now and next May, adding to the current float of 421M. [View news story]
There are two classes of short sellers. Those who believe the shares are going down in price and those who want to lock in a value constant to protect their investment.
Taking the leap that everyone understands the first class, short sellers who come in when they view the shares as overpriced and ripe for a pull back, let's review the second class who invested early and want to make sure they protect their original investment and some amount of gain.
There's a important legal distinction under SEC Rule 144 for restricted security sales that should provide some insight into the second class that no posters on this thread have mentioned, and who like most observes most likely do not understand.
In the many early stages of private financing a new venture, many investors are happy to exit when they feel their shares have provided an acceptable return. This can happen at several events well before the IPO.
As a result of having so many early stage investors, many of whom wanted to exit at various times well over the years before the IPO, had Facebook authorized any of those exits in the US, they would have been deemed to have run afoul of "public offering" guidelines.
This was the position taken by both the banks and the regulators, that there was such a large universe of early stage investors that any attempt to exit their position would have been regarded as a public offering under the SEC regs.
As a result, hundreds of millions in USD private placements were done away from US jurisdictions. This was all perfectly legal, but it created a record amount of restricted securities, all of which would ultimately convert to public but restricted shares once the company went public in the US.
Under the SEC regs, there are two types of restricted securities, those owned by "restricted people" (officers, directors and affiliates) who are assumed to have inside information and therefore are restricted from trading the stock at certain times especially ahead of quarterly reports or extra-ordinary events like merger or takeover announcements.
The other class of restricted securities are those issued as a result of "restricted transactions', like stock option exercises, long term vesting compensation awards and also overseas private placements.
If you are an "insider" who obtained shares as a result of being a "restricted person," during certain times, you cannot undertake any transaction in your restricted securities. You legally cannot enter into a short sale, long position, derivative, or any transaction at all for that matter.
If you have restricted securities as a result of a "restricted transaction" (unlike "restricted people") you may enter into a short sale providing the stock loan department of the "bank" will allow you to pledge your restricted security.
It has long been the practice of 'restricted transaction' stock holders to sell short their awarded shares in order to protect value against volatility until the two year lock up ends when their shares can be freely traded. Given the record amount of "restricted transaction" Facebook holders, it should surprise no one that the short interest is as large as it is.
While I have always been in the camp that says the IPO did not reflect the reality of how proper IPO economics and pricing mechanics should have determined, no matter what price the underwriters brought the shares public, there would have a record amount of shares sold short by people owning restricted shares as a result of their shares being obtained through "restricted transactions."
Regardless of how you feel about FB's prospects, as a person who obtained shares through a restricted transaction, given the volatility of the market and your need to protect your initial investment during the two year lock up period, you would have been well advised to sell your shares short.
Treasury prices reverse losses and turn higher as Cummins provides a grim picture of global economic growth. The 10-year yield dips under 1.50%, within range of its modern-era low of 1.44%. The long bond yield falls to 2.60 (record low is 2.50%). TLT and SPY are neck and neck for the year, both up over 6%. [View news story]
If the ten year now yields 1.5% and it goes to 1% as you are implying, then the UST bond you bought for $1000 is now worth $1500 on the secondary market. Not bad.
Let's compare that to the S&P. While it is up 6% year to date, at the end of the second quarter, it was up 12%. Congratulations, you have lost half your gain in a month. That is assuming you bought in some time during the first quarter and still have a gain. Any purchases made after the first quarter and you are losing money.
The bond market has not gone crazy. It is quite sane. It rewards investors who understand the risks in the current market.
Strategies You Need To Know To Invest In Speculative Biotech [View article]
The strategy for speculators, which appears to be borne out by most of these charts, is to buy during the start of Phase I trials and then sell at the end of Phase I trials.
While one can hardly call this "investing" the rationale is clear. The purpose of Phase I trial is to determine whether the product has any therapeutic efficacy for a particular disease or condition. If the results are positive, the valuation of its market potential would typically be based upon a very bullish assumption that the particular treatment would capture most, if not all, of the entire patient population.
During the phase II trials, the drug is tested according to what maximum dose can be given without side affects and what is the minimal amount that can be given to have any effect. The Phase III trials then test a universe of patients to determine what per cent of the population will respond or not respond to a particular dose.
Under this process of drug discovery, most likely the highest earnings valuation will be derived during the Phase I trials when the sky is the limit, as every subsequent trial will only reduce the size of that potential market.
Again, I would not consider this strategy to have anything to do with investing but rather an arbitrage based upon an overly (if not unrealistically) high valuation the stock might have as a result of incomplete data.
SMID-Caps: Where The Real Chance For Alpha Lies [View article]
Plus, many readers may have come specifically to this article with the hopes of increasing their knowledge of small cap stocks, only to puzzle over the many references to "SMID".
Otherwise, a great piece of research that brings a lot of value to readers wanting to know more about this subject.
FAMCO
Bond Play: A Look At Federal Furloughs [View article]
Thank you for this well researched article on why bonds will continue to perform well. This is a great example of why some investors have done very since 2008 while others have not, on a risk adjusted basis or otherwise.
The "sell bonds now!" gang may grasp the elementary fact that bonds underperform when rates begin to rise, but they have, for over five years running, failed to understand why rates are not going up anytime too soon.
Start with jobs. Since 2009 unemployment is well above 7 per cent. In no prior recession has it continued this high for this long. We face structurally high unemployment, in part because the it is taking longer to come out of this recession. Most recoveries, as evidenced by normal employment rates, begin three quarters after a recession. We are now three years without any such data.
There are other reasons for this sustained higher level of unemployment. Primarly, our decades long investment in technology has permanently altered rates of employment. Technology driven efficiency means fewer jobs.
No surprise there, but the "sell bonds now!" gang needs to understand that as a result of technology's efficienies, we may never get below 7% unemployment. That has significant implications to the equity market (negative) and bond market (positive).
Entitlement spending, or "transfer payments" as a per cent of the government outlays has grown in the 90's from 20% to over 60%. This did not happen because we have three times as many people requriing entitlements and transfer payments.
This happened because our political decision making allocated more funds to transfers. That money actually comes from somewhere, taxpayers, and as a result does not go somewhere else, investments. So it is hard to see how investment flourshes at the same time it is being choked off.
Finally, while equities may be cheap compared to bonds, that does not mean equities are a good investment. As the entire "sell bonds now" gang should themselves know best, bonds are very overvalued. But equities being cheap to bonds when bonds are overvalued is not a ringing endorsement to sell your bonds and buy stocks.
More than anyone, I would like the equity market and all the benefits it confers, to flourish. But the last four years' outperformance of bonds over stocks is what you can expect going forward with a government policy of zero interest rates, multi billion dollar monthly bond buy-backs and higher taxes on capital gains to discourage investment in the capital formation needed to drive the equtiy markets.
Investors who will be successful are looking 18 months out and not simply betting on which index makes its next new high.
FAMCO
Commercial Banking Industry Continues To Shrink [View article]
First, there is an issue of economies of scale. The cost to acquire a dollar of assets needed to comply with regulatory matters at a small or medium bank far exceeds that of the large commercial banks.
SBA loans provide a perfect example. In spite of the little black and white logos seen at every teller station, most small and medium banks do not have the trained staff needed to market, fulfill and process SBA loans. As a result they lose that business to the large banks.
Then, the exponential factor kicks in as the large banks will only originate SBA loans at dollar levels that far exceed those of the smaller banks who actually can and do offer SBA loans. If you think Bank of America will write a $25K SBA loan to help your uncle's small engine repair shop, think again.
The same issues with "scale" hold true with many retail-based lines like car leasing, mortgage lending and student loans where the regularory bar gets higher every year.
If you want to succeed as a commercial bank and trust company. you need to scale up. Twenty five years ago, a young lawyer who served as outside legal counsel for Rhode Island Hospital Trust developed a model for scale that led to the creation of today's Bank of America. Are we better off today as a result of that scaling up?
The concept of scale has not only hurt small business but has also led to some of the most disasterous practices by the large banks. The legacy we are left with is TBTF. More concerning, as the author notes, scale has led to small and medium sized banks closing a consistently high rates...the unforseen consequence being that small businesses are unable to obtain the credit they need to grow.
This is not good for any kind of business.
FAMCO
Is The Fed's QE3 Liquidity Finally Starting To Flow? [View article]
Your comment makes about as much sense as the author's point that the increased balance sheet is somehow a good sign without indicating any understanding whatsoever whether the income statement increased or decreased.
Apparently you both feel that numbers without context mean something.
Is The Fed's QE3 Liquidity Finally Starting To Flow? [View article]
First, it's a balance sheet. Asset must match liabilities.
Second, the assets, loans being US Treasury issued, are offered at the lowest rates in any measure of recent history.
Third, the liabilities, QE's being purchased: mortgage-backed and agencies, are all issued with much higher coupons US AAA-rated securites, (which is why people buy them in the first place versus US treasuries).
If you are still with me, increasing the balance sheet means nothing as a metric without understanding the corresponding increase or decrease in the income statement. If you have increasing income, an increasing balance sheet is manageable. An increasing balance sheet with decreasing income is not manageable and not sustainable.
If the income we receive from assets does not at least match or exceed the debt service we owe on the liabilites, then those assets will be written down. Forgive me if I sound patronizing, but this is how every business works.
It is a misrepresentation, at best, to imply that an increase in the balance sheet somehow represents a good sign unless income also increases.
FAMCO
PCEF: How Marginal CEF Investors Can Avoid Being 'Gamed' [View article]
Moreover, where the strong researchers on Seeking Alpha like Doug Albo and others will help you develop a better understanding of the values available, why would you buy PCEF that allows management to buy CEF's that trade at levels of 20% plus premium to NAV?
A good CEF portfolio typically starts with a screen which requires discounts to NAV, not premia. That being the case, read more of the writers here, and save yourself the fee-upon-fee structure and take some satisfaction by knowing that you have the tools to build a good CEF portfolio on your own rather than rely on others whose interests are not aligned with yours.
Your interests are much better served doing your own research than by investing with management whose compensation is based upon over-valued assets. PCEF's mission is not aligned with that of its investors.
FAMCO
JPMorgan Loss Could Be Next 'Shock' Event [View article]
Or why not just write an article titled "The Sky is Falling!"?
FAMCO
Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
Not unsurprisingly, there was an offsetting and incredible amount of buying on the short end. If you look at the ETFs BOND and MINT, you see a hugely positive move in short maturity portfolios.
The short term, however, has a way of becoming less significant as time passes, which is the point Stuber makes by referring to the Japanese experience.
For anyone whose job involves the allocation of cash, whether you are a prop trader at a global bank or the CFO of a Fortune 1000 global company, if you cannot find a good return of your own cash , it's probably pretty clear that additional cash from the government is really not going to help much either.
While I am not an overly insightful person, I will say that the Japanese political culture and collective national traits have allowed them to withstand the last two decades of a paralyzed economy in a way that would be unthinkable to the occidental world here in the US.
The fact that the architects of QE3 most likely understand this, but for some inexplicable reason, have gone the same direction, belies the sad fact that there is no real ammunition left to fight with.
FAMCO
After a 72% Y/Y rise in the XHB, the housing recovery rates the cover at Barron's. "We're in the early stages," says Lennar (LEN) President Rick Beckwith. The industry could triple in size to 1.8M housing starts in the next 3-4 years, says Ivy Zelman, who thinks Lennar could earn $5.30/share in FY15 vs. $0.48 last year. A more speculative play is Beazer (BZH), which isn't yet profitable, but has eased short-term liquidity fears with recent capital raises. [View news story]
You are the one who used a 85 to 90% number of people who are "just fine" , not me.
The drop in home values at 40% since 2007 is completely accurate.
The rest of my calculations about what a person has really lost in spite of the recent 7% increase are basic math. If you lose 40% of your value in the investment and then it goes up 7%, you are still down 35.25% from your starting point.
I am not relying upon the media. To use your phrase "It's that simple".
FAMCO
After a 72% Y/Y rise in the XHB, the housing recovery rates the cover at Barron's. "We're in the early stages," says Lennar (LEN) President Rick Beckwith. The industry could triple in size to 1.8M housing starts in the next 3-4 years, says Ivy Zelman, who thinks Lennar could earn $5.30/share in FY15 vs. $0.48 last year. A more speculative play is Beazer (BZH), which isn't yet profitable, but has eased short-term liquidity fears with recent capital raises. [View news story]
The math is less than inspiring. If housing prices are down about 40% since the five year period beginning 2007, then a 7% increase this year means owners from 2007 are really up only 4.2% since the trough.
What that means to those homeowners is that you are still down 35.75%, a significant amount below your purchase price. This is why the majority of mortgages are still deeply underwater. This has been widely reported in August, but with September's newly announced 7% increase, apparently now everything is okay.
In the meantime, for that 85-90% for whom "things are just fine"... at the current rate of "improvement", they will need over 25 years to break even on the largest investment of their lives.
FAMCO
This Fund Offers Berkshire Hathaway At A Discount, But With A Catch [View article]
This case appears to be no different. PCEF is an income fund that buys income producing CEF's. George Spitzer's article clearly states that BIF is an investment company that buys equities, not fixed income insturments and not other income producing CEF's. BIF as George notes is not an income producing fund in any sense of the word. So why does gcmagone introduce PCEF into this discussion?
Furthermore, readers of the ETF/CEF article know that authors like Albo. Spitzer and others have consistently focused upon funds that sell at discounts to Net Asset Value (NAV), not funds that sell at a premium to NAV.
It is well understood by the SA community that the investment mandate of PCEF allows management to purchase CEF's at a premium of 20% to NAV. As recent SEC filings have shown, they have done exactly that.
To my original point, I do not understand why anyone posting in this thread would be solicitous of PCEF unless they had an incentive.
Given the marketing dollars that are now spent on digital communication to reach specifically targeted networks, like Seeking Alpha readers, it would not surprise me to learn that many writers flogging PCEF have incentives to do so.
FAMCO
Disclosure: I have no long or short position in PCEF and have no intention to enter into any transaction in this security over the next 72 hours, or the next 72 years for that matter.
The bears are still piling in to Facebook (FB), the number of shares on loan to short sellers standing at 97M, up from 63M a month ago. One reason could be lockup expiration - an additional 2B shares will become eligible to sell between now and next May, adding to the current float of 421M. [View news story]
I am not sure I understand this comment "the tolling period (two years generally) is put on hold while the shares are not at risk". There are two parts to this statement that I question.
First, the tolling period for shares acquired through a restricted transaction are never put "on hold." The actual physical certificates have a restricted legend printed in red ink that states the shares cannot be sold until a letter from counsel indicates the tolling period has expired.
Secondly, you state that the tolling period is put on hold while the shares "are not at risk". There is no SEC enforcement mechanism based upon whether shares are or are not at risk that in any way mitigates either the lock up period for restricted shares or the tolling period for restricted transactions under the Rule 144.
FAMCO
The bears are still piling in to Facebook (FB), the number of shares on loan to short sellers standing at 97M, up from 63M a month ago. One reason could be lockup expiration - an additional 2B shares will become eligible to sell between now and next May, adding to the current float of 421M. [View news story]
Taking the leap that everyone understands the first class, short sellers who come in when they view the shares as overpriced and ripe for a pull back, let's review the second class who invested early and want to make sure they protect their original investment and some amount of gain.
There's a important legal distinction under SEC Rule 144 for restricted security sales that should provide some insight into the second class that no posters on this thread have mentioned, and who like most observes most likely do not understand.
In the many early stages of private financing a new venture, many investors are happy to exit when they feel their shares have provided an acceptable return. This can happen at several events well before the IPO.
As a result of having so many early stage investors, many of whom wanted to exit at various times well over the years before the IPO, had Facebook authorized any of those exits in the US, they would have been deemed to have run afoul of "public offering" guidelines.
This was the position taken by both the banks and the regulators, that there was such a large universe of early stage investors that any attempt to exit their position would have been regarded as a public offering under the SEC regs.
As a result, hundreds of millions in USD private placements were done away from US jurisdictions. This was all perfectly legal, but it created a record amount of restricted securities, all of which would ultimately convert to public but restricted shares once the company went public in the US.
Under the SEC regs, there are two types of restricted securities, those owned by "restricted people" (officers, directors and affiliates) who are assumed to have inside information and therefore are restricted from trading the stock at certain times especially ahead of quarterly reports or extra-ordinary events like merger or takeover announcements.
The other class of restricted securities are those issued as a result of "restricted transactions', like stock option exercises, long term vesting compensation awards and also overseas private placements.
If you are an "insider" who obtained shares as a result of being a "restricted person," during certain times, you cannot undertake any transaction in your restricted securities. You legally cannot enter into a short sale, long position, derivative, or any transaction at all for that matter.
If you have restricted securities as a result of a "restricted transaction" (unlike "restricted people") you may enter into a short sale providing the stock loan department of the "bank" will allow you to pledge your restricted security.
It has long been the practice of 'restricted transaction' stock holders to sell short their awarded shares in order to protect value against volatility until the two year lock up ends when their shares can be freely traded. Given the record amount of "restricted transaction" Facebook holders, it should surprise no one that the short interest is as large as it is.
While I have always been in the camp that says the IPO did not reflect the reality of how proper IPO economics and pricing mechanics should have determined, no matter what price the underwriters brought the shares public, there would have a record amount of shares sold short by people owning restricted shares as a result of their shares being obtained through "restricted transactions."
Regardless of how you feel about FB's prospects, as a person who obtained shares through a restricted transaction, given the volatility of the market and your need to protect your initial investment during the two year lock up period, you would have been well advised to sell your shares short.
FAMCO
Treasury prices reverse losses and turn higher as Cummins provides a grim picture of global economic growth. The 10-year yield dips under 1.50%, within range of its modern-era low of 1.44%. The long bond yield falls to 2.60 (record low is 2.50%). TLT and SPY are neck and neck for the year, both up over 6%. [View news story]
Let's compare that to the S&P. While it is up 6% year to date, at the end of the second quarter, it was up 12%. Congratulations, you have lost half your gain in a month. That is assuming you bought in some time during the first quarter and still have a gain. Any purchases made after the first quarter and you are losing money.
The bond market has not gone crazy. It is quite sane. It rewards investors who understand the risks in the current market.
FAMCO
Strategies You Need To Know To Invest In Speculative Biotech [View article]
While one can hardly call this "investing" the rationale is clear. The purpose of Phase I trial is to determine whether the product has any therapeutic efficacy for a particular disease or condition. If the results are positive, the valuation of its market potential would typically be based upon a very bullish assumption that the particular treatment would capture most, if not all, of the entire patient population.
During the phase II trials, the drug is tested according to what maximum dose can be given without side affects and what is the minimal amount that can be given to have any effect. The Phase III trials then test a universe of patients to determine what per cent of the population will respond or not respond to a particular dose.
Under this process of drug discovery, most likely the highest earnings valuation will be derived during the Phase I trials when the sky is the limit, as every subsequent trial will only reduce the size of that potential market.
Again, I would not consider this strategy to have anything to do with investing but rather an arbitrage based upon an overly (if not unrealistically) high valuation the stock might have as a result of incomplete data.
FAMCO