GlobalTrekker

Closed-End Funds and Tax Free Dividends

I'd have to agree with YoYoMama. Good introductory article for people on tax-free muni CEFs, but be very cautious of chasing yield alone. I'd view BNY and FMN as shorts and VCV and VMV as sells if I owned them. Only VPV looks decent, but there are better PA muni funds with lower management fees, deeper discounts, and only slightly less yield. The deeper discounts and lower management fees are better long-term bets than those with high yield alone. Disclosure: long and short dozens of munis.

PIMCO Global StocksPLUS & Income Fund Looks Overvalued

Good, straightforward article. PGP is, indeed, over-valued but is not that hard to short. It's just not for the faint-hearted. Pimco is not all-knowing, the fund just has a perhaps overly loyal following that is seduced by the high distribution (I wouldn't call it a dividend) and the current mania for commodities/natural resources.

Were I long, I'd sell. Otherwise, I'd look at the recent (one year or so) discount/premium profile and see where it is now. If it's particularly high by *that* measure, and you have the stomach for it, it could be a good short. I am short it now.

Why I'm Long Helios Total Return Fund

May indeed be a good investment. We rate it neutral to its category and have a sell on a small long position. My concern is its leverage which it uses partially to pay a rather high mgmt fee of 2.1%, though that's not high for the category. It's not clear to me why management needs a 2.1% annual reward for holding a large portfolio of Fannie Maes and the like. It seems you could assemble this for about 30 basis points and still have handsome income to manager and shareholder alike. The manager, however, seems very sharp, and there may be an argument that agency debt can rise soon (though I wouldn't make it ... seems there is quite a bit of this debt overhanging the market). But I worry about the dividend. It seems unsustainable, and they don't explain how much is a return of capital. With moderate leverage, a 2.1% haircut, and underlying notes paying 4.5% and the like, how do you keep an 11.3% dividend? I like the short duration of the portfolio, but everything else looks a bit skittish to me.

CEF Mergers Drives Special Equity Funds

I'm referring to your "People's Republic of California" comment which has nothing to with your article's economics and is simply puerile. Your condescending "A little history lesson for you" continues that supercilious tone and tries to imply that you went to Oxford, which you did not. "When economics was original [sic] taught at Oxford" ... uh, economics did not start in England. You next snobbishly spew bathos about economics and the social sciences. I can meet your academic name-dropping and raise you three, but outside of your MZF observations which are sound, the rest is just rehash. I have been trading closed-end funds for over twenty years for two of the five most prestigious and profitable firms in the world. Part of that considerable success has been a dispassionate look at facts and objective analysis. Not naming semi-obscure reviews and posturing. Lastly, to answer your question, if you think our fiscal mess that peaked in the last ten years is apt to be chronic, I'd simply opt for VWO. It's liquid, contrarian to our budgets, and resilient to our inflation and dollar weakness.


On Jul 19 10:27 PM Joe Eqcome wrote:

> GlobalTrekker
>
> A little history lesson for you. When economics was original taught
> at Oxford the course was entitled “Political Economics”. The reason
> was economics was, and still is, considered a social science. Political
> policies are designed to influence economic and investment behavior.
> So, it is almost impossible to separate politics from economic policy
> and sound investments decision making.
>
> Since America is still a country that recognizes free speech and
> debate, rather than not injecting my economic and political views—which
> I believe is crucial to sound investing, why don’t you countermand
> my arguments with your views if you disagree?
>
> I, and I’m sure others, would like to hear someone defend an out-of-control
> fiscal policy and what would be the best places to invest if such
> were to become an economic reality.
>
> Joe Eqcome
>

The Imminent Collapse of Municipal Bonds

I guess I am starting to become the contrarian voice in the never ending tirades against public institutions and their funding. But I believe the intellectual thrust of this article is a tad facile, preaching to the choir, as it were, and ignores some distinct features of the municipal bond market. Municipal markets may not be able to print money, but they have many tools at their disposal to satisfy bond holders.

Interest payments are usually very senior in the states' hierarchy, and revenue bonds continue to collect tolls, fuel taxes, and utility surcharges. These have fallen little. CA and others have risen the sales tax 1%, and that's a lot of money in the world's 8th largest economy.

Many states actually are cutting back services, so much of what the old saws say in this article is untrue.

Also, comparing expenses in 1955 versus nearly 2010 is really quite a mental stretch. This is not the same nation as 55 years ago, despite what perhaps many readers might wish.

It's always a little surprising to me that people claim to be so patriotic but deride all those who work for the nation. Do you really have so little regard for the value and services of our nation's military, teachers, forest fire fighters, meat inspectors, police, firemen, park rangers, state university professors, flight controllers?

Factually, the article also falls a bit short: "the investor gets only a slightly better return than in Treasuries." Uhm, on what planet have you been residing? My Vanguard muni funds have been yielding 4.3%, a double-tax-free equivalence of nearly 8%, not counting the huge appreciation I've enjoyed. The triple-A rating may be suspect, but I'll take my chances. In the CEF muni world I have funds paying out over 10% in tax equivalent yields, again, ignoring the far larger appreciation received since purchase in the spring.

In all, the muni market is in trouble, like most of the economy, but the writers protest too much. The states comprise America, and America is filled with potential, creativity, and vigor -- throughout, not just in a few Silicon Valley start-ups.

California's High Tax / High Benefit Model: A Constantly Renegotiated Bargain

A little balance in the comments wouldn't be a bad thing. I'd still live in CA over TX any day of my life, but that's just a personal quality of life issue. I, for one, admire much of what Texas has done in growth and improvement.

But I'll take San Francisco over Dallas, and LA over Houston summer or winter. Sacramento versus Austin, you have an argument. I have a small business in the Golden State, and through careful and legal tax-minimization techniques, my taxes are quite manageable, lower than in other states I've worked and owned. The beauty and the weather and the people and the food and the nature facilities are fantastic.

CA has to clean its act up, but it's most because of its super-majority budgetary system. Too many highly paid municipal union workers, for sure, but I have to say in permits, courts, police, emergency workers, I am startled by how much competence and decency I encounter, so much greater than in the East or the middle South. People are also consistently friendly, pretty smart, helpful -- something I've found a rarity though much of the rest of the world, and even in large parts of the U.S.

That said, I've nothing in terms of bad experiences with Texas -- just a little distaste for their over-zealous executions (I know it's very popular in Texas, and it's for Texans to decide; just hate parts of our country to be in such tight concert with Saudi Arabia, Iran, and China on this expensive, mistake-prone retribution).

Here's Why Asia Must Eventually Ditch the Dollar

Please don't politicize the already dire economic circumstances the U.S. is in. President Obama did not create this situation; his administration stepped under a falling anvil. Does the author truly want the current, or any, Administration to "reflate the burst consumer bubble"? SeekingAlpha readers and writers should remember that the deficit is huge because first, *no one* in government came up with a better approach than a Keynsian deluge and second, the new deficit accounting finally includes war costs and all the rest. Again and again, the more political postings here are, the less useful or insightful.

PPM Claims Liquidation Is in the Best Interests of the Fund

Well put. Activist management and keen attention to discount and management fees are perhaps the single best way to be vigilant with these self-interested CEF fund managers.

Smarter Way to Pick High Yield Stocks?

This is a well-done analysis based on Schwab's report, but overall I am really suspicious of this kind of research. It's very much data-mining and has no checks for survivor-bias, data adjustment, data quality, etc.. Essentially, the differences between segments are most likely too small to be statistically significant, and the data-crunching too marred by Schwab's non-rigorous methods. Once you had accurately adjusted the equities for all true distributions, mergers, delistings, etc. I think you'll find the results are more random-walk than anything else. If you really believe in this method, try it with the above stocks on paper for the next 6 months and see how it truly performs compared to the others. I will bet you big that the results will not be what you are predicting now.

CEF Weekly Review: Wall of Worry

For the ETW distribution yield, I think it would be most useful to track the actual income of the fund. That, combined with its annual return, would give the best idea of true yield. For the buy/writes, even the return of capital is a confusing measure.

Obama's Trade Battle Explained

This is indeed a mistake of the left. But there could be a more reasoned discussion on all these economic issues if the right would not so blindly and violently attack every necessary non-conservative idea. At this point, health care reform is desperately needed by us small business owners to stay afloat. The right has no ideas and offers zero cooperation with policy exploration. Why should Obama discuss anything with them? Their record for dialogue is Joe Wilson, and to them post-partisanship is anathema. All the right suggests is caps on doctors' malpractice claims. The left-ish CA legislature already passed that. Seeking Alpha readers, who are overwhelmingly conservative, should get their representatives to move past this mindless, extreme partisanship. When there's some cooperation from the right, I am certain Obama will listen and guide a far more moderate trade policy.

AerCap Acquisition of Genesis to Create Largest Aircraft Leasing Company

This seems kind of a pointless posting. This news is five days old, and the headline is incorrect. AER will not remotely be the largest aircraft leasing company, not by an order of magnitude. One more nail in the coffins of the rating-agencies.

PIMCO High Income Fund: A Swan Song

Of course PHK is wildly overpriced. There's nothing magical about PIMCo or Bill Gross. Both have done disastrously in many areas of debt over this recession. And Gross's justifiable but stubborn position on CEF ARPs blew up badly in his face, not to mention his investors. The reason is actually unmentioned. Saying that it's overpriced because its overpriced is tautologic. The price is simply supported by lots of small holders, most not in margin accounts, and no short stock borrow. Pure and simple.

Tax-Free ETFs Have Delivered Exceptional Results

YoYoMama, you have done spectacularly with your six holdings, but each one but KTF is trading at huge premiums. You are setting yourself up for a huge fall. Sell them and buy their equivalents trading at discounts. With the exception of KTF, I would short everyone of those funds if I could borrow the shares. Look at PMO, NPM, NPF, MQT, NUW, OIC, MHI, PMM, MUI, and MZF. They're what I am buying now.

Tax-Free ETFs Have Delivered Exceptional Results

PVI's annual yield is wrong. That is the historic (and hysteric) yield annualized over the last year. It owes nearly all to a one-time spike in short-term tax-free interest rates. Its yield now is about 1.25% and falling. Still not terrible for its safety.