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  • Macau VIP Refugees' No-Show At Melco Crown's New City Of Dreams In Manila [View article]
    I read with interest MS report about the sector and here is a brief summary of what the analyst perceives as the 3 risks going forward for the next year:

    The first is revenue risk; VIP, which is still 52% of gross gaming revenue, will decline further in 2H15 due to junkets closing down, while the full smoking ban will take 2016 revenue down further in his view. Second is earnings risk; apart from negative operating leverage, fixed and rising staff cost, and rising promotional allowance, he thinks the additional cost of Phase 2 will push the overall margin/ROIC down. The last is multiple contraction risk – Macau stocks are trading at 13-15x EV/EBITDA on 2015/16 and thus in the event of slower future growth, no support from dividend, and negative earnings revisions, he sees multiples declining further.

    Seems reasonable to me..your take?
    Jul 2, 2015. 10:01 AM | Likes Like |Link to Comment
  • Is Yield All That Matters? [View instapost]
    I just re-read this comment of yours:
    "consider high coupon bonds which trade above par to give roughly equivalent yield to similar maturity bonds e.g., the Boeing 8.75% 08/15/21 trade at >$130 but there's not a real case to be made that the premium price of the bond is "unsustainable"..."
    Are you serious?
    How much capital losses you will incur if you bought those Boeings today at 130 when they mature in 2021 at par?
    ANyone buying those bonds today (or owning them today) can't expect more than their Yield to Maturity which will take into account the high coupon but also the principle erosion to par (assuming they don't default).
    Regardless if you bought them way back at 50, your total return from today will be their YTM!
    I hope you agree with that basic notion and see their premium is indeed unsustainable.
    If PHK owns that bond and keeps paying the 8.75% coupon, it will have its NAV shrink when BA bond goes slowly but surely from 130 to Par.
    Jul 1, 2015. 02:36 PM | Likes Like |Link to Comment
  • Rising Rates Are Good For PHK [View article]
    Thanks for your response and admitting the FUND's performance (as evidenced by its NAV) was not really special during the examined period (there are many other funds that did better, with less risk).
    ANy chance you will respond to the questions posed above? I will post them again here hoping to hear your take on them:
    So I ask these questions:
    Does PHK merits a buy recommendation (or even a Hold recommendation) when:
    1. It's Premium is 25% over NAV when virtually all other alternatives are trading at attractive Discounts to their NAV?
    2. How can anyone make 19% consistently to pay for the inflated distribution rate which was set some 12 years ago when NAV was around 100% higher than when it is now? when HY rates of B rated bonds are around 7% and CCC rated bonds (susceptible to very high default rates) are at around 11%
    3.Does a fund sporting 50% HIGHER RISK merit a Discount or a Premium valuation?
    4.How come NAV declined by 9% over the past 2 years?
    5. Do you feel the lower leverage that the fund is employing now makes it easier or harder to achieve that 19% benchmark target to satisfy that inflated distribution rate?
    6. Have you examined PHK's portfolio and looked at its major positions? If so, do you see a significant percentage yielding over 8-9%
    Thanks for your consideration and hopefully responses to the above questions.
    7. Have you examined PHK's Section 19 notices this year.
    Can you spot a deviation in frequency from previous years and also a change in magnitude of "other sources" of income in those notices?
    What would you ascribe those notices to and do you believe they may be related to the fund's inability to meet its distribution rate from earned income vs. previous years?
    Jul 1, 2015. 01:57 PM | Likes Like |Link to Comment
  • Rising Rates Are Good For PHK [View article]
    As a retiree who must preserve principal using the Vanguard fund vs. PHK is a no brainer. I think you are doing the right thing even if you give up some income in the process..
    There are other options in the leveraged CEF arena apart from PHK who provide decent income and trade at very nice discounts to their NAVs.
    They pay much higher than the Vanguard fund but of course are more volatile.
    However, check out EVV, BLW, DSU..they are LESS volatile than the Vanguard fund and provide more income, they also have portfolios with shorter average durations that can mitigate interest rate risks.
    A combination of the 3 will further reduce risks through diversification and exposure to different management styles.
    Jul 1, 2015. 01:31 PM | Likes Like |Link to Comment
  • Rising Rates Are Good For PHK [View article]
    He would have still told me to short it bulls.
    Sentiments and emotions make people pay 25-30-40-50 and 60% premium to nav, not logic and fact checking.

    I am short, have a lot of skin in the game, you are with no position whatsoever..who is the obssesive one?
    If you feel PHK is a buy here, just buy it..
    I feel it is a sell here and I sold more of it a few days ago between 10.10 to 10.18
    Because my rationale tells me it will trade below NAV this year..that means a further 30%+ decline in market price.
    Meanwhile bulls, perhaps you care to educate us all and comment on my 7 questions posed to the author (who choses to stay mute on them) at the begining of the comment section?
    Make your case that this is just an emotional sell off and nothing more, mabye I am wrong and you are right but so far you haven't presented anything to support your position on the matter that can hold water.
    Jul 1, 2015. 12:50 PM | Likes Like |Link to Comment
  • Is Yield All That Matters? [View instapost]
    Appreciate the feedback.
    My mind is open, but I need to see facts and figures to be convinced, not vague ideas.
    The facts and figures point to an unsustainable distribution rate from earned anything.
    Best of luck and I truly hope you're not long this disaster waiting to happen.
    Jul 1, 2015. 10:26 AM | Likes Like |Link to Comment
  • Rising Rates Are Good For PHK [View article]
    The distributions are considered dividends unless classified otherwise.
    They can be dividends, return of capital or capital gains (long or short term).
    The discussion about PHK's performance from about 10 years ago is quite laughable.
    We are talking about a different management team, different market circumstances, different portfolio composition , different leverage, different Asset base - and Probably a different distribution rate by the time Fed Funds rise significantly (and possibly way sooner) IMO.
    To think that one can base a projection of such fund on its performance of 10 years ago..There is not much in PHK's portfolio to suggest a rise in the Fed Funds rate would help its performance - yes PHK can change the portfolio but change it to what? More Bank Loans? That would probably lower earned income even more!
    Didn't NAV actually go DOWN by about 4.5% for those 2 years the author alludes to (2004-2006), but he neglects to mention this fact to us and only shows the price chart - so basically he looks at a premium creation period some 10 years ago.
    The author also neglects to show us what other alternatives had done with respect to performance for that period and what were the risk differences undertaken by investors.
    Just one quick example, DSU was up as much as PHK for that period, price wise, but look at the difference in NAv performance : UP 2.7% vs. DOWN around 4.5% on PHK.
    PHK had been a very mediocre fund up until the super charged days after the financial crisis vs. its peer group, the author wants us to believe PHK is a good buy as a hedge against rising rates and there are 2 problems with that proposition to start with:
    1. Past performance is no guarantee of future results
    2. Even if we ignore item 1, PHK was a very middle of the road fund back then and to think a high premium valuation is merited for such fund is not logical.
    The over inflated distribution at 19% of NAV will assure NAV erosion going forward and the more they delay the cut the more people get hurt and the larger the losses may be.
    Jul 1, 2015. 09:00 AM | 1 Like Like |Link to Comment
  • Rising Rates Are Good For PHK [View article]
    "dont fight the tape. "
    Go back to MArty Zweig and ask his opinion about PHK, he would tell you to short it.
    If you've beem watching the tape , do you notice a certain under performance by PHK over the past year, 3 years, 5 years?
    Do you notice this under performance achieved at 50%+ risk vs. peers?
    Bulls, for someone who admits to have no skin in the game you sound pretty emotional to me!
    Jul 1, 2015. 01:05 AM | Likes Like |Link to Comment
  • Casino stocks (LVS, WYNN, MGM, MPEL) spike as Macau relaxes visa rules [View news story]
    A day does not a trend make as you very well know.
    Jun 30, 2015. 07:01 PM | Likes Like |Link to Comment
  • Rising Rates Are Good For PHK [View article]
    Stay long and watch what happens :)
    Jun 30, 2015. 06:59 PM | Likes Like |Link to Comment
  • Rising Rates Are Good For PHK [View article]
    so jck, are you long PHK or not?
    It is YOUR money to LOSE regardless of your cost basis.
    See you below won't have to wait years.
    Jun 30, 2015. 05:47 PM | Likes Like |Link to Comment
  • Is Yield All That Matters? [View instapost]
    You are wrong, plain and simple.
    Using the example above:
    "(2) I buy the hypothetical bond from above; that is, I buy $1,000,000 par value of bond at 50 that pays an 8% coupon and matures in 10 years. Instead of cash I now have a bond worth $500,000, but my NAV is unchanged.
    (3) It is now 10 years later and the bond has paid off at par and not missed a single coupon payment."

    First off, your yield on your NAV is 16% when you start, right? (80k over 500k)
    What is your distribution annually? 80k or 130k? you claim in one of your comments above it is 130k and that is how PHK achieves such high distribution over its NAV.
    If it is 80 k only, look what happens:
    You assume the bond matures at par after 10 years, let's say that we are in year 10 and the bond is very close to par already.
    The bond still pays the 80k as before BUT, what is the NAV of your CEF now?
    The NAV is not 500k but $1mm now (as the bond is at par and you have a million $ in bonds)

    What is your current distribution rate on your NAV?
    It is just 8% - VOILA!
    The bond matured, you end up with cash of $1mm. Over the 10 years you got 800k in income not $1.3mm. If you want to distribute the extra cash of 500k after maturity you make a return of capital of 500k to get to your 1.3mm number.
    You can't have appreciated NAV with the initial discounted high distribution rate.That is just MATH.

    Going to scenario II now:
    You pay both the 80k in earned income + another 50k a year in "accreted value" - this is the self liquidating scenario. I shall use linear appreciation on the bond price to make it simple in this illustration:
    Year one you pay 130k but you have to sell some 91m face value to generate 50k extra (and bond price is 55 now)
    You are left with just 901m face value now which makes your NAv about 495.55k - yield? 14.7%
    Those earn you just 72.88k during the second year so you pay that, but you want to keep the 130k distribution constant, so you have to generate another 57.12k - you liquidate some 95m of face value at market value of 60 - you are left now with just 806m face value in bonds paying you just some 65.5k a year in income.
    End of year 3 you need that 130k so you are short 64.5k - you liquidate around 99m in face value at price of 65 now to get to that constant payment of 130k.
    i can go on, but can you see where you are heading?
    End of year 3 you are left with roughly 707m of face value at a price of 65 - your NAv is down to 459.5k.
    Fast forward..end of year 5 you are left with just 493m face value of bonds and your NAV is just 370k (bonds already up to 75 price).Your income is just 39.44k now - what is your yield over the NAV of 370k? 10.66%
    Can you guess what your NAV will be at end of year 10? ZERO
    Your fund just self liquidated.
    This is what has been happening with PHK.
    They have kept a very high, not realistic distribution rate for way too long
    They were very lucky over the years right after the financial crisis as they were able to generate some large capital gains but look at the past 2 years, NAV has been going down, because the distributions are way too high and the easy money in the markets has long been had .
    Check out PHK's Section 19 announcement over the past 6 months. In past years they would have one or two a year, scattered through the year and managed to finish the year with no meaningful return of capital.
    Never before has PHK released monthly Section 19 announcements for 6 straight months and look at the amounts of "other income" mentioned in those announcements.
    This is as clear writing on the wall as one can get - WINTER IS COMING (I love those books, and the show too) !
    Jun 30, 2015. 05:29 PM | Likes Like |Link to Comment
  • Rising Rates Are Good For PHK [View article]
    based on what? past results?
    Jun 30, 2015. 04:50 PM | 1 Like Like |Link to Comment
  • Casino stocks (LVS, WYNN, MGM, MPEL) spike as Macau relaxes visa rules [View news story]
    I agree with WFC McKnight,
    if you are shunning Macao due to corruption or wealth tracking concerns the fact you can stay 2 more days a week or come more often than before is not going to make you go there at all.
    Jun 30, 2015. 04:16 PM | Likes Like |Link to Comment
  • Rising Rates Are Good For PHK [View article]
    I like any article that makes sense, this doesn't!
    The fact that HY bonds are not highly correlated with interest rates has been known for over 25 years.
    The fact the author willfully ignores some of the points I raise in my comments taints his point of view.
    All IMHO of course.
    I can read differing points of view but I don't like to stay mute if I don't agree with them.
    I respect a good exchange based on facts and look forward to hear from the author re my comments.
    Jun 30, 2015. 03:12 PM | 2 Likes Like |Link to Comment