Chamois16

A Cyclical Guide to CEF and ETF Investing

Thanks Joe. The graphic is from Fidelity You can find it at personal.fidelity.com/...

If you click on the sector names below the graphic, each will be discussed

Index ETFs Have the Edge Over Actively Managed CEFs

Not a very persuasive argument. CEF pay out higher distributions, particularly country funds, and its not clear that that the comparisons are based on total returns. Finally comparisons can be made either on NAV basis or market price basis. You can't compare a CEF market price with an Index ETF NAV.

One of the advantages of CEF is the ability to exploit periodic excursions from equilibrium discounts common to each fund. That doesn't ccur with ETF subject to creation unit arbitrage, usually penalizing the ETF holder in favor of the arb. There are times in a market cycle in which index ETF outperform CEF and vice versa.

The article seems to be comparing an investment vehicle which is at best nascent (how many truly actively managed ETF are out there). with CEF which have been around for a long time and are particularly suited to sspecific asset classes.

You would do better to limit your comparison to index ETF vs actively managed ETF when sufficient data becomes available, and not try to deal with the vaery different attributes of CEF

Timing the Addition of a CEF to Your Portfolio

Just to be clear. The 1.51% "other expense" is attributable to leverage costs

Annual Expense Ratios
As of 06/30/2008
ACG Common Shares
Management Fees 0.72%
Other Expenses 1.51%
Total 2.23%

Timing the Addition of a CEF to Your Portfolio

The 2.2% expense ratio is very misleading. ACG's comparable ratio is 0.72%, well below normal for actively managed funds. ACG uses debt for funding its leverage rather than auction preferred shares (ARPS), so the interest on the $1B loan appears as "other interest" in the expense ratio.

Had ACG used ARPS, the required dividends would have shown up as liabilities on the balance sheet rather than an expense in the income statement.

This environment shows the advantage of active management, as treasuries lose favr.

Home Prices May Be Nearing Bottom, Bank Equities to Follow?

You guys are probably right that housing has more downside; how much more likely depends on location. But the more important point in the article is that good banks are over-reserving for losses and have possibly fallen too far.. The continued decline from here being in large part sentiment-driven and somewhat unrelated to operating cash flow expectations for 2009 and forward.

If everyone agreed this is a good time to get serious about banks, it would be too late to exploit what is arguably an oversold situation among retail and commercial banks with well-managed risk. JMO

Three Companies Perfectly Positioned to Bridge the Energy Gap

Maybe Mr. Fessler should meet Mr Quinn, also of seekingalpha

General Electric: Genuine Risk of Collapse?
by: James Quinn November 17, 2008 | about stocks: GE

General Electric (GE), the legendary American institution, founded in 1878 by Thomas Edison, is in deep trouble. Its PR machine has been in constant spin mode as the company sinks deeper into despair. It is one of the few companies in the U.S. that still retains a AAA rating. Considering Moody’s and S&P’s track record, rating companies and financial instruments, that AAA rating is not worth the paper it is written on. One look at GE’s balance sheet will convince you they do not deserve a AAA rating. AAA companies do not need to take the desperate actions that GE has taken in the last few months.? etc etc in a very long screed.

Midstream MLPs Crashing, Present Opportunity

For now, I would avoid MLP CEF such as KYE mentioned above. Most are leveraged and are having to sell portfolio holdings at fire sale prices to rebalance leverage and asset collateral to the SEC limits. They are significant contributors to the excessive and continuing fall in MLP pricces, for this reason

Six Reasons to Like the Morgan Stanley Emerging Market Domestic Debt Fund

There are other CEF holding EM debt in local currencies (eg AWF), so EDD is not the only choice. EDD suffered from the downgrade by its own parent (Morgan Stanley), who may be right about the strength, or lack thereof, of EM currencies.

Nevertheless, in a well diversified portfolio, these CEF may have a place. EDD is probably as good as most and is particularly attractive at current discount and distribution rate. JMO

GE, Microsoft on New Low List

I think we may be underestimating GE's infrastructure position, which transcends the "green" idea. They have fielded 9000 1.5MW windturbines at $3.3M per to date, and the order backlog is growing, but they also build world class gas turbines (series 7 and 9) for utilities, have arguably the best new reactor technology in the ESBWR and dominate the transportation market with aircraft engins, pipeline flow compressors, shipboard propulsion turbines and locomotives. The financing unit is synergistic in enabling the sales of the big ticket items, some of which exceed $100MM each. I think the household appliance business is on the way out and maybe aircraft leasing. I am starting a position here at $30-31, despite six sigma and the past mistakes.

Currency, Precious Metal and Futures ETFs: Don't Get Caught in the Tax Trap

Purely a nitpick, but ETF are not mutual funds. From the SEC:

"There are some investment companies, known as exchange-traded funds or ETFs, which are legally classified as open-end companies or UITs. ETFs differ from traditional open-end companies and UITs, because, pursuant to SEC exemptive orders, shares issued by ETFs trade on a secondary market and are only redeemable in very large blocks (blocks of 50,000 shares for example). ETFs are not considered to be, and are not permitted to call themselves, mutual funds."

Can Eaton Vance's Tax-Advantaged Dividend Fund Sustain Its Yield?

Correction to the above. The distributions are from investment income, not ROC or capital gains.

Can Eaton Vance's Tax-Advantaged Dividend Fund Sustain Its Yield?

Lots of bad info here. EVT is a dividend capture fund, the additional dividends providing the extra yield. It doesn't do options. It is a levered fund along with its cohorts ETG and ETO which just switched to bankd debt from APS. There is no reason tp believe that this will cost significantly more than default APS rates resulting from failed auctions. Many CEF use debt rather than preferred shares, even before the APS problem. EVT distributions to date are entirely from earned invested income and are 15% qdi

The original poster apparently missed the capture strategy and subsequent posters have confused EVT with other funds

Understanding Closed-End Funds

Sorry for the PS, but my response was truncated. The point was that if one is going to give a tutorial on "understanding closed-end funds," why not accurately make the distinction? With the explosion of "managed index" ETF, financial advisors who fail to make the important distinctions among investment vehicles and the difficulty in understanding why CEF prices, unlike those of mutual funds, stray significantly, and for good reason, from NAVs, investors have enough problem reconciling the conflicting statements by experts in the field. JMO as always

Understanding Closed-End Funds

Closed end funds,,as you say, are like mutual funds in many ways, but they are not mutual funds. Here's one clip from sec.gov

Mutual Funds

A mutual fund is a company that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, or other securities. Legally known as an "open-end company," a mutual fund is one of three basic types of investment company. The two other basic types are closed-end funds and Unit Investment Trusts (UITs).

There are enough differences within the ICA 1940, to mse the distinction worthwhile.

Understanding Closed-End Funds

It seems like someone who has worked in the field would know that closed-end funds are not mutual funds. The misuse of the term destroys the validity of whatever point is being made.

"Closed-End Funds

"A "closed-end fund," legally known as a "closed-end company," is one of three basic types of investment company. The two other basic types of investment companies are mutual funds and unit investments trusts (UITs)." -sec.gov