suburban blues

PIMCO Global StocksPLUS & Income Fund Looks Overvalued

And a stopped clock is right twice a day.. This reminds me a great deal of all the naysayers against the present rally...eventually they will be right. but they sure passed up a lot of profits.


On Nov 13 12:32 PM Joe Eqcome wrote:

> The historically unsupportable CEF premiums you note are illustrative
> of the pricing bubble being built by a continuation of the Fed’s
> zero interest rate policy. I understand and support their policy
> but note the aftershocks it could produce.
>
> The Fed's zero funds rate policy has driven down these CEFs' cost
> of capital to tenths of a percent. As a result it has allowed for
> unprecedented spreads between the asset yield and the cost of capital.
>
>
> This spread translates into attractive, but unsustainable, distribution
> yields accessible by retail buyers in a low yield environment. This
> retail buying of these high yields is driving the share price up
> and unmooring it from NAV. So, there is a disconnection between the
> two and the creation of a valuation bubble.
>
> As I argued here before, unsuccessfully, in the case of the Pimco
> CEFs, Pimco’s managements are the ones valuing the NAV on level I
> & II assets in their CEFs. They’re presumably the best in the
> business and they’re telling you that the stocks are overvalued!
> Nature speaks; it is we who fail to listen.
>
> However, investors have been emboldened by the Fed's declaration
> of a continuation of this policy. Nonetheless, once rates begin to
> rise, these CEF stock prices will plunge like Kamikaze pilots on
> to the decks of the retail investor.
>
> Remember, financial suicide is not illegal.

PIMCO Global StocksPLUS & Income Fund Looks Overvalued

Good point, Mavericks