grinninbrit

7 Comments

    • ON: Sun Jun 22nd 23:55 PM
      Commented on:
      6 Stock Picks for a Weak Market - Barron's Interview
      The time to be a bear was a year ago, and now its time to be cautious they say.... then they point to energy and materials as the future leaders. I'd say the time to be a bull on energy and materials was a year ago, and now its time to plan an exit strategy.
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    • ON: Mon Jul 9th 18:07 PM
      Commented on:
      Cornerstone Funds Alters Dividend Reinvestment Policy - No More NAV
      today on July 9th was that Renaissance or someone else that had 450,000.00 dollars to spend at 10:35AM CDT and decided that the best way to invest that money in this market was to split it down the middle with almost a quarter of a million going to buy CRF and almost a quarter of a million going to buy the other Cornerstone fund CLM. One at 10:35am and the other ticking off at 10:39am. Then it must have been off to a Wall Street lunch after a morning of hard work investing another half a million in funds trading 75-100% premium... anyone have any clue what kind of edge they have secured ?
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    • ON: Thu Jul 5th 02:47 AM
      Commented on:
      Cornerstone Funds Alters Dividend Reinvestment Policy - No More NAV
      First of all thanks for your opinion on the Renaissance Strategy. But I can't necessarily concur that there was only that element to their strategy. The one other thing I disagree with is your comment "Why am I writing a post exposing this fantastic inefficiency? It’s simple: the game has come to an abrupt end. "

      I should also say I have a short position in this and find the valuation here not merely ridiculous, but sure to be a element of some future financial thesis on the breakdown of efficient market theory as we know it...

      That being said, the Renaissance team is far more intelligent than I. And years ago when you or I might have also suspected an "abrupt end" to this, they were far more right than us. They've milked this extraordinarly well. And I suspect not just for the dividends, even distributed at NAV. If your them, you don't pick up a vanilla large-cap closed end at 70-100% premiums for that little game.

      They have another edge.

      Most investors here are either not getting this stock short or paying 25-50%+ negative rebate fee's to their broker for the supply of this to short. My guess is that Renaissance corners the market on this security, and although your broker is getting a little piece of that 25-50, Renaissance or a "partner" collects the rest for providing supply to the brokerages. This is a guess. I need more education on how negative rebate fee's are determined and distributed once collected from the margin accounts holding the shorts.

      But even if I'm completely wrong I believe there is another missing piece to this puzzle that is far more complex than we can know. You are correct that its certainly got nothing to do with the value of the fund or its holdings. Crazy, crazy, valuation. But I'll bet Renaissance has some type of "edge" here that the rest of the "public" market is not privy to. And they'll have it as long at they need or want to have it. An abrubt end should not be assumed.
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    • ON: Thu Jun 28th 11:14 AM
      Commented on:
      The Cornerstone Funds Are Sucker Bets
      Negative Rebate Fee's.... What do any of you know about the regulation and/or market mechanics of these? Mitchflorida mentioned Schwab would charge him 25% per year to provide the short position to him. This doesn't surprise me as I've seen these charges all over the board for various stocks. But they don't seem to be consistant from broker to broker, and don't always seem to be even be relatively comparable to other stocks in the same liquidity boat.

      There is certainly a supply demand aspect to it. But there is so much disparity I have to wonder if there is any regulation and/or structure to it.

      For a stock like "Travelzoo" lets say where there is a high negative rebate fee and an extremely large short position I imagine the mechanics would be that there are several hedge funds and market specialists competing to offer their long positions to various discount brokerages for a fee they feel would be likely to place their long stock and earn the income from that fee.

      But what about these even more thinly traded stocks such as the Cornerstone closed-ends. If rather than many hedge funds and market specialists owning, rather one hedge fund corners the market supply on that stock, a stock which will be in great demand to short due to a crazy premium for a vanilla basket of large cap stocks, can they essentially dictate a charge to the brokerages to be passed on to the customer that shorts? Or might they be well connected to an entity that does set that fee? I know people prefer demand and supply market forces over SEC regulation, but I'd be interested from someone knowing a little bit more about the mechanics here. Is the structure here conducive to supply demand market fundamentals? Any SEC regulations in place for "charges" to lend out stocks?
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    • ON: Mon Jun 18th 00:17 AM
      Commented on:
      The Cornerstone Funds Are Sucker Bets
      And the sole hedge fund thats buying like mad is a long running top quantitative fund that can do this math to. So whether this thing floats for 1,2, or 3 years (as the small guy short pays big dividends and negative rebate fee's ) before crashing, you really have to wonder how they'll know when to get out. But you got to believe they will. I believe they have a window into the market supply on this that none of the rest of us will ever be privy to. Just a guess....
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    • ON: Wed Jun 13th 08:40 AM
      Commented on:
      The Cornerstone Funds Are Sucker Bets
      be careful!

      not because anything of what the author is wrong, he's head on. But to short this you could be charged a massive "negative rebate fee" by your broker to hold it. Also consider that its in great demand from hedge funds as a short. And the supply of less-liquid desirable shorting shares creates a situation where the big player can trounce the small player because of under-regulation by the SEC. Whenever you short shares they fall under the margin agreement you have signed with the broker. Which means he can call them anytime due to "supply" reasons. So a hedgefund or investment banking arm which is likely a LARGE customer of the brokerage, knowing they can borrow these shares out at 25% per year goes to the brokerage house and says we'd like your supply of CRF and we'll pay you $2 per share more than current market value (which they are happy to since they'll make $5 per share loaning it out over the year). Now the broker calls the little customer on the phone Tuesday and says due to "supply" constraints we are calling your shares by Friday. You'll need to close the position yourself over the next few days or we might do a forced close on Friday. Again, this is not due to insufficient funds in the small guy's account, just a supply call. And the small guy shorted the stock a year ago, paid 12% in dividends along the way, CRF has gone up to a yet larger crazy premium where the small guy has lost more than even the 12% dividends. I've had it happen to me.

      This thing has sat up this high for years now, and the large hedge fund holding this long and loaning it out has high confidence they'll keep this thing floating long enough to risk paying the $9 per share premium since they make about $7 per year between the 25% loan-out collect and the dividend collect of $2 per year from the shorter. Not sure how they have this confidence, "special" relationships with other large market participants? Not saying I have any evidence of that. All speculation, because although I don't subscribe to the efficient market theory, this type of imbalance creates heavy curiousity in my mind.

      It doesn't seem like the type of "market" the SEC would want... where the little guy this extreme of a disadvantage to the big guy in this playing field. But I guess they might focus on how market mechanics ensure a level playing field on shares held long. The short holding stockholder is perhaps not a great concern, but I do think that is wrong, created by the ability of short "supply" to be bounced around without regulation of free-market price.
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    • ON: Sat May 19th 11:02 AM
      Commented on:
      Converting Closed-End Funds to ETFs: Has the Trend Begun?
      Yes, and if the problem were excessive discounts, that is less the case now than its ever been.. many funds are trading at premiums and even large premiums to NAV. Discounts are very low, especially if you look at this historically. Much less a compelling reason to convert than in the past.
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