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  • Bill Gross PIMCO Exit Creates Unprecedented Value In CEFs [View article]
    Random thoughts, none of which are probitive:

    (a) if he wants to hurt PIMCO, then selling off a bunch of CEFs en masse does absolutely nothing to PIMCO's bottom line. Whether he own a CEF at X or dumps into a bidless market where someone else buys it at .8X means zilch to PIMCO. CEFs are fixed pools of capital. if he really wants to cause them problems, it's by urging redemptions from their OEFs.

    (b) Guy is probably pissed but not stupid. He can't get out of these $50-60M positions (most of which are in family trusts) without moving the market and selling at significant losses. The only people who'd lose from him dumping shares in a temper tantrum are his family and kids (and those who'd gain are the buyers). Any rational liquidation is likely to be slow and measured.

    (c) somebody is going to have to seed the new Janus fund. One assumes that someone worth $3B can find some free money to pony up for this without worrying about a lousy $200-300M stuck in family trusts. Plus, given the cult he's inspired over the years, plenty of money will follow him (wisely or stupidly) to this new Janus vehicle.
    Sep 27, 2014. 09:54 PM | 2 Likes Like |Link to Comment
  • Bill Gross PIMCO Exit Creates Unprecedented Value In CEFs [View article]

    Your logic would suggest that any time a dividend or "taxable event" is on the horizon, one oughtn't to buy, regardless of the order of magnitude of the newfound discounts relative to the potential special dividends. But one has to weigh the opportunity to buy some of these funds at 3-10% (or more) off the "regular" price versus the tax-adjusted cost of getting .25-1.00 (or whatever you think the special might be) of the current NAV back at the end of the year. There's no categorical right or wrong answer to this, other than to say that in most tax brackets, you're looking at the temporary discount as being worth a factor of 2.5 to 3 times the tax-adjusted cost of the special.

    Agree that one should never deliberately buy into a dividend in a taxable account, but (a) presumably the potential for a special distribution at year end was already priced into these funds before the Gross bombshell, and thus the new "sale prices" are true discounts to the fund value ex-ante; (b) many CEFs exhibit irrational price moves at year end as the special dividend triggers chasing as well as making it clear (as in the case of PDI or PCI) that the fund is currently overearning the monthly "yield," on which uniformed retail investors tend to fixate); and (c) as a de facto return of UNII from the course of the year, specials mark one way in which CEFs trading at discounts to NAV move closer to par.

    In sum, if these become significantly cheaper, I don;t see the potential for a special as a deterrent to buying. But what makes tax sense for one person may be completely a waste of time for another....
    Sep 27, 2014. 09:43 PM | Likes Like |Link to Comment
  • Bill Gross PIMCO Exit Creates Unprecedented Value In CEFs [View article]
    Jensen I,

    Interesting comments, most of which I agree with. I, too, think Gross is somewhat overrated--and likely to flub badly in the new enterprise at Janus. He's always generated outsized returns by making aggressive unidirectional bets on IR moves. When these bets have been correct, he's done really well. Lately, however, when he's been off (i.e. dead wrong) on the effects of QE, his returns have been dismal. Still, you have to give the guy props for being able to move the needle consistently on a $250B bond fund. We'll shortly learn who the real Bill Gross is when he's managing what's likely to be a much smaller and nimbler fund with a more aggressive mandate and a chip on his shoulder. I won't be investing in it but watching closely from the sidelines.

    Where I disagree is that it's by no means empirically clear that the "bull trend has broken down."
    Sep 26, 2014. 06:04 PM | 7 Likes Like |Link to Comment
  • Bill Gross PIMCO Exit Creates Unprecedented Value In CEFs [View article]
    Added to PDI, PCI, and PKO today (all Ivascyn-managed funds). In contrast to OEFs like PTTRX, which could indeed suffer some forced-selling due to redemptions, the CEFs (especially the Ivascyn vehicles, which have outperformed Gross) are bullet-proof in terms of their underlying NAVs.

    But the main worry about these funds is that Gross himself owns hundreds of millions in Pimco CEFS, and one would assume--given the acrimony--that he'll eventually want to exit these positions. He's got upwards of $50-60M each in PDI and PCI, for example. That's a lot of shares potentially headed for a very small door.

    You have to assume that while he's difficult to work with, he's not stupid, and I can't imagine he'd dump these all at once. But even assuming a slow and measured exit, that's a big overhang of shares that may be put back onto the market in the next 12-24 months (or whatever time frame).
    Sep 26, 2014. 05:00 PM | 4 Likes Like |Link to Comment
  • Walter Energy: Dramatic Price Decline Appears Overdone [View article]
    Truly ugly selling action, but with a market cap of $150M through to the equity, the stock is still overpriced given their capital structure. I now fear the bonds will also be a zero, but if you want to play hot potato on this one, the bonds are a better bet at 15-20 on the $.

    And I wouldn't be at all surprised if they file ch. 11 well in advance of exhausting the cash, so these kinds of liquidity calculations aren't especially helpful in terms of guessing the timing.
    Sep 24, 2014. 02:39 PM | Likes Like |Link to Comment
  • Yield Is Over 18%, Western Asset Mortgage Capital Increased The Dividend [View article]
    Glad that helped. It's a good company--my fave mreit--but at some price everything becomes disposable. My largest single name exposure, and I'd like to get it down a little and pivot into some of the mortgage Cefs that are beginning to open up nice discounts.
    Sep 24, 2014. 11:12 AM | Likes Like |Link to Comment
  • Yield Is Over 18%, Western Asset Mortgage Capital Increased The Dividend [View article]
    Well, if it came straight from Schwab, then it's gotta be solid... :)

    Tips: only take data from the official SEC filings, and like RLP says above, don't invest in something you don't understand.

    If I had to *guess* where they're getting the numbers you cite, I'd imagine that it's probably a blended annualized earnings number which reflects the 1-Q headline disaster. But those "earnings" numbers from 1-Q reflect realized as well as mainly unrealized mark-to-market losses on their portfolio. Losses are losses, you might say, but for mreit purposes the relevant number is core income--which was $1 last quarter, as the article correctly points out. They earned .75 core with .25 in drop income. Unclear whether the drop income will be replicable on a going forward basis.

    If none of that means anything to you, then by all means do not buy this mreit or invest in mreits more generally.

    PS: the other relevant number people should be paying attention to is NAV. They are probably very close to current NAV (inclusive of the unpaid .70). In what now looks like the increasingly unlikely event that this should run up much higher before ex-div date (say, a very high 15 or low 16 handle), you run the risk of an SPO after it goes ex-div.

    Disclosure: long WMC, but looking to trim in the mid to upper 15s.
    Sep 24, 2014. 10:52 AM | 1 Like Like |Link to Comment
  • 20% Yielding Western Asset Mortgage Shifts Holdings To Support The Yield And Book Value [View article]
    You're missing something: total shareholders equity/ shares outstanding at the date. It's divided out for you in the earnings 8-k, for the mathematically challenged.
    Sep 21, 2014. 02:09 PM | Likes Like |Link to Comment
  • Insider Buying And Effect On Dividend Due At Western Asset Mortgage Capital Corp. [View article]
    Betcha they raise to .75...and then do an SPO after ex-div.
    Sep 16, 2014. 07:27 AM | 3 Likes Like |Link to Comment
  • Update: Closing My Long Thesis On RadioShack Following The Q2 Earnings Call [View article]
    Congrats on the 60% gain. The tell on the bs rumour (and ensuing short squeeze) was that the bonds scarcely moved.
    Sep 13, 2014. 09:33 PM | Likes Like |Link to Comment
  • Breaking It Down: RadioShack Corporation's Q2 FY 2015 Earnings Call [View article]
    That quarterly statement was dire indeed: my read is that the "best case" scenario at this point is an additional capital injection in conjunction with a pre-pack Ch.11, and the "worst case" is a Ch. 7 liquidation. They're going to restructure, as should have been obvious all along, and the common equity is now officially a call option that they'll feel compelled to throw equity holders a bone and let them share 5-10% of the newco equity.

    Assuming there is even a Newco...the fact that they put the possibility of a total, doors-closed Ch. 7 liquidation on the table is alarming.

    Glad I banked all the profits from the short squeeze...
    Sep 13, 2014. 01:11 PM | Likes Like |Link to Comment
  • RadioShack: Buying The Stock Outright Is Still A Losing Proposition. But With Downside Protection, It Is Becoming A Viable Bet [View article]
    Ah, so many stories and rumors over the years on this one...just when you think they're on the ropes, they pull another one out of their rear end.

    SG may successfully refi the credit line, and possibly issue some more shares to keep them afloat for another year or two. But as far as the price action, I think most of this frenzy really is short covering and momo chasing. Significantly, the unsecured 2019s haven't moved up nearly to the same extent as the equity. Curious how the CDS are trading.

    I'll buy the rumor, and sell the news on this one. Closed 1/2 position on my Calls and rolling back into some long-dated Puts.
    Aug 27, 2014. 02:24 PM | Likes Like |Link to Comment
  • RadioShack: Buying The Stock Outright Is Still A Losing Proposition. But With Downside Protection, It Is Becoming A Viable Bet [View article]
    Here's to playing the best risk-reward at any given time!

    I'm considering cashing out part of the ill-gotten gains from the short squeeze, and going short again now that Puts are cheapening up a bit...
    Aug 27, 2014. 10:25 AM | Likes Like |Link to Comment
  • Pacific Coast Oil Trust: Regulatory Fears Unfounded, While Units Yield 15% And Sell At A Discount [View article]
    Hey REDI,

    Thanks for the generous response and clarifications. Respect for this illuminating exchange and defense of your thesis, which is exactly what SA should be all about! You've found an interesting situation, and I sincerely hope that it plays out exactly as you anticipate.

    For me, though, I prefer to dumpster dive not in the market stage of "Denial" but that of complete and utter "Capitulation," and I'm just not feeling that here yet. With the Puts, you're covered, though.

    Will look to revisit this when November roles around...

    Aug 25, 2014. 10:20 AM | Likes Like |Link to Comment
  • Pacific Coast Oil Trust: Regulatory Fears Unfounded, While Units Yield 15% And Sell At A Discount [View article]
    Thanks much for the follow up, REDI.

    With all due respect, I just don't find your investment thesis persuasive, at least at current price levels.

    You assume several things:

    1) The measure itself won't pass because your average Santa Barbara voter cares about tax revenues. I think this is dubious. Santa Barbara voters are college students, hippy millionaires, and yoga moms. If you think that voters are going to parse the budgetary nuances of a bill that purports to ban fracking, you are being extraordinarily optimistic. But only time will tell.

    2) You assume that the ban doesn't facially affect what ROYT is doing. It clearly does affect it. It explicitly bans cyclical steam extraction techniques like those used by ROYT. At minimum, it constrains new development (whose effects you've not quantified, and which have to be material). At maximum, it can be construed (and will be by supporters and their attorneys) as precluding current activities. It is rational strategy for them to deny this now, but once the legislation is passed, they have every incentive to try to stretch it to curtail existing production.

    3) You assume that a CA court will see things in a rational way that supports vested property rights. We have all kinds of evidence of municipalities using referenda and zoning regulations to constrain property rights, and courts backing them on this. You disavow legal expertise, but your thesis rests on it. Moreover, even if you are correct, there are legal costs to be borne in terms of hashing out the effects of this legislation. Unless I'm mistaken, ROYT discloses these potential legal costs as a "risk factor" that could very well eat into royalty income payable to unitholders. One doesn't have to be a lawyer to see this issue as a major risk factor.

    4) You assume that management is properly incentivized and aligned with unitholders. I'm skeptical. Parties connected to this enterprise cashed out big time just before this issue emerged (coincidence?). These royalty trusts are rife with conflicts of interest, and their very existence in many cases stems from the desire to offload legal risks or declining assets onto yield-hungry retail investors. While ROYT is not as self-evidently flawed as others you identify, its performance since being spun off is hardly reassuring.

    If you are wrong about any one of these assumptions, the price goes to low single digits immediately. I've always found it more helpful to try to imagine what the worst possible outcome is, as a way of trying to falsify one's thesis.

    Why not wait to scoop up on the capitulation if/when the Measure passes in November? Even if you are right about the ultimate implications for ROYT, the headlines will be ugly and scare out many longs.

    I would only buy this after a further shake-out, but good luck to all.
    Aug 24, 2014. 10:54 AM | 2 Likes Like |Link to Comment