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  • We've Now Approached 'Stupid' Levels For Prospect Capital [View article]
    Good comments all ...but ... I used to own PSEC and loved the yield. The frequent dilution of shares by additional share offerings was annoying but livable.

    Then I started to look beyond the math and the various statistical metrics on this company and instead look at the various investments the management was making ...while some were good, several were outrageous and foolish ...worse still was the management's attempt to distort the poor performing investments in the annual reports ...Example - a " Green Energy / renewable investment in New England ..lots of data ...but a simple Google search determined that this was a basic " firewood" company ... one with a troubled past and horrible management ...and far, far from being a " Green energy" concern ...PSEC lost millions betting on this whopper...and there were more of similar ilk.

    I decided to SELL my holdings ...not because of the new issuance of shares , or any specific financial aspect ...but because I felt the company was prone to taking super high risk on projects that had little chance of success.


    I attended a meeting with the senior people of MAIN in Houston ..and they went over their investment in Castro cheese ...why it was a solid target market with a brand affinity in the Hispanic community , how their sizable investment was somewhat protected with liens and what their expectations were for the investment ...they clearly knew the company , management team and business potential. The Castro investment turned out very well ...but the difference in management competency as compared to PSEC was demonstrable.

    Since I had flipped out of PSEC ..and invested the proceeds in MAIN ( May 09 ) ...the investment results have been noticeably different as well :

    MAIN - 2014 ytd - (-2.12%) Total Return , PSEC - ( -17.73%) Total return , S&P 500 - +10.59%
    2013 - Today - MAIN - +11.59% Total Return , PSEC ( -6% ) , S&P -+41.3%
    May 28, 2009 - today - MAIN -+288% , PSEC -+85% , S&P index - +144%

    BDC companies have seemingly fallen on hard times over the past two years ....but PSEC has proven itself UNABLE to compete with its peer group even in good years ...and is frankly getting walloped by the simple / unmanaged S&P 500 index ....turning in a massive underperformance on a one, two and five year basis.

    Why hold BDC type companies at all ? except to earn income and get a reasonable growth component over time ....In that gage, PSEC has failed ... and while the current discounts and various investment metrics seem compelling as defined by this article ...I just can't get past their management and disparity with the typical peer group performance and versus the S&P index.
    Dec 16, 2014. 03:05 PM | 1 Like Like |Link to Comment
  • Comparing Dividend CEFs With ETFs: Which Are Better? [View article]
    Interesting thought ...but lets address your recommendation with some contingencies that have happened to us in the past and which, if repeated, might tend to offer a contrary view to the overall attractiveness of Preferred stock ETFs :

    1. Preferred stocks are primarily an Income investment without any specific maturity date inside an ETF ...individually they typically have a 25, 30 or even 45 year duration so the average duration of the underlying paper inside the ETF can be very, very long. ( not good in a rising interest rate environment where any increase in the Fed rate will cause a sharp and significant decline in valuation of the preferred stock )
    2.Companies can and will suspend the dividends on preferred issues ....even those with an implied Federal Government backing ( FANNIE, FREDDY MAC ) come to mind ...where the new issue 9% preferred stock issued in early 2009 failed to pay even one dividend ...and the price fell from $25 to $3 in a few months ...ouch ) This sudden price decline triggered a stampede of investors dumping the stock ...causing even more price declines.
    3. ETFs typically trade at or close to their NAV ...whereas CEFs can trade at a premium or discount to their respective NAVs. Right now ..AOD is trading at a -13.35% discount to the NAV price in a market that is surpassing all time highs on the DOW and S&P 500 index. This very large discount in a top heavy market could serve to make AOD even more attractive to Growth & Income investors.
    4. Capital Gains - AOD literally has $3 Billion in capital loss carry forwards on the books since 2009 ...( not a misprint -lol ) AOD fund management can trade with a higher portfolio turnover than an ETF and NOT create a single dollar of capital gains taxation for 2014, 2015 ,2016 and 2017. Those gains must be washed against the capital losses incurred in 2008 / 2009 it becomes an advantage to AOD shareholders, particularly in a good market.
    5. Portfolio Income - AOD is producing 7.9% annually as compared to 6.8% income for PFF. Give the advantage to the CEF here as well.
    6. AOD has a fund expense ratio of 1.2% as compared to PFF of 0.47% ...advantage to PFF ...but having an active portfolio management team versus what is essentially an unmanaged basket of preferred stocks, in a rising interest rate environ, and which have very long maturity levels ...the higher expense ratio may well be worth it.
    7. AOD management has an on-going stock repurchase plan underway ...where they can remove up to 10% of the funds shares from the open market at their discretion. These share buy-back plans can help close the discount to NAV and improve the overall market price over time.
    8. AOD, sporting perhaps the absolute WORST reputation in the mutual fund industry, brought in a new portfolio management team about two years ago. Since then; they have improved the NAV by over + 20% , increased the dividend +4% , Reverse split the stock 50% , started a 10% share repurchase plan ...In short, They are making a series of management changes and moves to bring the fund back to respectability. It can prove interesting ( and profitable ) to hold the shares for their third year in control of the fund ...

    Hope this proves helpful in your decision making ...Regards
    Nov 19, 2014. 11:12 AM | 1 Like Like |Link to Comment
  • Fire Away [View instapost]
    Good points all ....and without bothering to specifically check the exact numbers ....allow me to " Kentucky windage " the share positions :

    Mill Valley Venture Capital firm has roughly 1.2 million shares
    Last secondary offering placed what... 500,000 shares directly with another institution ...( rough numbers )
    Insiders , including Dr Lederman own or control what ? 4,000,000 shares ...and have NOT sold a single share ...ever.

    Wild Ballpark guess that there are another 3,000,000 -4,000,000 shares in the hands of committed LONG holders like you and me ...

    Last report I saw indicated that there were 12,200,000 shares issued and outstanding ....

    That basically sucks all the wind out of the trading " sails" of this stock ...

    So many as 9.7 million of the 12.2 million shares are with Venture capital , Insiders , committed Longs waiting for the BESTFIT results ...79% of the outstanding stock ...

    so wonder the daily volume is so small ...not much left to trade


    Dr Lederman's disclosed compensation package includes about 250,000 options struck at $30 per share...

    Obviously he thinks that the value of TNXP will be NORTH of $30 sometime in the next few years ...( seemed a good point to mention )

    For better or worse ...we are on this ship ...waiting for the Bestfit test results ...
    Sep 23, 2014. 05:01 PM | 3 Likes Like |Link to Comment
  • Fire Away [View instapost]
    brichnyc - Actually am LONG the stock in a very serious fashion.
    I follow Joe Springer and Jason N.'s work on TNXP and have read most everything out there that has been published for review.
    Simply asking questions from the company's official slide presentation...I am not sure how that impacts Joe Springer's " time and dignity" test ...and I didn't think my question was snarky or out-of-line.
    In simple point of fact ...we are basing a good portion of our investment thesis to own TNXP on the 26% reduction in pain reported by the 2a trial versus the placebo ... and projecting that outcome on the BESTFIT trial with 200 participants instead of the 36 participants in the initial trial. ( BESTFIT will also use the SL formulation instead of the capsule )

    The 2a test we are ALL citing for its 26% reduction in pain and 72% improvement in objective sleep quality the control group taking TNX-102 ...also reported a 28% increase in nausea experienced by the 18 people taking the sugar pill ... and 11% of those actually taking TNX-102. Headaches were experienced by 28% of the people taking the sugar pill and 39% of the group actually taking TNX-102 ( in a 3.5 mg dosage )
    Perhaps small group tests are inherently flawed as just a few headaches and nausea can tend to sway the overall opinion as Joe seems to be suggesting ...for example ...I doubt very much that the sugar pill taken by the placebo group actually caused a 28% increase in headaches ....but 39% of the 18 folks taking TNX-102 reported experiencing headaches ... and Joe's response is "migraine headaches ? what migraine headaches ? "

    Invoking the " time and dignity" rule to avoid answering basic and legitimate concerns ...and then your dismissal as BS / much ado about nothing ...probably a short" ....That is just ignoring data that does not comport to your investment opinion.

    Joe - I do apologize if my earlier question about the TNXP slide presentation was somehow offensive ...and was unworthy of your time to merit a response.

    Sep 19, 2014. 01:07 PM | 1 Like Like |Link to Comment
  • Tonix Could Match Pfizer's Biggest Drug's Best Market [View article]
    Joe - was looking at the Investor presentation posted on TNXP website and in specific the results of the Phase Two trial of TNX-102 ...

    It seems to state that 28% of the N group of 18 ....reported increased nausea ...from the placebo pill ...

    39% using actual TNX-102 reported increased headaches
    33% reported dry mouth ....

    My concern is that the small control group can and will provide outsized percentages of adverse events ...

    How on earth did the sugar pill increase nausea 28% for example ?

    or conversely ...if taking TNX-102 causes migraine headaches in roughly 40% of the patients ...that will be a huge factor that will weigh heavily against its usage.

    Hopefully ...the SL formulation in the BESTFIT trial will have a larger sampling ...and better results ...

    I also noted where the PTSD trail will have a 5.6 mg version of TNX-102 SL included with a third of the subjects was wondering if having a stronger ( 2 x ) formulation of the TNX-102 SL in their arsenal could potentially show even better test results ....guess we will see those results in first quarter 2015 ??

    What do you think ?

    Thx - Mike
    Sep 11, 2014. 02:26 PM | Likes Like |Link to Comment
  • Comparing Dividend CEFs With ETFs: Which Are Better? [View article]
    Good morning Nick....

    I saw your comment regarding unrealized capital losses on AGD, AOD and EOD and wanted to suggest that , in reality, you are far advanced over a simple break even ...but that from an accounting standpoint do indeed have an unrealized tax loss that can be used in your 2014 tax computations.

    Let me explain ....Assuming reinvested dividends and an investment start date of Jan 1, 2010 ...EOD has delivered a + 36.52% Total return to your account ...better put : You have 36% more than you originally invested in current account value ...yes ...the S&P 500 index with reinvested dividends would have delivered to you a +92.61% Total return over the same investment period but you didn't have that point being that a plus 36% return is a lot better than simply being under water EOD is UP a net +23.34% ytd 2014 compared to the S&P index being up +10.39% so you might be getting a very nice benefit for holding on to the underperforming shares least in 2014.

    Another example, AOD, and where a similar phenomena from a tax basis is unfolding.
    In one account, I purchased 1,250 shares of AOD on 3/09/09 ....with a split adjusted cost basis of $8.901. Thru dividend reinvesting I now OWN 2,555 shares of AOD with an unrealized capital loss on the brokerage statement of ( $2,710.89 ) ...the helpful brokerage statement even shows a percentage loss of -24.38% making me think that I am very much " underwater" with this investment and AOD is one of the real " stinkers" in my portfolio. ( sound familiar ? )
    But wait ...I started out investing in AOD with a cash purchase totaling $11,119 and the present value is quoted as $22,690 ....that is approximately a +110% Total return over a 5.5 year duration or +14.46% per year ...hardly an exercise in losing money in the stock market.

    The reason for this apparent disparity is the way reinvested dividends are added to the position holdings ....the approximate 1,305 new shares of AOD purchased thru reinvesting dividends show a cost basis of $10.936 per share ...with a market value of $8.88 per share ...hence a $2,684 unrealized capital loss of the $2,710 total unrealized loss.

    By reinvesting the large monthly dividends are essentially ' dollar cost averaging ' 12 times each year back into additional shares of AOD buy fewer shares when the price is high....and more shares when the price is low ....over time ...this will develop into a significant investment advantage ...

    Incredibly can even sell off the reinvested dividends to realize a valuable tax loss , up to ($3,000) per year and further reduce your overall tax burden for the year by $750-$1,000 depending on your tax bracket ...on an investment you made some solid overall gains in.

    Total Return is by far and away the best measure of individual investment performance ...

    ( I did briefly look at AGD and saw where it was scoring an average -3% ish Total return since 2010 - 9/10/14 that particular investment is indeed ' underwater ' ....I would consider dumping it ...realizing your valuable capital losses ...washing them against any 2014 capital gains ...or ...simply letting the losses carryforward to upcoming tax years ...and re-deploy the cash proceeds into a better performing income based fund )

    After all ...if this tactic can reduce your hard dollar tax bill for 2014 by perhaps $1,000 ...its well worth it to do so. AGD is the weakest of the three investments you listed ...Its the proverbial " F " on your investment report card ....even money market funds have out produced this one remove the " F " from your monthly statement ...start fresh with another investment ....I like your chances to do much better than AGD.

    Hope this proves helpful - Mike

    Sep 11, 2014. 11:39 AM | 1 Like Like |Link to Comment
  • How To Trade The 8% Yielding Alpine Total Fund Before It Splits And Raises Its Payout [View article]
    Hello Cygnusx3 ...I feel your pain regarding AOD which most probably has the ABSOLUTE WORST reputation in the mutual fund industry. Total Return data from the fund's inception indicates that investors who purchased AOD on the offering have net lost 40% of their capital ...whereas ...a simple investment in the S&P 500 index would have netted a +55% Total Return in the same time period.
    My contention is that in the closed end mutual fund world ...things get " over-baked " easily ...both on the upside ( big premiums to NAV ) and the downside ( big discounts to NAV ) ...which can lead to compelling valuation despite the well deserved HORRIBLE reputation and performance of the fund.
    At this writing; AOD is trading at a -12.55% discount to NAV while the comparable indices are trading very close to their all time highs ...and paying out a current yield of 7.7% ..Performance metrics for 2014 show the market price annualizing a +16.8% Total Return Versus a +15.4% for the S&P index ...AOD is within $0.07 per share of it's 52 week trading high ...
    In the last 18 months ...the fund has brought in a new management team ...improved the NAV a bit over 20%, raised the dividend +4.5% , reverse split the stock 1:2, and retired 3,544,829 shares thru share buy-back ...( whew ...that's a lot )
    The reverse split , in my opinion, was designed to make the fund's market price more attractive ...and distinguish it from some "penny stock" ...and fund management had to know that investors HATE reverse splits ...but they did it anyway ...sacrificing first quarter 2014 performance comparisons with the S&P ...while betting that the subsequent quarters would reward them ...and it has.
    The fund has $3 Billion in capital loss carryforwards on the books with only $1 Billion in assets realistically we will NOT see any capital gains taxation from AOD thru at least 2017 ...which can be a positive for us.

    Summary - They might be worth a second look ....solid yield, decent performance in 2014 thus far , trading at a 12%+ discount ....holding Apple,Nestle,Walgreens, Qualcomm, Canadian Pacific and Vodaphone as their principal holdings ...( nice portfolio )

    Last point - reinvesting dividends 12 times per year at roughly an 8% yield rate gives you a powerful " dollar cost averaging" methodology ...Example - I purchased 1,250 shares back in early 2009 ...and thru reinvested dividends, now have another 1,290 shares totaling 2,540 ....and despite the miserable market price performance ...have a decent gain ( +107% ) ... YES ...many other investments would have done better ...but a +14% annual Total return is good enough to earn a spot on the roster ...and IF ...AOD ever returns to decent market performance ...the additional shares purchased thru reinvestment will prove beneficial.

    Incredibly ...I also note that there is an UNREALIZED capital LOSS of ( $2,943) due to the accounting formula and valuation method the IRS imposes ....literally I can book a 100% + gain on AOD AND take a long term capital LOSS of nearly $3,000 on the transaction ...its an unintended benefit I guess ...but an important one.

    Hope this proves helpful - Regards - Mike
    Aug 21, 2014. 11:44 AM | Likes Like |Link to Comment
  • Comparing Dividend CEFs With ETFs: Which Are Better? [View article]
    Not to quibble ...but the portfolio turnover ( audited #s for AOD ) show as follows :
    2013 - 192% Fiscal year market Total return - +9.11%
    2012 - 310% -( 0.32%)
    2011 - 367% -(2.19% )
    2010 - 487% - (21.34%)
    2009 - 653% -+32.76%

    We are still waiting for the mid-year 2014 report from AOD to see the extent of their re-purchase plan guessing that the guys who would impose a 1:2 Reverse split in Jan of 2014 and raise the dividend by 4.63% at the same time ...would NOT be bashful about snapping up shares with a 13% average discount figure a heavy volume of buying each month.

    AOD management depends on the proceeds from their 192% annual portfolio turnover to pay the dividends ( some ROC ) and fund the share buy-backs some ways this can obscure the financial health of the fund by illustrating significant unrealized gains on the share purchases of their own stock.

    I agree that the new portfolio managers in AOD are being more conservative than the predecessor ... but a near 200% annual portfolio turnover is still alarming ... by way of comparison; Richie Freeman over at Legg Mason typically posts a 2% portfolio turnover on his AGGRESSIVE growth fund for example ...while delivering +44% in 2013, +18% in 2012, +1.4% in 2011, +23% in 2010 and +32% in 2009 compared to AOD over the same time line.

    Both funds are essentially large cap aggressive growth funds ...perhaps extremes on both ends of the portfolio turnover spectrum.

    I am thinking that the poster who mentioned that " dividend capture " has been debunked was referring to those numbers ...where AOD missed the majority of the post Mar 2009 market recovery while most other funds did very well.

    Jul 24, 2014. 10:55 AM | Likes Like |Link to Comment
  • Comparing Dividend CEFs With ETFs: Which Are Better? [View article]
    Good morning John and thanks for the informative article from an analytic but perhaps short term perspective. ( numbers don't lie ) Here are some additional numbers to consider when considering AOD:

    AOD has perhaps the absolute worst reputation in the mutual fund industry having been incepted as one of the largest closed end offerings of all time ...with a feverish bull market dividend capture investment tactic that recorded portfolio turnover at 650% an attempt to grab dividends ...then dump the stock a day or three later ...The SEC would call that " Selling Dividends " if a broker called to recommend that tactic it would be a violation of post 1929 securities regulation but incredibly ...its totally OK for a mutual fund to do it and have small investors buy the fund.
    AOD essentially got slaughtered in the bear markets of 2008 / 2009 ..racking up an audited $3 BILLION in capital loss carryforwards on a fund with a smidgen over $1 Billion in assets ...the market price ( split adjusted ) has fallen from $40 per share to roughly $9 where it stands today. ( performance was even worse as recently as Jan 2014 ) Audited returns based on market price being -0.32% in 2012, -2.19% in 2011, and -21.34% in 2010 ..( ouch ..and totally missing the market recovery post March 2009 )

    Under tremendous pressure from shareholders; Alpine management finally removed the "run & gun" portfolio manager and replaced her with two fairly young / smart / aggressive managers - Brian Hennessey and Joshua Duitz about 19 months ago.

    In their first 12 months on the job , and in conjunction with a strong market, they improved the NAV +17.60% ...with the fiscal year end 2013 delivering a + 9.11% total return versus the comparative index return of +23.89% over the same period. In other words ...AOD ended fiscal 2013 with a - 1,478 basis point market price underperformance against the MSCI world index. ( that's an ass-kicking by virtually any standard )

    But ...wait is what the new managers have done in 2014 you mention, the discount to NAV is -13.4% ...but it was -15.1% on 10/31/13 some improvement there.
    1. They announced a REVERSE 1:2 stock split effective in Jan 2014 ...a wildly unpopular move that depressed their market performance significantly during the first quarter of 2014 ...but has yielded new investor interest.
    2. They INCREASED the monthly dividend by + 4.63% ...reversing the trend of constant dividend cuts the old management has inflicted on investors.
    3.They announced a 10% share buy-back plan after retiring 3,544,829 shares in fiscal 2013 ..roughly 295,000 per month ...and they are booking an average gain on those, accretive to investors, buybacks between 12-16% ...
    4. The new managers have abandoned the discredited dividend capture tactics and are now essentially a proxy for the S&P 500 index ...except at a 13% discount to market price ...holding mostly blue-chips and name brand stocks with a turnover of 192% versus 310% in 2012 ...( still eye popping but reflective of the new management change )
    5. They have DELIVERED an 11.2% total return YTD 2014 versus 9.08% for the S&P 500 ...Amazingly ...the YTD market performance of AOD is ALREADY better than the entire 2013, 2012, 2011, 2010 fiscal year total returns COMBINED that is a good sign and start for the rookie portfolio managers.

    We started this note by stating that " numbers don't lie " ...and therefore, by most standards, AOD would and should be a PARIAH in the fund business ...The replacement of the portfolio manager with Brian & Joshua marked a new beginning for this fund ...NAV up over 20% since then, dividends up +4.63%, market performance up 11% YTD, share buyback plan removing 295,000 shares of common each month, Reverse 1:2 stock split in Jan 2014, new investment tactics reducing portfolio turnover significantly ...

    This was a " GUTS" move by Alpine to try and recover from the MASSIVE underperformance ...and reflective of the pressure on Alpine to do something / anything to help fix the fund performance ...

    I own and hold AOD ...having found the discount to NAV compelling back in March 2009 ...but the numbers versus the S&P index indicate that during that 5 year period, where I received a +14.70% average total return from AOD ...the S&P 500 index DELIVERED a +24.52% average annual total return over the same time line. ( 5.36 years and an average -982 basis point underperformance each and every year thru Friday... )

    Investors who purchased AOD on the IPO have a -40.25% Total return or -6.87% per year ...

    Those numbers should have been included in your article as historic yield is important ...but a managed fund that routinely posts a 1,000 basis point underperformance each and every year versus the unmanaged S&P 500 index should not be touted as a top performer ...It would be similar to saying that Brazil scored a goal on the German team in the final minutes of World Cup competition ...but neglecting to mention that The Germans had scored SEVEN earlier goals in the same game ...

    AOD is essentially, at its core, a RECOVERING ALCOHOLIC mutual fund story and they have done some fun and interesting things over the past 19 months of leadership ...but can they " stay on the wagon" and avoid the temptation of going back to the 400-600% portfolio turnover days to capture yield ?

    The numbers I want to see from AOD in 2014 :

    1. Pay the dividends ...( no cuts for any reason )
    2. Outperform the S&P 500 index by a measurable and significant amount
    3. Complete the 10% share buy-back
    4. Stay away from the giant / excessive portfolio turnover
    5. Earn the dividend distribution without inflicting too much ROC on investors.
    6. Continue to grow the NAV while reducing the discount to NAV.

    Summary - Its too early to put TOP PERFORMER and AOD in the same sentence ...but the trend has been favorable over the past 12 months ...

    Thanks again for the interesting article - Mike

    Jul 20, 2014. 01:59 PM | 3 Likes Like |Link to Comment
  • Tonix Approaching 100 Days Until BESTFIT Results [View article]
    Had always heard that there are at least seven ways to be Bullish or Bearish on a stock ...The top three Bullish tactics being :
    1. Long Call
    2. Short Put
    3. Buy shares ..

    So essentially the debate is which tactic is best for TNXP at this price ...but all are essentially BULLISH variants ...whichever " floats your boat" ....that fits your specific risk / financial profile and prior experience ...

    Am long the shares ...seemed the easiest, most convenient way to act on this investment idea ...I think the options chain was a very recent change / development for TNXP ...with a grand total of 137 CALL contracts outstanding thru three strike prices in December 2014 ...( according to WSJ this am ) ...That's not just thin volume ...that's tissue thin ...( one ply if you will ) ...and as a former options trader; B&H certainly understands that lots of bad things can easily happen ...such as no buyers when you really , really want to sell ...making the quoted option bid / ask more of a fantasy than a price where you can actually get an execution or worse.. a market execution far , far below the quoted price which is nothing more than a last trade history ...or a machine calculated number ...based on an algorithm, not trading based. ( ouch )

    In my opinion, and given the relatively low price of the stock , the approximate 10,000,000 total number of shares outstanding, heavily held by the insiders and about 1.3 million shares held by Technology Partners Fund VIII LP in Mill Valley, California, the best way own the future of TNXP by simply buying the shares.

    But ...lets have some fun ...and ASSUME that the stock hits the $61 per share level suggested by Joe in this article ....and in November ....what do you think the December CALLS struck at $60 would be selling for ? My guess is that the huge volatility in driving the price upwards over $50 per share in the last 100 days ...and the 3-7 week time value remaining on the Dec 14 contracts would impute a BIG NUMBER ....$10 per contract ? $15 on what would be the latest pharma stock to explode upwards ....My point is that you can then SELL the covered calls expiring in Dec 14 ....probably get $15 per share or perhaps much more ...and when exercised ...your exit price would be effectively $75 per share ....or about a $63 per share profit assuming a $12 average purchase price ...that's not shabby either ....if the market price sags back to $40 per share ...close out the open covered call position ...count your money ...keep the underlying shares for another Covered write ...

    Lots of fun ways to make money ...IF... the market price goes up as Joe has forecasted ...There is no ONE RIGHT answer here ...just the one that fits you.


    Jun 20, 2014. 04:00 PM | 4 Likes Like |Link to Comment
  • Cynapsus Therapeutics Shares Will Soar - Here's Why [View article]
    Thanks for the detailed article ...
    From a purely analytics viewpoint ...

    The concept of the SL formulation and preliminary testing looks promising ...but am a bit concerned ..they have about 39 million shares outstanding with warrants for approximately 21 million more and options to buy about 2.5 million more ...
    So ...when exercised ...about 60% more shares on the market ...and the company could conceivably raise about $12,000,000 if all 21 million were struck at $0.57 and subsequently exercised ...( just some guesswork ...but you get the idea )
    While not absolute ...the company is reporting that 125,000 or so warrants struck at $0.57 per share were exercised last month ...the implication being that many of these 21,000,000 stock warrants were priced at $0.57 per share ...hard to be 100% sure but with the stock recently trading at $0.40 ...and now at $0.90 ish in the market ..that would impute almost a +60% gain for these warrant holders to exercise and simply sell the shares ...while diluting the overall shares and reducing market value ...
    I understand that the company needs to raise cash estimated $10,000,000 is required according to the one report I reviewed and your report mentions $16,000,000 will be required ... ...which is very likely to happen when a + 60% gain is to be had ...( $0.57 strike price to the current $0.90 market price = + 60% )
    That scenario will still leave them a bit short of your estimated funding requirement ...requiring more warrants ? secondary stock offerings ? or a loan ...What do you think they will do to fill any financial shortfall ?

    Also - Their Chief Scientist seems to have resigned ...after five years with the firm ..and after being an integral part of the process to develop this SL formulation ...That does NOT look good ...or feel right to me ...What is the company saying about that potential loss of critical technical talent ?

    Jason - as always ..enjoyed the descriptive detail in your articles ...Thx
    Feb 12, 2014. 10:39 AM | 1 Like Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    Wow ...Thanks Brad for the kind words ...was taken by surprise

    I do in fact sell covered calls on a portion of my equity portfolio ....and have enjoyed using various option related strategies in the past ...sometimes a painful experience I do admit ...
    ETY is essentially SELLING INDEX CALLS many as 10,000 contracts in a given month ....As you are aware called " naked " Calls are potentially very hazardous and risky ...requiring a financial net worth far in excess of my ability to sustain ...( I also hope to keep the hair I have remaining )
    In 2013 ...we collected a + 28% Total return with ETY ....and I believe 2012 was around + 15% ...good work for a mutual fund ....

    I do manage to torment EV management with pesky questions from time to time ...and I believe they would like to see me " off-their-case" ...but that's not likely to happen for a while ...

    Regards - Mike
    Feb 9, 2014. 02:09 AM | 1 Like Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    wkirk500 - Your earlier question was regarding the notifications of the dividend component estimates we received ...where the ROC portion was estimated at 92% ...and how that was seemingly at odds with the zero ROC component for the entire fiscal 2013 year.

    I attempted to explain that ...with supporting references / data from the 2013 audited year end report.

    I am not exactly sure how that gets me " back to the same place" as you suggest ...or how UNII and the Reg M significance need to be tackled ....( that sounds like a job for " Accounting Man " to paraphrase an old TV show ) ....and that is definitely NOT me.

    Love or Hate ETY and the Option Income funds ...they are doing some interesting and innovative things to help make the fund more attractive to investors ...doubtless there will be some consequences , both good and bad from these decisions ... and the undistributed net investment income and the tax regulations related to passing those gains from dividends and income thru to investors ..( Reg M ) will be a part of that ...lets see what the semi annual report contains ...

    Thx - Mike
    Feb 7, 2014. 11:52 AM | Likes Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    Good am wkirk500 ...
    Yes ...I did also received that letter / notification from EV ESTIMATING that 92% of the Jan 2014 was thought to be ROC.
    EV had previously sent out monthly letters estimating that approximately 82% of the aggregate 2013 distribution was ROC ...
    I was reading the fiscal 2013 annual report when I noticed that the huge capital loss carryforward amount ( $500,000,000 ish ) had "disappeared" ...and was wondering how exactly they had made that happen from an accounting viewpoint. Page 18 of the annual report details the 2013 distribution as : $59,722.778 ordinary income and $ 104,673,449 long term capital gains ..with ZERO tax return of capital. ( 57% ordinary income / 43% long term gains )
    I went to the EV homepage and wrote out a long question to the customer service staff and was surprised when, a few hours later, a representative called me and went over the data in specific detail.
    First - He pointed out that the letters we shareholders had received regarding the ROC component of the fiscal year distributions were in fact mere 'estimates' and not fully audited statements to be used with the IRS.
    Secondly - he advised me that ETY management had made an "executive decision" back in the fall to essentially blow out their considerable unrealized capital gains in the portfolio and wash them against the carryforward losses ....
    Third - the monthly distributions from Nov & Dec 2013 would revert back to the earlier methodology of ROC and managed distribution of the dividends we are back to the 92% ROC letter we recently received as usual ...
    Fourth - I asked for the specific tax component of the fiscal 2013 distribution and he mentioned that we would be getting the detailed specifics in our 1099-DIV ...and when I suggested that 80% plus must therefore be considered capital gains instead of ROC ..he responded that LTCG was still " tax advantaged " as compared to ordinary income and the fund was well within its rights to re-characterize the estimated distributions made earlier.
    Summary - I spoke directly with the EV representative ...he was working with a ' talking points ' memorandum and seemed very prepared to deal with questions like mine that would arise from the audited / certified annual report ...They were ready for the questions ...and he even commented that he was surprised that more folks had not ,as yet, called ..the fact that they called me instead of simply e-mailing me back ...and they called within a few hours of my question is very interesting to me.
    My earlier comment was more of a review as to the aggressive steps ETY was taking to make the fund more popular ...switch to monthly dividends / share repurchase program / improving the NAV / and this dynamic decision to REALIZE essentially all of the unrealized capital gains in their portfolio to wash against the aggregate losses one gigantic swoop ...I nearly jumped out of my chair when I saw the fund had a net realized gain of $560,378,480 in fiscal 2013 ( page 14 )
    But ....the annual report makes NO MENTION of this , what just has to be, a huge, decision process or the practical consequences of it ...just the accounting portion they were required by law to provide.
    I would hope that a portfolio manager's letter or at least the quarterly update report would contain some mention of it ....but far ...not a word.
    Perhaps there were legal or HR considerations and other factors involved ....I like the use of those 2007 / 2008 capital losses before they started to expire in the years ahead ...its clever ...but it tends to obscure the "normal" performance of the fund in a solid market year ...netting out a plus 28% in calendar 2013 was very nice ...but now the question arises ..." have they essentially shot their load ?" ....pulled out all the stops and accounting gimmicks to make the fund more attractive ? They did improve the NAV 20.61% in 2013 ...and added a bit more than $120,688,000 in assets to the fund ...
    Just something to consider ...oh more thing...the possibility that the EV rep was misinformed or mistaken ( or that I was - LOL ) negated by the audited annual report ( page 18 ) which generated my written question in the first place ...we should be seeing our 1099-DIV forms in the next few weeks to further confirm ...
    Hope this helps explain / answer your question - I appreciate the interest ....
    Feb 6, 2014. 12:01 PM | 1 Like Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    Just as a follow up on our earlier threads with a focus on Eaton Vance and ETY in specific ...
    I spoke with EV to question the fiscal 2013 distribution characterization from a tax viewpoint and was surprised to learn that 100% of the 2013 dividend will be defined as investment income / capital gain ...this despite their published quarterly estimates that 75-82% of the distribution was ROC.
    EV has essentially used up its massive capital loss carryforwards in one gigantic swoop ...over $500,000,000 ..
    Their calendar year 2013 total return performance is listed as + 28% and I believe that 2012 was + 15% making the fund's return market competitive ...
    We still have an approximate 9.5% discount to NAV ...a strong monthly dividend stream that annualizes at 9.5% and the reality that ETY management will be " retiring " 12-13 million additional shares in the fund in 2014 & 2015 their discretion ...
    The fund reported earnings of $1.993 per share for fiscal 2013 far their best year of the last five ...
    The fund has reduced the number of stocks in its portfolio to 130 ...Google, Apple Amazon, Merck, Canadian Pacific Railway compose almost 10% of the fund ...
    ETY management has made some strong / aggressive moves in the recent past ...switch to monthly distribution / share buy-back / reducing positions from 200 to 130 / reducing the option over write to 36% from 55% and has DELIVERED a stout investment performance ...while improving the NAV ...( small amount but still non-destructive ) ...Now they eliminate the ROC component of their 2013 distribution while eating up the capital loss carryforwards ...
    Remember the old PGA slogan ..." These guys are good " ....ETY management has stepped up and seems to be making " all the right moves " to benefit the shareholder ...
    Feb 5, 2014. 10:19 AM | Likes Like |Link to Comment