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  • A Close-Up Look At The Report That Had MannKind Investors Reeling [View article]
    Goldman Sachs Research Analyst ....( almost a conflict of interest in the job description alone ) - GS does have a clientele of major corporate organizations , ultra high net worth individuals and even Countries ...( Greece comes to mind ) Despite this impressive " stable " of customers ; GS earns right at 80% of its considerable annual profits by placing BETS with their own capital.
    Their familiar tactic is to use their cache to the wealthy and political types as a door opener to various new customers ....and once inside the financials of the organization ...a surprising and sudden amount of " short interest " in the common stock typically appears ...slamming the common stock market price significantly. ( look at what they did to another small company - BPZ a few years ago )
    One noted author has called GS a " vampire squid " sucking the life from their own customers / clients ...while of few select clients benefit greatly.

    Does any of this sound even vaguely familiar to the MNKD situation in today's environment ??
    In my opinion; Goldman Research, especially downgrades, are almost always dramatic events ....scheduled and designed to " shake-the-tree " and have many smaller investors quickly sell or dump their shares ....They are making their money by betting their own accounts and assets the tune of 80% of their annual profits ...that places THEIR financial interests far, far in front of their clients and the investing public ....

    Just a few years ago ( 2008 ); the mighty and well regarded Goldman Sachs did NOT have enough cash on hand to meet their month end payroll ...The Federal Reserve , made them a bank in one day ....a real bank , not just an investment bank, and loaned them $10 BILLION dollars to stay in business ....They had essentially BET their corporate asses on the mortgage market and CDOs ....with massive leverage ...they were literally and actually insolvent.

    They issued Research reports ( sounding familiar ? ) calling for an immediate rebound in the mortgage market and those CDOs ....They were wildly inaccurate and wrong ...

    Goldman Research - issued a BUY recommendation on Fannie Mae / Freddie Mac citing their implied government guarantee and AA+ rating ...both stocks subsequently collapsed in the ensuing months ....

    They helped Greece out tremendously bundling their future revenue from hospitals , roads and even the various Port authorities into a massive bond offering , whereby the local yokels in Athens would get some immediate cash from the bond creation , but then be stuck for decades with an impossible debt servicing on those same bonds ...which they sold to their unsuspecting retail clients and other brokerage houses ( anxious to market the super duper interest rate bonds backed by the revenue of a sovereign member of the EU )

    These bonds are all but worthless ...

    You seeing a trend here ? I literally laugh when I see a document chock-a-block full of charts and impressive graphs from Goldman Sachs their MNKD Research downgrade ....The SA author of this article properly notes that the revenue projections seem odd ...suspicious even ...wondering where the supporting data is coming from ....

    I don't ...I just ASSUME that GS is producing another document for the " yokels " or the little people ...They are a vested player in this game, not an independent or even a particularly honest broker for us to depend on their research advice.

    Want more circumstantial evidence ? Jon Corzine served as the CEO of GS in the 1990's ...later as a US Senator and Governor of New Jersey. He took over MF Global in 2010 , a long term and quiet little company that had previously been hedging farm crops and commodities as their primary business ...In less than 24 months he bankrupted and closed the company BETTING corporate assets and monies NOT the property of MF Global on super high risk investments.

    This is a culture thing with Goldman ... They are NOTHING more than a particularly fancy hedge fund ...wearing the cloak of a banker ...thanks to the US Taxpayer , but needing to make outrageous profits to keep their principals and key clients happy ....Those impressive gains often come at the expense of others.

    No ...I don't concern myself with Goldman Sachs Research , and neither should you.

    Hope this proves helpful ...Thx

    Mar 10, 2015. 01:43 AM | 17 Likes Like |Link to Comment
  • 10.6% Yielding ETW Offers Both Income And A Capital Appreciation Opportunity [View article]
    Enjoyed your article on ETW and wanted to throw a few other non-scientific factors that may factor into the equation or decision to purchase ETW.

    On Dec 3, 2014 the fund closed at $12.20 per share ...and closed the year on 12/31/14 priced at $11.02. That's about a -9.6% market price decline in less than 30 days ...Yahoo is showing the 2014 high for the stock at $12.95 on 6/11/14.

    The Total return measured with dividends reinvested for calendar 2014 was +0.96% compared to the unmanaged S&P 500 index of +14.56%
    Total return on a trailing 2 year basis is +22.02% versus the index of +46.37%
    Total return on a trailing 3 year basis is +43.34% versus the index of +71.39%

    The discount to NAV at this writing is approximately -8.63% which is compelling even if we accept the new normal of closed end equity funds to average a -5% discount to NAV.

    On the surface; these numbers would give pause to any investor looking for high income , monthly distributions and good growth potential ... even when on sale at a substantial discount.

    Eaton Vance is still showing the 2014 ytd 11/30/14 performance of ETW at a plus +9.97% with the NAV performance up 4% on the year ...The month of December seems to have wiped out any progress the fund made throughout 2014 ...

    Why ? why did the market price of ETW NOT recover along with the general market in late December ?

    Possible answers :

    1. " The Biggest Loser " syndrome ..( ok ..I just made that up ) ...ETW and sister funds like ETY are showing up on statements and portfolio holdings as the " weakest link " in most portfolios ....because of the accounting regulations that require that all reinvested dividends be treated like new money being invested in the security. For example holdings in ETY show a cost basis of $23,614 and a current value of $20,492 with an unrealized capital loss of ( $3,121 ) on the position ...-13.2% ( ouch ...but wait it gets even better )
    The reinvested monthly dividends show a current value of $15,292 and a cost basis of $13,923 for a small gain on that lot of $1,369 ...during the holding period.

    But wait ...the Total Value of that original $23,614 invested years ago is actually $37,537 ...or a +58.9% Total return. ( hardly a negative or a capital loss )

    My contention is that accountants / CPA's / brokerage professionals, and plain old everyday investors are SELLING ETY / ETW in December to effectively wash those capital losses against a general market gain of +14% in 2014 ...and citing the relatively large capital losses listed on the statements.

    2. The effective monthly compounding of dividend reinvestment , especially a 10% ish dividend, will provide an effective "dollar cost averaging" methodology over time ...essentially buying more shares when the market price is lower and fewer when the price is higher ...The peak market price for ETW in 2014 was $12.95 per share ....( just six months ago ) ....if you believe that ETW has been unfairly hammered by year end tax loss selling or just investors dumping the fund ...volume was up four fold on the last two trading days of 2014 guess would be that the great majority of that volume being SELL orders ...driving the market price down ...beyond any reasonable fair pricing level ...Closed End mutual funds like ETY / ETW are particularly susceptible to sudden price declines when a large sell order is processed. ( fixed number of shares ...few buyers and large sell orders can and will unfairly drive down the market price to a level that will find investor interest ....uh ...say $11.02 per share the other day....LOl )

    Summary - my opinion is that the December market price action knocked off about a dollar a share from ETW ...and much of this loss will be recovered ...and quickly investors see this market disparity ...we could easily see the market price back to its Dec 3, 2014 level of $12.20 per share ...all the while collecting our annualized 10.6% dividend ...if you forecasted a $2 per share market recovery in 2015 and a further dollar per share in dividends paid ...that would be an approximate +27% return in 2015 ...if we just got back to the market price of June 2014.

    That's the investment thesis / hope anyway ...for us " bargain shoppers "

    Hope this proves helpful ...Regards - Mike
    Jan 2, 2015. 10:14 PM | 7 Likes Like |Link to Comment
  • 10.6% Yielding ETW Offers Both Income And A Capital Appreciation Opportunity [View article]
    Good question ...and like any milestone or map of performance reference; The unmanaged S&P 500 index should be the benchmark of comparison for equity based funds.

    For example - If ETW, with dividends reinvested, produced a 1% Total return in 2014 versus the +14% return realized by the S&P index ....that is useful to know in evaluating weather or not to sell the fund as I strongly suspect many holders did in December ...

    At its core; ETW is a stock fund with positions in large blue chip companies globally ...its a RISK fund that produced a money market rate of return in 2014 , but that also produced a venture capital like return in 2009 with a + 59% performance ...

    Its a matter of record that most mutual funds do NOT beat their respective unmanaged index benchmark each year ....but a 1300 basis point underperformance signals to me that "something" happened this case during the month of December ...where ETW essentially lost the full year of gains it had accumulated ...

    My take is this anomaly was caused by year end selling and with very few buyers late in the year ...the market price of ETW just got slammed unfairly us an opportunity ...that's the thinking anyway

    ETW seldom holds their options longer than 10 days ...closing out the open positions and buying the next month's index options ...The premiums taken in by the option positions are a source of tax advantaged income for the fund and a defensive hedge should the market sustain a sudden downturn. ( Index options , regardless of holding period , have a 60/40 long term / short term capital gains taxation rate ...

    In short; I use the general purpose S&P 500 index as a basic tool in measuring the overall success or lack of it for all equity based funds. I don't use any options benchmark for ETW ..

    hope this proves helpful

    Jan 3, 2015. 01:14 AM | 5 Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Reply to ehsii ...
    Saw your comment and wanted to illustrate an answer to show why these Option Income funds are not necessarily "removing equity from the fund" as you mention.
    First aspect to consider is that there are TWO separate equity investments here ...ETY holds common stock and SELLS S&P 500 index calls each month ....two separate items that are taxed and distributed ..unlike a CMO bond for example; where they distribute a good portion of principal as ROC each month as the underlying mortgages are paid back; Option Income funds are Selling Calls (ETY) each month and closing out 90% + of them every 2-3 weeks ...
    ETY recieved about $90 million in Option premiums over the last reported six months doing this ...but spent over $103 million closing them out ....creating an estimated $13 million loss - taxed at 60% long term losses and 40% short term losses ....

    Now ...ETY has about $1.6 billlion invested in the stock market ...mostly in blue chip companies like Apple / Exxon ....and that portfolio value went UP during the same six months ....much / much more than the $13 million loss ..( they hold $60 million of Apple stock for example which went up significantly )

    This portfolio value increase was measured in their last six month report at + $250,000,000 NUA unrealized appreciation.

    These funds typically use a so-called managed distribution process to pay out their respective dividends which allows the fund to pay out their dividend distribution on an equal basis ....and provide some certainity to investors about the dividend cash flow ...where does the money come from to pay out the huge distribution ?

    Three places -
    1. The dividends the portfolio generates ..but that cant typically be more than 2% per year ...( and portfolio expenses are paid from dividends recieved so that leaves about 1% for investors )

    2. In a declining market ...the option premiums received for selling Call options can help pay for the distribution ....ETY needs about $187 million each year to pay an 11% annual distribution ....and the last six month report showed they booked $90 million in premiums ...hmmmmm...but then closed out that with a $103 million buy back ....

    3. They use appreciation in the stock portfolio to pay the huge distribution ....and they have about $250 million on hand ( today ) to do exactly that ....

    When there is no appreciation in the portfolio ....the Option premiums received will help offset the cost of the dividend distribution the fund management will not be closing out the CALL options they will be profitable ....

    The IRS loves short term transactions ....they get to tax them at the HIGHEST possible personal income rate ....BUT ....wait ...these funds all have a huge anount of capital loss carry-forwards from 2007 / 2008 to wash against these new capital gains ....netting in a ZERO TAXATION .....until 2018 when the carry-forwards will expire ....( whew ...lot to explain )

    So ....the net distribution from funds like ETY are classified as 90% " Other Capital " ....and is non-taxable ...where the remaining 10% is dividends and interest ...which is taxable ...

    Bottom Line - The fund is NOT eating itself up with return of capital like a mortgage bond does get some downside protection in the market as the fund is Selling index calls each month ...and upside potential as the fund closes out these Calls every 2-3 weeks for a loss when the market is good ( going up )...and you are buying the fund at a 13-15% discount to its actual underlying value ....
    Hope this helps explain ....regards
    Dec 2, 2012. 11:04 AM | 5 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
  • Equity CEFs: The Insanity Of CEF Investors [View article]
    Reply to KenGold -

    I pulled my 1099-Div statements from 2011 and 2010...just to be precise and avoid any mis-information.

    line 1a - total ordinary dividends ( includes 1b ) $5,503.22

    line 1b - Qualified dividends ......................... $1,862.43

    line 3 - Nondividend distributions ...............$4,038.87

    In the detail breakout section for Dividends and Distributions

    ETY - CUSIP # 27828N102 -02/28/11 - $6.43 - Qualified dividend
    02/28/11 -$662.60 - nondividend distribution

    This was repeated for the remaining three quarterly dividends paid in 2011....

    The net result being that ETY created a qualified dividend stream to me in 2011 of $26.78 ....and taxable at 15% back then $4.02 of the $26.78 was required for federal taxes due ....

    ETY also contributed $2,759.65 in completely non -Taxable, non dividend distributions ....
    ETY distributed ZERO short or long term capital gains ....ZERO / ZIP / NADA 2010 or 2011. ( because the capital loss carryforwards washed all capital gains away )

    The Summary also had this listed :

    Return of Principal distributions ......................... $0.00

    Basis Adjustments ......................... ..................$0.00

    Summary / opinion - I paid $4 in federal income taxes on cash received / reinvested of $2,786.43 ...Thats about a 0.0144% rate ...( check my math but $4 on $2786 is way less than 1% )

    Less than the cost of the " meal deal " from Subway ...or a Happy Meal at McDonalds me $2,782 in net tax-free Income.

    To be extra -certain ; I checked the other brokerage account where I have ETY a different firm ....and saw the exact same accounting result and methodology ....

    No ROC / No Basis Adjustments ....This is just Other Capital or non-dividend distributions ....

    As I stated before; this is not some sleazy accounting gimmick ..Its actually the only way to account / pay taxes correctly on the distributions from this security....

    If ETY didn't have such a huge amount of capital loss carryforwards ...I have no doubt that much of this income would have been classified as short and long term capital gains ....and taxable at a very high level potentially Obamacare investment tax depending on your income ...( 3.8% more potentially )

    My guess is that we will have 3-4 years of this super-favorable tax treatment ...and then face the consequences of high taxation that our lawmakers have bestowed upon us ....

    As more and more people figure this out ...I predict that there will be a migration from high tax funds these high yield / low tax funds ...not just ETY ....but that's the one Option Income fund I I am hoping the renewed interest will stimulate buying and move the market price even higher ...

    Hope this helps ...I really tried to make it understandable and specific ...we still have market risk and plenty could go wrong in our investment thesis ..but I am looking for + 20-25% from this fund in 2013 ...we almost got that much last year alone ...

    regards -
    Feb 1, 2013. 06:47 PM | 4 Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Thanks for the reply Doug ...I appreciate it.
    My contention, which may well be incorrect, is that NO ADJUSTMENT of cost basis is necessary with ETY....this is important because many potential investors would be loathe to try and figure out such an adjustment and perhaps fear some type of IRS challenge to any guestimates they might, in good faith, try to apply to the basis ...thus intimidating them away from this type of fund. ( who wants IRS problems ? or to try and calculate the basis reduction ? ...not me ) One of the points to owning a mutual fund is to let them figure out the taxation stuff
    ETY started out in 2006 with a professional Options Advisor that essentially charged them a fee to WRITE CALL options against the portfolio holdings each month ....The thesis then was that exercised call options had the premiums received ADDED to the option strike price to calculate a capital gain ...( typically short term with ETY ) adjustment to the cost basis was allowed or necessary under tax law ....premiums just increased net proceeds.
    Later, ETY management decided to FIRE the Options advisor and revert to exclusively writing WRITING S&P index calls at the next higher strike price from the prevailing market EACH MONTH ...and then ...CLOSE out the transaction typically within two-three weeks ...and repeat the cycle ....SELL / CLOSE ...

    The six month report in April, 2012 shows ETY recieving $90,698,884 in S&P Index call premiums ....BUT ....paying $104,386,575 to close out the majority of these positions ....lets postulate a ( $13,687,000 ) LOSS over the preceeding six months.

    This was fine and dandy ...because the overall portfolio value was appreciating with the market ...much more than the $13.6 million loss ....
    ETY management has been using the IRS rule 1256 tax treatment of equity index options where even short term holdings of Index options were taxed at 60/ 40 ...60% long term / 40% short term an investor in the 25% tax bracket would still get a net 19% capital gains tax rate on short term transactions using equity index options. ( whew )

    The REALLY interesting part, however, is that ETY is managing to book a raw LOSS on virtually their entire S&P index option trading ...estimated to be approximately 100,000 contracts each fiscal year ....because, in a rising market, it just makes a ton of sense to close out the index options each month, book a loss, and let the stock portfolio continue to appreciate ....ETY reported in April that they have $251,000,000 in NUA ....
    So ....they have nothing to " adjust " ....and INCREDIBILY this trading at a loss tactic even ADDS to the future capital loss carry-forward amounts ...( hard to believe ...but true )
    These guys are even booking NUA from their share re-purchase program ...showing a +3.45% gain in the Nov 5 update ....just on ETY.
    This entire ROC debate is clouded with confusion ....PUT contracts do have a basis adjustment / bonds have an ROC component ....but ....NOT CALL contracts ...The IRS allows the term " OTHER CAPITAL " on the brokerage 1099 statements which is non-taxable ...and ETY uses this avenue to provide year end tax reporting ....OTHER CAPITAL, from the option premiums for example, can and will be taxed at the Short Term / Long Term rates ( which the IRS LOVES ) ....BUT ....when the fund has $445 million in carryforwards and is losing money on their Index Option trading each year .....there is literally NOTHING to tax.

    Again, not to be arguementative, but I would never own a mutual fund where I had to guestimate or adjust the basis ...and even long term holders of the fund should have a plan to SELL ....perhaps if the fund moved back to a premium to NAV ? ( a + 10% Premium would force me to sell for example ) ....

    Appreciate your article and quick response ....Thx - Mike

    Nov 30, 2012. 01:37 PM | 4 Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Nice article Doug...a couple of questions though mention that holders of ETY will have to adjust their cost basis by the ROC component ...I just dont see that as practical or even necessary as ETY, in specific, uses a methodology of Selling S&P 500 calls and closing them out each month by Buying them back ....Since the fund exclusively uses CALLS and not PUTS adjustment of basis is necessary.
    I believe that current tax law allows for a 60/40 split of long and short term gains classification of the proceeds ....( similiar to commodity contracts ) which allows a super short holding period such as the 2-3 week average duration that ETY uses as a typical holding period for the 80,000+ S&P call contracts it buys and closes out each year.
    Also didnt mention the HUGE capital loss carry-froward these funds and ETY have on the books thru 2017 ...ETY has approximately $500,000,000 in capital loss carry-forwards to " wash" against future capital gains ....investors can look forward to ZERO taxation on capital gains thru 2017 in this fund ...only paying taxes on the stock dividends actually credited from the portfolio ...lets call it 10% of the 2013 estimated distribution ...$1.01 per share x 10% = $0.10 ....x your income tax bracket rate ...lets postulate 28% on average = a federal tax obligation of $0.028 per $1.01 in cash actually recieved in 2013 or a measley 2.8%.
    Comparative investments in dividend paying stocks / ETFs or dividend capture mutual funds WILL be taxed at your ordinary income tax rate up to 39.6% the 3.8% Obamacare tax for income over $388,350 in 2013.
    So ...investors in the option income funds will pay NO capital gains taxes for years ...and typically less than 3% on the total distribution paid out in 2013 ....Investors in CDs / Money market funds / rental income / ordinary dividends / preferred stocks will be paying typically 25-35% of the proceeds they recieve in 2013 ...
    This aspect gives the so-called Option Income funds a compelling advantage in the coming years ...( at least until 2017 )
    Thx - look forward to your response - Mike
    Nov 29, 2012. 01:30 PM | 4 Likes Like |Link to Comment
  • Assessing High-Income Covered Call CEFs [View article]
    Thanks for the interesting and informative article ...

    The questions about UNII and ROC have plagued funds like ETY for quite some time and seem to relate to the overall financial health of the fund. The accounting methodology / terminology can be confusing and misleading several of the comments listed here indicate.

    Using ETY as a baseline ( since I follow that specific fund ) ; perhaps a better indication of overall financial health might be the ( audited ) total income or loss from operations on a per share basis ...?
    In 2014 , ETY published a + $1.481 per share income from operations ...their second best year since 2010 ...while distributing $1.012 per share in the form of dividends ...( 83% portfolio turnover )
    In 2013, ETY published a +$1.993 per share income from operations while distributing $1.096 in dividends ...( 130% portfolio turnover )

    If the thrust of the ROC and UNII questions / concerns are directed at the ability of the respective fund to sustain the monthly dividend stream, it stands to reason that an audited " surplus " of income on a per share basis is a good metric to use.

    Another might be Unrealized Appreciation in the portfolio year over year ....( although a bad week or two in the market could significantly reduce that number ) ETY posted a + $158,339,832 in unrealized appreciation in fiscal 2014.
    This after taking a REALIZED gain of + $560,378,480 in fiscal 2013 ...effectively using up their capital loss carryforwards from 2008 / 2009 ...and completely eliminating ROC from the dividend distribution for 2013 ...( clever move in my opinion as long term capital gains are still taxed much more favorably than ordinary income for most taxpayers )

    The questions relating to Index options versus individual Call options on a specific stock ....Index options are by tax law granted an automatic 60/40 Long Term / Short term capital gains status , regardless of the holding period ...which is good since fund management is using a holding duration averaging 14 days ....Individual options on stocks do NOT feature that inherent tax advantage ...and typically require the fund to utilize an Options Advisory firm which is expensive and paperwork intensive.

    Finally ...Several of the CEF's you listed are utilizing an aggressive share buy-back / retirement program ...ETY officially "retired" 140,000 shares of stock in fiscal 2014 and 1,385,696 shares in fiscal 2013 at an average discount to NAV of 10.56% and 12.92% respectively ...and have authorization to " retire " upwards of 13,000,000 additional shares at their discretion. This can also be called an advantage versus ETFs as fewer shares mean a smaller monthly dividend distribution requirement ...and potentially a higher NAV.

    Thanks again for the great article ...Mike
    Feb 11, 2015. 11:39 AM | 3 Likes 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
  • 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
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Reply to no2cattx -
    Thanks for your reply and question.
    The answer is on page 13 of the semi-annual report to shareholders- Section D - Federal Taxation - ETY has $445,775,309 in capital loss carry-forwards that can and MUST be applied to capital gains going forward ...I did note that the capital loss carryforwards were itemized by expiring year ...and that $53,547,524 will expire, if not washed against capital gains at the end of 2018.
    In my opinion; this is HUGE investors; we can anticipate a full SIX YEARS of paying little to no capital gains taxes from this fund, regardless of tax rates or increases that may be imposed ...because fund management gets to " wash " their past capital losses against future capital gains thru 2018.
    Many mutual funds have aggregated tax loss carry-forwards on their books and ETY is no exception ...its just that they have $445 million ....
    If you had a choice of buying a new issue mutual fund that did the exact same thing and the identical trading strategy as ETY would essentially get " clobbered " by huge capital gains taxation ( assuming the fund had a good year ) ....because capital gains, especially short term capital gains ...are designed to be taxed at a very high rate ...estimated 30% under the President's proposed tax plan ..( ouch ) ...but by using some of the older funds which have built in capital losses that can be washed against gains will pay ZERO capital gains ...NADA / NUNCA / ZIPPO ....LOL
    Its an unintended benefit of coming out of a recession and having big losses ...( who didn't in 2008 ? ) ...and probably the reason the Federal government will get no where near their tax revenue projections from raising the tax rates as they expect ....Investors will have capital loss carry-forwards from all those investments that tanked back in 2007 / 2008 ....
    Why would you pay a 30% tax on your at risk gains ? ..when you could pay ZERO ? and get some benefit from all the losses endured a few years ago ? ...
    Hope this helps ..and thx for the comment
    Nov 30, 2012. 12:18 PM | 3 Likes Like |Link to Comment
  • Looking Closer At The Closed-End Buy-Write CEFs [View article]
    Paulo - Thanks for the updated article and the companion piece by Doug Albo on ROC. A few comments and reinforcement points on ETY in specific and Buy-Write funds in general:
    1.No adjustment of cost basis is required as the fund ONLY sells S&P 500 index CALLS against its portfolio. ( approx 70,000 contracts per year ) - PUT contracts are different but since the fund management does not use that strategy point in discussing.
    2.When call contracts are exercised ...the premium is tacked on or added to the strike price and the net proceeds are taxed as Capital Gains ( typically short term and at a very high rate ) - Index calls, however, are subject to the raw 60/40 - long / short term tax treatment regardless of holding period - even one or two days of duration.
    3.The average holding period / duration for ETY index call contracts is TWO WEEKS ...and they close out 90-95% of their open positions for a loss or a gain ...then SELL another months CALL options at the next closest strike price out-of-the-money ...12 times each year they ' reload ' S&P 500 Index calls....Individual investors seeking to replicate this tactic would necessarilly expose themselves to " UNLIMITED RISK " that a short / naked index option provides ...( suitability / financial resources / experience and the necessity of having a large asset base would preclude most small investors from such a naked strategy ) and would almost certainly guarantee a major hit should the underlying market make a sudden move upwards ( + 244 points on Dow the other day for example )
    4. Leverage - Closed End funds typically borrow heavily to magnify their positions and then issue preferred shares to further amplify the risk / reward equation. ETY does not use any significant form of leverage or borrowing ...( many CEF's wind up having an aggregate 50% overvaluation due to this type of risk and makes them subject to large and distressing price swings ...especially in down markets.)
    5.Liquidity - ETY has approximately $1,700,000,000 in assets and an average volume of 400,000+ shares per day ....In a tight / down market, smaller CEFs will experience problems executing orders...not so with larger funds. ( ever recieved a " nothing done " or stock ahead notice ? )
    6. Capital Loss Carryforwards - probably the secret weapon for investors in the coming years ...ETY has over $445,000,000 in carryforwards and investors buying the fund can participate in these carryforward losses thru 2018 ...thus avoiding the "taxmaggedon" that our intrepid lawmakers have in mind for us in six short months.
    7. ETY publishes the estimated tax characteristics of each distribution quarterly and sends a separate letter / notice of distribution to each shareholder. Thats how we know that the ytd estimate of ROC is 87% of the total distribution ( unaudited )
    6.Discount to NAV - a 15% discount in buying shares of APPLE / EXXON / COCA-COLA / JP MORGAN /PFIZER / IBM / AMAZON and McDonalds which compose the largest positions in ETY make this fund worthy of consideration ...if the discount expanded to 20% to NAV ....the fund would be more attractive for investors like me ...conversely ...a few years ago ...ETY was trading at a PREMIUM to NAV ...that is a danger / warning sign of overvaluation.
    7. Anger / brokerage statements - many investors purchased this fund on the IPO and paid $20 per share ....when they see the monthly statement - ETY is typically the " BIGGEST LOSER " by a wide margin ...$11 per share loss / into a $20 purchase price = a raw 55% loss despite the significant market rally since March 2009.
    Especially true if they have been taking cash from the distributions instead of reinvesting the dividends it seems that every time fund management reduces the dividend ...the market price takes a big hit ...( again ) ...even dividend reinvestments show up on the statement as new purchases in a fast declining market price ..( ouch ) - The net result being a distortion to the extreme of the actual LOSS taken ...
    Summary - ETY is invested in large cap ( blue chip ) US companies to the tune of 77.8% of total portfolio and another 6.9% in the UK it can be considered a proxy most similiar to the S&P 500 index ...with a bit more concentration ...if an investor believes that the US economy will rally, especially the cash heavy companies like APPLE / EXXON ...its a good way to participate in a very impressive stock portfolio ...AND ...use the naked index CALL strategy that most small investors are loathe to risk ....AND ...when everyone else in the US is paying 33-43% federal taxation on their distribution of income and capital gains in 2013 ...we will be paying Federal taxes on roughly $0.13 of every dollar of income distributed from ETY in 2013.( assumes 87% ROC ) Even at an average 40% mandatory tax rate that works out to $0.05 in tax due for every DOLLAR we earn ... and that makes these so-called Buy-Write funds a compelling story ...
    Hope this helps - your comments appreciated - Mike
    Jul 2, 2012. 12:17 PM | 3 Likes Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    Very nice article on the so-called Option Income funds ...and a further point in their favor ( Eaton Vance funds anyway ) is the large / aggressive -on-going share re-purchase program ...Fund management is literally buying back shares each month ...and there remains about 6-7% of the total 10% repurchase authorization made in the late summer of 2013.
    EV management is booking a very nice profit on the re-purchase thus far ....
    EV management switched to a monthly distribution from the quarterly payment starting Jan 2013 ...this reduced the huge amount of dividend only " chicken hawks " who would swoop in claim the dividend ...then dump the shares ...creating huge volume and price swings in the market price ....
    ETY holds over $500,000,000 in capital loss carryforwards on their books from the 2009 market crash ....and can wash these losses against capital gains going forward for several years to come ...they just published their quarterly report detailing over $200,000,000 in Capital gains over the previous NINE months ....The net result will be ZERO capital gains taxation and ZERO to Ms Pelosi's 3.8% NIIT tax ....Our net out-of-pocket taxation on the roughly $1 per share in dividends paid by the fund in 2013 will be $0.04-0.05 per share ....
    It makes these funds very hard to ignore ....and for a strong investment thesis.
    Thanks for the comprehensive article on these funds ...
    Dec 4, 2013. 07:41 PM | 2 Likes Like |Link to Comment
  • Equity CEFs: The Insanity Of CEF Investors [View article]
    Respectively , and as you said,....ETY did start out at $20 and is now trading a bit above $10 per share ...

    My brokerage statement shows a long term unrealized capital loss on the investment of ($8,248) ...making ETY one of the biggest LOSERS in my portfolio ...

    But wait ...I have $3,614 MORE dollars of current value than on DAY ONE of the IPO can that be possible ?

    The accounting rules treat each dividend reinvestment of new shares as if you wrote a new check for the purchase ...

    Over time ....we have collected numerous dividend checks resulting in many / many new shares of ETY ....The new aggregate number of ETY shares, even at $10 per share greater than the initial investment about $3,614.

    So .... I could SELL my shares of ETY and realize a Capital Loss of $8,248 ....wash that loss against any other capital gains I may have had ...reducing my tax bill by about $2,000 ( 25 % tax bracket ) and still have $3,614 more dollars than when I it a $5,600 hard dollar gain ...thru one of the worst recessions in US history.

    Not too shabby ....

    The simple truth is that if you purchased ETY on the IPO ...and reinvested your dividends have MORE money or cash value today than when you started ....not rocket science ...but it " beats-the-sox off " actually losing money ....

    Now your arguement against ETY is that ..." well, yes I made some money ..( + 6-7% net ) ...but I could have done better buying something else ..."

    Ok got me ....( said in good humor and not intended to be offensive )

    Hope this helps explain why so many people pour HATE on the fund ....the monthly statements really do show this investment as a huge LOSER ....despite you having more money than when you started ...

    You just gotta love accounting ....

    Regards - Mike
    Jan 31, 2013. 03:09 PM | 2 Likes Like |Link to Comment