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  • Omega Healthcare: Quality At A Discount  [View article]
    Let's assume you are right and interest rate increases shouldn't harm OHI. If the Fed raises rates this week will the OHI drop anyhow--even if it doesn't make any sense? If you were about to buy would you wait until rates increase?
    Sep 13, 2015. 02:16 PM | Likes Like |Link to Comment
  • Oxymoron: Shrewd Government Refis Credit Card  [View article]
    You make it sound like bond investors are forced to buy longer term bonds because the government issues more of them.
    Sep 13, 2015. 07:16 AM | 1 Like Like |Link to Comment
  • Should You Invest In Market Neutral Funds?  [View article]
    Herman: I feel the same way about Vanguard and have had all my funds there for many years. They seem to be in an awkward position related to the active/passive debate. They were the big pushers of the index fund starting in the 1970s but in a recent article on Morningstar, the case was made that Vanguard's active funds outperformed their index funds. I think many investors might not even be aware of Vanguards active funds because they don't push them--kinda what you are saying about the sales pitch for the neutral fund. Getting back to their recommendation not to take a big position in the neutral fund just because you think the market is overpriced. If I were to totally believe the market is efficient then that says to me the market is never expensive--it is always priced right so don't bother timing it. So why buy a neutral fund and give up market performance if you don't believe the market is overpriced? I don't totally agree with the efficient market theory but I understand the dilemma for Vanguard.
    Sep 13, 2015. 07:07 AM | Likes Like |Link to Comment
  • Should You Invest In Market Neutral Funds?  [View article]
    Ronald/Herman: I don't own a market neutral fund and am not pushing them but they all don't have high fees and aren't all sold by "wall street hucksters". And I am thinking comparing their returns to the S&P 500 at the top of a six year bull market misses the point of the funds.

    Vanguard (a non profit company) has a market neutral fund (VMNFX). Morningstar gives them a 4 star rating (bronze). The expense is .25% and their performance over the last three years is 4.96% per year. Morningstar compares them to the Barclays US Agg Bond return of 1.71%--so they outperform their benchmark by over 3% a year.

    My understanding of the purpose of this fund is to hold money when you think the stock and bond markets are both overpriced (sound familiar) and get you a better return than cash. They are not intended as a long term investment to compete with the stock market. Vanguard has done an excellent job and if the market drops 30% in the months to come we might might wish we owned it.
    Sep 12, 2015. 02:15 PM | Likes Like |Link to Comment
  • Amgen Vs. Regeneron In The PCSK9i War, With Comments On Competitive Threats  [View article]
    DoctoRx: Not related to this article but saw in today's WSJ that Gilead borrowed $10 Billion yesterday in the corporate bond market. Any thoughts on a near future merger.
    Sep 10, 2015. 06:37 PM | Likes Like |Link to Comment
  • How Safe Are The Distributions For PIMCO CEFs In The Aftermath Of PHK's Crash?  [View article]
    GB: What we have here is a failure to communicate! IMO, the irrationality is obvious-- at least for the financial press--Morningstar, Yahoo and all others that I know of show as the CEF distribution rate only the monthly portion of distribution and ignore the total distribution number that includes the year end distribution (remember those 8 of 10 PIMCO funds). Again--using PDI as an example, the financial press shows a 9% distribution rate instead of the real distribution of 14% for 2014. My take is that many investors would buy the CEF with a 14% distribution and pay a premium for it but ignore the 9% distribution which results in a discount for PDI. You might think that gives you an edge but I'm not sure how. Calling the Fund companies irrational is a little more difficult but I don't understand why PIMCO and other CEF companies tolerate the financial press giving out the flawed data--they are in competition with open end funds and ETFs so why not try to make their products appealing. Bill Gross could have raised hell about the issue in one of his monthly letters when he was at PIMCO and it would probably have been fixed.
    Sep 6, 2015. 08:24 PM | 2 Likes Like |Link to Comment
  • How Safe Are The Distributions For PIMCO CEFs In The Aftermath Of PHK's Crash?  [View article]
    Double Hmmm Jack:

    According to the Fidelity website on closed end funds "To maintain tax free status a CEF must pass onto shareholders--98% or more of net realized capital gains and 90% or more of net investment income from dividends and interest payments". Since no mutual fund wants to give up tax free status --causing a double (or triple) taxation to shareholders--that tells me CEFs distribute almost all of their income.

    Your CEFs might not have year end distributions (or you might not be aware of them) but of the 10 Pimco funds that Lefty addresses in the article, 8 had a year end distribution in 2014--and all of them currently sell at a discount. What is amazing is that the only two that didn't have a year end distribution (PGF and PHK) sell at a premium--confirming in my eyes that investors are often unaware of the year end distribution and thus, in comparison, paying up for those whose entire distribution is showing up in the financial press.

    Of course there is no guarantee that there will be a December double distribution and of course the amount will vary based on the income. But there is no guarantee that the monthly distribution will stay the same--point of the article. Just like the performance of open end funds changes from year to year--but would you buy one without knowing about total returns? If I buy a fund based on the size of the distribution (which I don't) I want to know about the TOTAL distribution.

    You say "Yes of course portfolio managers will decide"? How about the board? How about a fund company policy? Looks like Pimco (8 of 10 funds) has close to a policy.

    Maybe investors who are too lazy to do the deep digging should be in index funds but what is the purpose of SA if not to make it a little easier? Why shouldn't an article by Lefty (and he usually does a great job) provide the important stuff?
    Sep 6, 2015. 04:28 PM | 2 Likes Like |Link to Comment
  • How Safe Are The Distributions For PIMCO CEFs In The Aftermath Of PHK's Crash?  [View article]
    Lefty: It's hard to disagree with your statement about the "irrationality of CEF investors" but I wonder if a large part of that is caused by the irrationality of CEF fund companies and the financial press (maybe including you).

    I am thinking that the IRS requires that mutual funds (including CEFs) annually distribute all of their realized income. For income CEFs that usually comes as monthly distributions and a second distribution in December to balance. For whatever reason the financial press has decided to ignore the second December distribution when calculating the annual distribution/yield. You call it a "special distribution" even if it occurs every year as in PDI's case. So the distribution shown for PDI on Morningstar is 9.41% and that is what you quote in your article. The actual distribution for PDI over the last year is closer to 14% and was also much higher in 2013 and I am guessing it will be much higher in 2015.

    If there is any logic in distributing a large chunk of income as a "special" distribution it isn't obvious to me--and the policy seems to vary dramatically within a fund family like PIMCO--almost as if the manager gets to make that decision. Nor is it obvious why the financial press chooses to ignore these annual distributions in their quoted yield (other than it makes for an easier calculation). If PDI increased their monthly dividend to consume most of their income I bet that their discount would disappear as some investors spotted what seems to be a higher distribution (even though it had been there all along).

    So investors who never get beyond the headline distribution numbers when selecting their funds end up with what seems to be irrational investments like PHK.
    Sep 6, 2015. 09:58 AM | 5 Likes Like |Link to Comment
  • Value Investors: The Best Valuation Ratio May Not Be What You Think  [View article]
    Fred: If I am understanding your findings, and just focusing on the annualized return portion of your findings--do you have a way to combine factors? There are four of the six you tested that far exceeded the benchmark. What if you looked at the stocks that made the low 20% threshold for all four of those factors? I would guess that the number of stocks that meet that threshold would be less than 10%-say 50 stocks at any one time. It would be interesting to see how that smaller subset performed compared to the benchmark.
    Sep 4, 2015. 10:10 AM | Likes Like |Link to Comment
  • Investment Strategies For Enhancing Required Minimum Distributions From An IRA  [View article]
    Brian: You mentioned up front that you have other sources of income and I am guessing that includes taxable investments. I am thinking that most SA readers will also have taxable investments as they near RMD time. It would seem the first thing you might want to do is look at the tax impact/return of the whole portfolio and not look at the IRA in a vacuum. Second thing I would do (am doing) is think about my marginal tax rate now and what will happen when RMDs add to taxable income (and for many Social Security will also boost taxable income in that same time frame). Let's assume you are currently in the 25% Fed rate but will go to 30% Fed rate--if you put your qualified dividend and capital gain investments in your taxable account you will pay 15% tax on those dividends--if you place them in your conventional IRA you have converted that tax to 30%. Do you really want to do that? The only real benefit of a conventional IRA is to defer taxes--putting qualified dividend stocks in an IRA does defer taxes but it also increases them. If you put foreign dividend paying stocks in an IRA it will be even worse--you will pay the foreign tax on those dividends (and in most cases not get a credit) and then you will have converted a 15% tax to a 30% tax.

    If you look at the entire portfolio you will probably place the highest taxed items in your IRA--taxable bonds, REITS, BDCs, royalty trusts and the lowest taxed items in your taxable account--munis, qualified dividend stocks, long term capital gain stocks.

    Also be aware that at the time of death your IRA tax liability will pass on to the beneficiary whereas for most (except the super rich who pay an estate tax) the unrealized long term capital gains tax will disappear--a crazy gift from Uncle.
    Aug 27, 2015. 12:40 PM | 1 Like Like |Link to Comment
  • My Favorite Ratios - Part 1  [View article]
    Mepat1111: I don't disagree with most of what you are saying. I guess it comes down to what one of our recent Presidents might have said. "What is the meaning of cash"? The article wasn't dealing with the benefits of share buy backs. It was making the case that share buy backs provide cash to shareholders. Your comment says nothing of cash. When you get a dividend you get cash. You might choose to reinvest that cash but that is your choice. If you want cash to spend in retirement you have it with dividends-that is the reason this site is overflowing with dividend growth investors. Where is the cash from share repurchases? As I mentioned, it goes to ex shareholders. None of it goes to the shareholder who retains his shares. Maybe I am being too literal in reading the authors view of cash--if so let him make that point instead of paraphrasing some unknown comment of Warren Buffett who in 50 years has only repurchased shares twice at Berkshire Hathaway. As to your statement that buying back shares "benefiting remaining shareholders"--apply that theory to IBM over the last three years--would shareholders have not been better off with real cash from dividends instead of buy backs at falling stock price? I will summarize my point--share buy backs might or might not be beneficial to the shareholder but they are never a return of cash to shareholders.
    Aug 15, 2015. 12:43 PM | Likes Like |Link to Comment
  • My Favorite Ratios - Part 1  [View article]
    Douglas: I am always surprised to hear CFAs talking about share buybacks and how they "return money to shareholders". Think about it--in most cases the cash is going to ex shareholders. If the stock is being purchased in the open market the ex shareholder doesn't even know the company is buying the shares. And he doesn't care. He gets the same amount of cash regardless of who buys the shares. You might be able to make a case that share buybacks are a good use of company cash (which depends on the price and other uses for the cash) and you can even make the case that share buybacks are more tax efficient than dividends (only true if the stock is held in a taxable account) and you might stretch things to say the ex shareholder might get just a slightly better price based on the increased demand for stock resulting from the buybacks. But the cash is not going to the shareholders!
    Aug 11, 2015. 11:53 AM | 2 Likes Like |Link to Comment
  • How To Build An Early Retirement, Tax-Free Income Portfolio With Closed-End Funds  [View article]
    Not clear (to me) if you think this approach avoids state income taxes. Many states (maybe most) tax qualified dividends and long term capital gains as general income and will tax it. Doesn't matter if you are in the 15% marginal tax rate. But maybe you are saying you live outside the country and file no state return?
    Aug 4, 2015. 02:24 PM | 1 Like Like |Link to Comment
  • Whole Foods Market increases focus on value brand  [View news story]
    Tricky: You're right that they don't have as extensive a line as many grocery stores--and far less than Walmart super. But they never did and that was never their goal. And their customers knew that the minute they walked in the store for the first time. Nor does Costco, Trader Joe's, Fresh Market and many others including every food coop in the country (and most of the Whole Foods have a larger range of products than any of those). A lot of people focus on the organic nature but I always thought of them as more of a gourmet outlet, with a focus on organic. If you want to see high prices go into the typical food coop. Go into Whole Foods at lunch and you will see a huge crowd buying salad bar, pizza by the slice, sushi, etc and I'm not sure organic has anything to do with those customers being there. Don't know Wegmans or HEB (seems like I went into one in San Antonio long ago and was impressed with their wine selection)--but competition is good--it drives the A&Ps of the world out of business and forces the Whole Foods to improve and adapt--I think the 365 is part of that process.
    Aug 2, 2015. 11:52 AM | Likes Like |Link to Comment
  • Whole Foods Market increases focus on value brand  [View news story]
    Funny--all these comments and nary a comment about the 365 line of products. I assume that will be the backbone of the new concept. I mostly avoid generics but have found the 365 products as good or better than most name brands and at a lesser cost. They also seem to do well in product reviews in Consumer Reports and Cooks Illustrated. A lot of moaning about the prices at Whole Foods--check out the 365 line. I think it is a concept that might work and if it does it will result in adding more 365 products to their regular stores--great economies of scale and maybe margin expansion. Costco has been doing a lot or replacing name brands with their Kirkland brand with mixed results (to my taste buds). I think there is a lot of psychology in how each of us select our favorite grocery store/restaurant/wines... IS no accounting for taste. But as investors I think we need to do more than assume the rest of the world has tastes similar to our own.
    Aug 2, 2015. 10:15 AM | 2 Likes Like |Link to Comment