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FrankEllis

FrankEllis
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  • X-Raying CEFL: Leverage And Expense Ratio Statistics [View article]
    In the CEF's, expenses come out of revenue to leave taxable income that must be distributed. Therefore, expenses are already account for in the yield, the distribution divided by the purchase price. Net asset value is what is left after expenses, fees, and distributions.

    In CEFL, NAV is the weighted value of all shares of CEF's. UBS cannot subtract fees from the share prices. It subtracts fees from the distribution, making the distribution smaller than it would have been had one owned a weighted average of shares of the individual CEF's instead of paying UBS to manage and leverage and buy and sell shares to keep CEFL aligned with its underlying index.

    I appreciate your concern over end of year rebalancing. I did not like the effect on my portfolio and yield. Yet, I have no crystal ball to determine if the rebalance will be negative or positive this year. I am focused on the income, the yield, not the price. If UBS and the index does the same "hosing" to investors this year, investors will dissolve the index and CEFL, so it would not be in their interest to provoke the investors. The uproar over repeated "hosing" will bring about a tsunami of negative press, negative articles on SA and elsewhere, and the index and CEFL will shrivel and die.
    In spite of the "hosing," I am still yielding 16.14% on my original investment, and that will improve each month as my distributions purchase more shares, thus reducing my average cost per share. While that is only the sixth highest yield in my portfolio, it is still ahead of some.

    If, as you say, this end of year provides another "hosing," well then, fool me once, fool me. Fool me twice, and I make a fool of the index and UBS, take my money where they will not be paid fees. I am working under the assumption that both have smarter managers than that, and will fix the problem. If I am wrong about their ability as managers, I will give them untold amounts of free advertising after taking away their fees. I still vote with my dollars, and there are too many ways to tell the world about repetitious management mistakes. Until proven wrong, I will assume the way of positive thinking instead of worrying about what might happen. What I think about tends to be what I bring about.
    May 22, 2015. 06:32 PM | 2 Likes Like |Link to Comment
  • 13.6% Dividend REIT New York Mortgage Trust Is Banking On Credit Investments, Will That Work? [View article]
    Again, the law of supply and demand will smooth out all aberrations. Higher financing costs is going to coincide with high mortgage rates. As cost increases, so will mortgage interest income. The spread may expand or contract, but the market and the law of supply and demand will bring the spread back to a norm that allows business to continue as usual. Nothing changes by itself. A change in one thing causes a change in all things. Looking at a tiny piece of the picture, reflection in a sliver of the broken mirror, does not reveal the big picture. Nature abhors a vacuum and will fill it in due time. Equilibrium will return. The peaks and valleys will dissolve one another.
    May 22, 2015. 05:52 PM | 3 Likes Like |Link to Comment
  • New York Mortgage Trust: They Can't All Be Winners [View article]
    Understand that the price of a bond changes by 10% in the opposite direction for each 1% change in interest rate. Holding a bond to maturity eliminates the "crash." With interest rates at the bottom, the only way interest rates can change is upward, causing the price of bonds to drop. Income investors will continue to receive the same interest payments until maturity. Only selling bonds after increasing interest rates cause prices to drop will affect the investor. If one is happy with the income, do nothing. If one is not happy with the income, sell before prices drop. Focus on income, not price.

    If one is happy with NYMT yield, do nothing, hold the shares, reinvest in more shares if possible. If one is not happy with NYMT yield, sell before interest rates climb and cause price to drop at least temporarily. Focus on income, not price, not portfolio value, but only income. Good management will sustain the distribution as much as possible through the transition period of changing interest rates, until their interest income rate catches up with their cost of borrowing. The interest rate spread will narrow and widen, and narrow and widen. Management will keep pace and watch ahead.

    Folks will buy houses they cannot afford, therefore will mortgage them, therefore must have REIT's willing to buy the mortgages from mortgage companies so that there is always fresh capital to lend to new home buyers. It matters not so much whether mortgage interest rates are at 18% where they were not so long ago, or at 3%, the population grows, children mature, have families, must have homes, and so the cycle of mortgages and REIT's continue on and on. If the spread were to disappear, so would homes for new families, not to mention the governments and banks that set it all in motion. Change is a certainty, fluctuations are sure, but the economy, population growth, families, home purchases, mortgages, banks, and REIT's will change accordingly to keep all things in balance. Don't stand too close to the picture, or you won't see the constant change out of and back into equilibrium. The law of supply and demand will keep everything aligned, correcting all overages and shortfalls in relatively short time spans. In the long run, the wrinkles that looked huge in the short term virtually disappear when looked at from the distance of the long term. Look at a one day chart of the S&P fluctuations, and compare it to a ten year chart. Look at sixteen year cycles of bull markets followed by sixteen year cycles of sideways markets. All have corrections up and down in the short term, but in the long term the market climbs, businesses grow, rates are managed, and prosperity happens for those who look at the long term instead of the short term drama of corrections and volatility. 
    May 22, 2015. 04:21 PM | 3 Likes Like |Link to Comment
  • 13.6% Dividend REIT New York Mortgage Trust Is Banking On Credit Investments, Will That Work? [View article]
    And grexit is important because the Greek economy is WHAT percentage of the world economy? If Greece fell off the face of the earth, would more than a drop be taken out of the bucket. The US has Corporations larger, and better managed, than the Greek economy. The last time Greece did something and panic driven traders sold off the stock market, what happened? BUT, far more importantly, what have the stock market and US stock indexes done since that panic? The short sighted and fearful lose money by buying high and selling low in a panic over irrelevant ripples in the market. The long term income investor enjoys the 13.6% yield, reinvests the yield in additional shares, is happy about any drop in price that allows more shares to be purchased with the same amount of distribution, and doubles the number of yield paying shares about every 5-1/4 years, also doubling the income that is paying for retirement.
    May 22, 2015. 03:23 PM | 2 Likes Like |Link to Comment
  • X-Raying CEFL: Leverage And Expense Ratio Statistics [View article]
    I believe that the chicanery fees and the cleverly hidden price supplement and management fees are all clearly totaled up in the yield. The Yield is the bottom line rather than all of the expenses and fees being relevant deductions out of the investor's pocket, taken out of the yield. I am happy that all the CEF managers and the UBS managers are charging so much for their products that I still receive an annualized compounded yield of 18.6% simply by reinvesting the distributions. Since the yield includes all the expenses, I am not paying any of the expenses out of my yield. Financial managers should be well paid for their hard work, and I am glad to be the recipient of the mere 18.6% that is left over after their chicanery and hidden fees. Guess today is pay day and reinvestment day. Guess by the end of the year I will have about 18.6% more shares after paying all those fees and expenses. Guess in about 3.9 years my number of income paying shares will double, so I will be receiving an annualized yield of about 37.2% on my original investment because I'll be paying twice as much in chicanery and cleverly hidden fees. Thank goodness for all the fees!
    May 22, 2015. 03:06 PM | 14 Likes Like |Link to Comment
  • 13.6% Dividend REIT New York Mortgage Trust Is Banking On Credit Investments, Will That Work? [View article]
    Thanks for your attempt to clarify your thoughts, but too many dubious opinions. Understanding high yield RIC's, the requirement as a pass through entity to pay out most to all taxable income, means the price should not have relevance in terms of appreciation, should, aside from market fluctuations having nothing to do with the RIC, be flat. The RIC is not allowed to hold income in order to appreciate stock price, book value, equity. A quarter showing change in the book value, income, and other aspects of business, is a normal occurrence, of no concern to long term income investors. Similarly, investing in distressed real estate in not likely to produce short term income in a quarter, but will derive capital gains from longer term holding as the housing market rises/recovers. Perhaps the time when it recovers, yields a profit to NYMT, is unknown, but buying low and selling high is a natural process to produce long term capital gains, even if it does not produce short term quarterly income to cover distributions for the quarter. Yet, it is also a hedge against NYMT being overly interest rate sensitive. Consistent quarterly distributions automatically reinvested in additional shares which will pay ever increasing income is the focus of income investors. Owning trust units of REIT's and other RIC's is not the same as buying shares of stock of income tax paying corporations for price appreciation. Investment appreciation comes through reinvestment of distributions, not price appreciation. Given that the number of shares will increase 13.6% per year, therefore the dollar amount of the reinvestible distribution will increase 13.6% a year, my investment value is increasing 13.6% a year even if the price remains the same. 13.6% annual rate of return on investment is normally considered a good investment. Likewise, if one is taking 13.6% out of the investment (by not reinvesting the distributions), one could hardly expect price appreciation in addition to income withdrawn. Stocks and dividends are an entirely different concept from units of trusts and pass through income distributions, and should be completely comprehended by anyone wishing to share info about investments in pass through, high yield, untaxed REIT's like NYMT. We invest in it for income, not price appreciation, and not short term quarterly fluctuations in book value or income. One must bear in mind the mortgage interest income is only one aspect, whereas long term capital gains only appear as income when the sale is complete, but is still figured in on a best estimate of potential sales price until the property is sold, or until the default mortgage becomes a regular payer due to improving jobs market, situation of the borrower, growing economy, and a multitude of longer term situations. We trust management to make decisions in a flexible manner according to what is in the best long term income interest of the holders of units of the trust, a very different view from the drama of stock price appreciation in taxable corporation shares. We look at the BIG picture, the long term potential of the trust in three to five years or when we plan to retire, rather than the quarterly price and book short sighted view. Reinvesting NYMT's 13.6% distributions allows an income investor to double the number of shares owned, hence the dollar amount of potential retirement income, about every 5-1/4 years, even if the price remains the same, showing zero appreciation. Twice as many shares at the same price does increase the value of my investment in addition to doubling my income, but is a different way of investing. Yet, it must be understood.
    May 21, 2015. 08:05 PM | 13 Likes Like |Link to Comment
  • ETN Showdown: Are MORL - And All mREITs - Doomed By Rising Rates? [View article]
    Many thanks for your beneficial article. Clear, factual, pertinent.
    Consider what would happen if there were no MREIT's making enough income to invest in mortgages. For whatever the cause may be, a narrowing or inversion is against the best interest of vast areas of the economy, from mortgages to banking to construction, to lumber, carpeting, paint, HVAC and every related aspect, to furniture and appliance manufacturing and sales, to unemployment.

    Would seem more likely that the FED, and world wide decision makers would watch the long term rate, only increasing the short term rate when the spread reached some undesirable width, whatever that may be. Instead of short term driving long term, MREIT prices, spreads, and all associated effects, the long term rate should dictate the spread which should be watched and kept deliberately at a reasonable percent through increasing the short term rate.

    With that said, as an income investor, I do not see myself buying and selling as these factors affect my investments. Certainly not as the rates and spread cause price change in the investments. But by automatically reinvesting all distributions into additional shares which will pay more distributions, regardless of price and yield at any one short term fluctuation. The longer look, the bigger picture, is price and yield will and do fluctuate, but are self correcting. The longer the time span of a graph, the smoother it gets. Simply by determined, intentional reinvestment of high yield in the high yield investment, the long term goal of increasing income must come to fruition.

    One should also consider the nature of high yield is due the choice to be a pass through tax entity rather than a corporate tax payer distributing less income which will then be taxed a second time at the individual level. Also understand that the distribution is a direct reduction in the value of the share, so to maintain equality, the distribution must be reinvested, because it works like a stock split. If the yield percentage is subtracted from 100%, it equals the after distribution value of the share. It must be reinvested to recoup the part of the share that was distributed as required by Federal Income Tax law. Space is too short to explain this reality thoroughly, but those who understand the direct correlation of pass through tax entities, high yield distribution, and reinvestment, will grow income in the long run, because growth of income is the goal. The goal is achieved through increasing the number of owned shares paying the distribution, NOT through price appreciation. Short term price appreciation or NAV increase is not the goal of RIC's that MUST pass through distributions of the largest part of taxable income. Income is the goal of the pass through entity, and is directly related to the income goal of the prudent investor. The knowledgeable income investor takes advantage of the company not paying out 40% in income tax by distributing 90+% of taxable income to the share and trust holders. These are not dividends, but distributions of taxable income, a part of the value of the share which is taken out of the share and distributed as pass through taxable income. That MORL is leveraged 2X means simply that twice as many shares of future distributions can be purchased on each Pay Date, thus compounding future income. The yield means that MRD is covered several times over, leaving enough to pay tax and still reinvest part in more shares to increase income to protect against inflation. The BIG picture is so much bigger than lesser concerns about fluctuations in interest rates, prices, and other short term occurrences that time will show to be irrelevant.
    Happy investing. Thanks for an excellent, well thought out and well written contribution to our combined education.
    May 14, 2015. 06:43 PM | 7 Likes Like |Link to Comment
  • New York Mortgage Trust: They Can't All Be Winners [View article]
    Thanks. Guess I lumped too much together. Will have to do more research of the difference between RIC's and MLP's.
    May 8, 2015. 03:02 PM | Likes Like |Link to Comment
  • New York Mortgage Trust: They Can't All Be Winners [View article]
    Any investment that paid 14% must be a law abiding company distributing untaxed income to individuals. The 14% is not after paying the corporate rate of 40% income tax, and after using most of the rest of the profit to grow the company. The 14% is the majority of income which must, by law, be distributed. I would hope that any company you invest in has about this same percentage of pretax income. Then that income is distributed first to the IRS, then to capital expansion, leaving the investor with a few percent dividend. RIC's such as NYMT elect to be pass through entities, not paying income tax before distributing the income to owners of the stock. To understand RIC's, one must be willing to understand the advantages of not paying tax twice on the same income, but also understand the disadvantage of the company not being able to hold its profit to grow the company/book value, therefore to expect the stock price to not grow by much. If the company cannot retain its profits to benefit from capital expansion, to grow book value, then price cannot increase dramatically, so the investor reinvests the 14% dividends to grow capital in the form of number of shares owned. If price/book value stayed the same, and the company's profit is distributed to the investor to grow the number of shares by 14% per year, then the end result is the same as other companies reinvesting within themselves to grow stock price, except the income is not taxed twice. Many of us are not taxed at the rate at which a corporation pays tax, plus the rate at which an investor pays tax on the dividend. The 14% income is the same, but used differently. No investor is required to buy stock with which he is not comfortable. Some investors understand the value of income only being taxed once, and at a generally lower rate, and therefore are happy to find and buy NYMT and other RIC's. Some investors look at long term goals, hold long term, increasing wealth by reinvesting the income that REIT's cannot invest internally. Others just do not understand, therefore fear the unknown, or never draw into their awareness the opportunity for growing wealth. Choice, election, each to his own.
    May 7, 2015. 04:15 PM | 1 Like Like |Link to Comment
  • New York Mortgage Trust: They Can't All Be Winners [View article]
    At today's price $7.71, divided by today's distribution $1.08, one would cover the purchase price with dividends in 7.14 years, leaving the purchase price as profit.

    Again, at today's price, therefore a yield of 14.01%, using the rule of 72, which is 72 divided by 14.01, the value of the purchase would double every 5.14 years.
    Said another way, the dollar amount of income doubles every 5.14 years.
    Although some may purchase NYMT for price appreciation or total return, I purchase high yielders for income, reinvesting all income, thus grow my number of dividend paying shares by about 14.01% per year, hence my income by the same, but compounding quarterly, or according to the frequency of the distribution/reinvestm...
    Since Trusts, REIT's, BDC's, MLP's, CEF's, all RIC's -- Registered Investment companies -- are required to pay out at least 90% of their income annually in order to not pay income tax, we benefit from the income not being taxed at the company level, only at our individual level, and not there if high yielders are held in a retirement account, never if held in a Roth.
    If reinvested, the income grows income at a relatively predictable rate. Income, not price fluctuation, is the focus.
    If the owner is at least at MRD, Minimum Required Distribution age, the 14% comfortably covers the required distribution (which starts at 3.65% @ age 70-1/2) and income tax if applicable, leaving additional for reinvestment or withdrawal, but also enough that at least a small amount of the dividend can be reinvested to cover the rate of inflation so that actual cash distributions can increase over time as goods and services prices inflate over time.
    All of the above make me a very happy investor. Long and growing my income by automatically reinvesting all income in NYMT, MORL, BDCL, OXLC, CEFL, NMM, MLPL, plus some SPXL for a pure price appreciation aspect in the portfolio.
    In the long run the market climbs. The short sighted are blinded by worry about blips in price, but the price crashes only mean that more shares are purchased with the same dividends. Keeping focus of attention on the long term growth of income is simply "steady wins the prize."

    Thanks for the good article, and for all comments and discussion.
    May 7, 2015. 03:42 PM | 3 Likes Like |Link to Comment
  • A Dividend Growth Leaders Portfolio With A 17.5% Dividend Growth Rate [View article]
    How about SDYL, automatically reinvesting the dividends. It is counter intuitive to believe that a twenty-five plus year record of dividend increase, reinvested, is going to end up a long term loser. Owning, holding, and automatically reinvesting dividends in a single investment containing the Aristocrats, will eliminate mistaken decisions and a multitude of commissions, allowing the owner to sleep at night and attain a predictable amount of income when the dividends from the increased number of shares is taken as retirement income. Fear, buying high and selling low, is the enemy, not comments of uninvolved antagonists. Also seems the Aristocrats are a good core of a Roth. Owning the fifty-two stocks of the S&P that have increased dividends for at least twenty-fine consecutive years is also pretty substantial diversification.

    Hold steadfast in confidence in a good long term plan, and give no thought to the naysayers so verbose on Seeking Alpha. They do their utmost to persuade everyone that nothing is possible, but confidently staying the course, holding in the face of doubt and opinions and world events, all temporary and ephemeral, will keep one's eye on the goal. Yet, those who are focused on the NOT, the cannot do, the negative, have nothing to offer. There is no long term way to invest in NOT, negative, cannot do.

    Look at the S&P, 19 in 1950, now up over 100 times. Look at the Dow, up an average per year of over 14% for the last 100 years. All the short term negatives in the world have not stopped the long term growth of stocks, this country, and the ever improving American dream. To hold when all about you are naysaying is a strategy worthy of a confident investor. Publicizing our thoughts is often the way to draw doubt and fear to ourselves. We have no one to prove our thoughts to but ourselves.

    Thanks for your article. Keep your eye on the goal, not on the discussion of those who think you can't.
    May 3, 2015. 05:07 PM | 5 Likes Like |Link to Comment
  • Crude Oil Inventories Rise For Record 16th Straight Week [View article]
    <<Low Oil/Gasoline prices did not juice the USA economy ?>>

    Is that to say that savings do not juice the economy? Without savings there would be no banking or stock market or financial instruments. If savings at the pump were used to pay off mortgages or credit cards or to add to IRAs or portfolios, would the short duration of the drop in prices at the pump even make enough of a blip to be discernible? How many gallons a month does a person/family use, times the potential savings of what was $1.50, but is now only a $1.00 per gallon savings? Personally, how much did you save at the pump, and did it make such a difference in your family budget that you noticed it and ran out to juice the economy? Only those who deplete their bank account every paycheck would have been likely to juice the economy somewhere else. The wiser ones merely have a slightly larger reserve now, or used the additional reserve to pay down a priority that was a sucking burden on the reserve/rainy day fund. There is no knee jerk reaction by the wise, budget-aware person actually in charge of their own financial condition. There is no OMG, I saved $100 at the pump so I must spend it somewhere else. It is merely an imperceptible blip in personal liquidity, and thus available for some future, as yet undetermined choice.
    May 3, 2015. 04:05 PM | Likes Like |Link to Comment
  • Crude Oil Inventories Rise For Record 16th Straight Week [View article]
    Yet, consumer price at the pump is up 20%. What is wrong with the law of supply and demand? As the price at the pump goes up, I park the car in garage, voting with my dollar.

    How does the surplus weigh in as a percent of annual usage?
    Apr 29, 2015. 07:23 PM | Likes Like |Link to Comment
  • CEFL: Attractive 18.6% Yield And Discount To Book Value [View article]
    If the ex-date of the 30 CEF's in CEFL is the determiner of the distribution announced, ex-dated, and paid in a month by UBS, why include frequent mention in your articles about pay dates of the underlying CEF's? The pay dates of the 30 CEF's would seem to contribute nothing to the discussion of CEFL, but at least the ex-date and pay date of the single Quarterly CEF is confusing. The potential variance in the ex-month and pay month, even for monthly CEF's, can also be confusing. Keeping attention focused on the single date that determines the CEFL distribution will increase understanding by reducing distracting information. Thanx.
    Apr 27, 2015. 07:18 PM | Likes Like |Link to Comment
  • CEFL: Attractive 18.6% Yield And Discount To Book Value [View article]
    Lance,
    Looking at three months of distributions, there appears to be no big/little months.
    3-11 = $0.3404
    4-9 = $0.3273
    5-?? = $0.3175

    With EDD on your chart above, looks like the big month is now irrelevant for CEFL. Meaning the only fluctuation is in indicative value affecting the monthly distribution? If so, distributions should be relatively stable in the 30 cents plus area and EDD making no perceptible wave.
    Barring any crash causing a huge change in indicative value, your annualized rate should factually balance out any slight ripples through the year, and meaning an actual loss of about $1 annual distribution due to rebalancing.

    Also wonder why you don't compute your estimate on the same day/price/basis as UBS instead of on numbers and data a week out of kilter. The facts in the spread sheet you post, combined with your commentary, would still be very useful, and potentially a day or few ahead of UBS. Even if reported after the UBS announcement, your depth of explanation is of much greater benefit than the UBS announcement. Perhaps just personal free time determines when you can prepare. Someone out here has the computer expertise to prepare the chart for your analysis. Thanks for all you do.
    Apr 27, 2015. 06:53 PM | Likes Like |Link to Comment
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