Anyone buying closed ends here?

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Aug 16, 2007 9:57 pm

Yields over 10% ,  20% discount to NAV.  I'm thinking I might be early, but you can buy some of theses below $15.00  - Do they recover a couple of bucks and then year end selling takes them down again?


i bought a little JCE but I'm looking at BGY and DEX.  Get 10% - 20% upside + the dividend.  You might be able to trade out by Thanksgiving and buy back in @ Christmas.  Worst case I wait until Spring '08.  Anyone have a closed end (without leverage) that's getting crushed that is wort a look? 


Aug 16, 2007 10:25 pm

You're not going to get that many dividends if you're out by Thanksgiving.


I want to add some CEF's into some accounts, but today was very brutal for them before the market came back.  I will wait until there is some calming, but I will be buying soon enough.

Aug 16, 2007 10:26 pm

GDV, almost positive no leverage, one of my favorites.

Aug 16, 2007 10:42 pm

Not sure about leverage, but I would prefer some of the equity based CEF's The deals that came fairly recently from Alpine and Eaton Vance are looking tempting, with fat yields, and 12-15% discounts. Market turns, big win.

Aug 17, 2007 12:12 am

I'd help you, but the trolls would see...

Aug 17, 2007 12:17 am
pratoman:

Not sure about leverage, but I would prefer some of the
equity based CEF's The deals that came fairly recently from Alpine and
Eaton Vance are looking tempting, with fat yields, and 12-15%
discounts. Market turns, big win.





Not really since the options overlay (the covered calls) puts a stop to how much upside the fund can collect.



These funds have an wonderful downward ratchet, the upside is limited
to the call premium and the downside to strong technical support at
zero.



http://finance.yahoo.com/q/bc?t=6m&l=on&z=m&q=l& amp;p=&a=&c=%5EGSPC&s=EXG



Just think of all the happy EXG buyers, a 10% yeild @ IPO and it falls 15% a year.

Aug 17, 2007 12:29 am
AllREIT:
pratoman:

Not sure about leverage, but I would prefer some of the equity based CEF's The deals that came fairly recently from Alpine and Eaton Vance are looking tempting, with fat yields, and 12-15% discounts. Market turns, big win.



Not really since the options overlay (the covered calls) puts a stop to how much upside the fund can collect.

These funds have an wonderful downward ratchet, the upside is limited to the call premium and the downside to strong technical support at zero.

http://finance.yahoo.com/q/bc?t=6m&l=on&z=m&q=l& amp; amp;p=&a=&c=%5EGSPC&s=EXG

Just think of all the happy EXG buyers, a 10% yeild @ IPO and it falls 15% a year.


Surely many CEF's have appreciated 10-15+% in good markets after a correction.  It may take a few months, but the right CEF's would seem to make sense once the downside is out.  I'm not talking about IPO's either.  What's wrong with a CEF that isn't overly leveraged and doesn't make all of its income from options?   

Aug 17, 2007 9:19 am

They are getting hammered.  Just a smaller market as many institutional investors do not buy them.


For income, they cannot be beat.

Aug 17, 2007 10:03 am
AllREIT:
pratoman:

Not sure about leverage, but I would prefer some of the equity based CEF's The deals that came fairly recently from Alpine and Eaton Vance are looking tempting, with fat yields, and 12-15% discounts. Market turns, big win.



Not really since the options overlay (the covered calls) puts a stop to how much upside the fund can collect.

These funds have an wonderful downward ratchet, the upside is limited to the call premium and the downside to strong technical support at zero.

http://finance.yahoo.com/q/bc?t=6m&l=on&z=m&q=l& amp; amp;p=&a=&c=%5EGSPC&s=EXG

Just think of all the happy EXG buyers, a 10% yeild @ IPO and it falls 15% a year.



I find it fascinating that consistently you sing the praises of  TIPs for “income buyers” when the yield is below money market rates, and you sniff at something like EXG, spitting off 10.88% in qualified dividends and selling at a significant discount to NAV. <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


Say what you will, but I’m a buyer here for clients who have been cautioned about the movements of both sale prices and NAVs. We must have a very different idea of what "income" looks like.


Aug 17, 2007 2:33 pm

yield comes at a price.... risk is that price.  I would not touch a CEF with fixed income or leverage.  Try MCN for stocks (options strategy) or bet on banks with BTO.  -JB

Aug 17, 2007 10:17 pm
mikebutler222:

I find it fascinating that consistently you sing the praises of  TIPs
for “income buyers” when the yield is below money market rates, and you
sniff at something like EXG, spitting off 10.88% in qualified dividends
and selling at a significant discount to NAV.

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Mike, I think it is superb that EXG is yeilding 10.88% per year, what
bothers me is that NAV seems to be dropping by 20% per year.

Aug 18, 2007 10:33 am
AllREIT:
pratoman:

Not sure about leverage, but I would prefer some of the equity based CEF's The deals that came fairly recently from Alpine and Eaton Vance are looking tempting, with fat yields, and 12-15% discounts. Market turns, big win.



Not really since the options overlay (the covered calls) puts a stop to how much upside the fund can collect.

These funds have an wonderful downward ratchet, the upside is limited to the call premium and the downside to strong technical support at zero.

http://finance.yahoo.com/q/bc?t=6m&l=on&z=m&q=l& amp; amp;p=&a=&c=%5EGSPC&s=EXG

Just think of all the happy EXG buyers, a 10% yeild @ IPO and it falls 15% a year.


All your points are good ones AR, except if the market turns (I mean, to clarify, truly turns, including psychology), you go from a 12-15% discount to NAV, to a 6-10% premium. I think your comments refer to NAV. If you buy these suckers at a discount, and sell them at a premium, you dont need a big jump in NAV to get double digit returns. 

Aug 18, 2007 10:50 am
pratoman:

All your points are good ones AR, except if the market turns (I mean, to clarify, truly turns, including psychology), you go from a 12-15% discount to NAV, to a 6-10% premium. I think your comments refer to NAV. If you buy these suckers at a discount, and sell them at a premium, you dont need a big jump in NAV to get double digit returns. 



If this was such a great idea why is it that CEFs historically trade at discounts?


Finding one that will trade at a premium to NAV in the near future is akin to finding the holy grail.


Why would I pay a premium for fund shares when I do not know on a daily basis what the manager is holding, what was just acquired, what was just sold?

Aug 18, 2007 11:04 am

When market psychology is positive, these things trade to a premium. EXAMPLE: All the Alpine deals that came in the last year went to a fat premium, and only recently are at discounts. Buy now, wait for psycholgy to change.


In addition, DAToo, this strategy doesnt apply to you, one needs to understand the markets, and the value of an advisor,  in order to apply it.

Aug 18, 2007 3:00 pm
pratoman:

All your points are good ones AR, except if the
market turns (I mean, to clarify, truly turns, including psychology),
you go from a 12-15% discount to NAV, to a 6-10% premium. I think your
comments refer to NAV. If you buy these suckers at a discount, and sell
them at a premium, you dont need a big jump in NAV to get
double digit returns. 





Prato, I think it unlikely that premiums will return for the various
equity income CEF's. Their method is unsound, and will over time errode
NAV leading to an eventual cut in the dividends.



I'd much rather own a Junk bond CEF than an equity income CEF.

Aug 18, 2007 5:35 pm

AR, RESPECTFULLY disagree. It may take some time, but this market will stabilize, especially if the fed shows that it is about to become more accomadative. When it does, NAV drop, it will reverse back up with the rest of the market. I do have to admit I am not clear on how the dividend is affected by option writing in this type of market, but I just think we are close to stabilizing. If I buy one of these CEF's at a discount, and even have to wait 18 months for it to be trading at a premium again so I can take my profit, its ok, if I am being paid, even 8% to wait. And some of these CEF's are paying upwards of 11%. See AWP and ETY

Aug 18, 2007 10:16 pm
pratoman:

AR, RESPECTFULLY disagree. It may take some time,
but this market will stabilize, especially if the fed shows that it is
about to become more accomadative. When it does, NAV drop, it will
reverse back up with the rest of the market. I do have to admit I am
not clear on how the dividend is affected by option writing in this
type of market, but I just think we are close to stabilizing. If I buy
one of these CEF's at a discount, and even have to wait 18 months for
it to be trading at a premium again so I can take my profit, its ok, if
I am being paid, even 8% to wait. And some of these CEF's are paying
upwards of 11%. See AWP and ETY





Just to make my thinking clear.



1) I think all equity income CEF's (based on option writing) are smoke
and mirrors. IMHO eventually base of earning assets will be erroded,
and the dividend will be cut.



The options overly prevents NAV from going up, since as the underlying
portfolio moves upwards, it gets called away. When you sell a covered
call, you are giving up all upside beyond the call price in exchange for a fixed option premium. 



That's why the NAV on these funds has a downward ratchet. All the
options premium gets paid out, while the fund retains the downward
moves in portfolio.



2.) No reason to think these funds will trade at a premium in the
future. CEF's do very little ongoing marketing to maintain interest in
the funds. After the initial sales period is over holders start
selling, and very few people are buying. Hence the vast majority of
CEF's historically trade at discounts to NAV.



I'd much rather own a Junk bond CEF which truly earns its dividend than
an equity income CEF that gambles for it. The Junk CEF is also senior
in the capital structure, and has lower volatility because of that.

Aug 18, 2007 10:52 pm

As I said, I am not sure how the options affect the possibility of yields getting cut, I always thought when the portfolio gets called away, the proceeds would just be used to do more buy writes.


In any case, that doesnt preclude the idea that there is great value in some of the non buy write equity funds, i.e. AWP, Gabelli Growth and Income, etc.

Aug 20, 2007 10:08 am

Bought 8200 JCE @ 15.75 and 7000 BGY @ 15.75 on Friday.  Probably should have placed market orders instead of limits.  Only bought half what I needed.  I'm working 16.15 now

Aug 20, 2007 10:11 am
NOFX:

Bought 8200 JCE @ 15.75 and 7000 BGY @ 15.75 on Friday.  Probably should have placed market orders instead of limits.  Only bought half what I needed.  I'm working 16.15 now


You know damn well that if you had entered market orders it would trade down afterwards--this is a thankless business in that area.