Monday, February 3, 2014

MBC and MOU/More Low Inflation Numbers for Europe and the U.S. Released Last Friday/Bought ROTH IRA 50 ARCPP at $21.33/Sold 50 EAA at $24.69-Roth IRA/Added to JABAX/Added: 150 FAX at $5.8 and 100 DPG at $18.58/Sold 307+NPI at $13.1/Sold 50 GLW at $17.34

Any trades made after last Thursday will be discussed in the next post.

Big Picture Synopsis

Stocks:
Stable Vix Pattern (bullish)
Short Term: Expecting a 10%+ Correction
Intermediate Term: Slightly Bullish
Long Term: Bullish

A long anticipated correction appears to be underway, although buyers returned to the market briefly last Thursday in response to the U.S. 4th quarter GDP report.

For the month of January the S & P 500 declined only 3.6%. The DJIA was down 5.3%. The VIX jumped 34%, closing last Friday at 18.41. Continuous movement below 20 in the VIX is consistent with the Stable Vix Pattern, notwithstanding the sharp swings between 10 and 20 from time to time.

My bond heavy retirement accounts rose in value during January, while my main taxable account declined 1.45%.

The current downdraft in the stock market was triggered by valuations, the lack of any meaningful correction in U.S. major stock averages since the summer of 2011 (S & P 500 closed at 1119 on 8/8/11 Historical Prices | S&P 500 Stock), growing concerns about earnings growth as reflected in lukewarm 2014 first quarter guidance by a number of companies, and the latest in a long series of emerging market currency meltdowns.

Doug Short has a chart showing the four dips since the market bottomed on 3/9/2009. Market Snapshot (4th chart). The four declines are measured by him as follows:

-15.99%
-19.39%
-  9.94%
-  7.67%

The worst of those declines occurred during the summer of 2011. Notwithstanding those declines, the S & P 500 was up over 170% since early March 2009. Relatively short duration dips are common in ongoing secular bull markets. A cyclical bear market will also occur during long term secular bull markets, generally manifested by a relatively quick decline of more than 20% but less than 30%.

Bonds:
Short Term: Slightly Bearish to Neutral
Intermediate and Long Term: Slightly Bearish
The Difficult Path to Interest Rate Normalization

Treasuries and investment grade corporate bonds continued to rally last week. Daily Treasury Yield Curve Rates

The break-even spread for the ten year TIP closed at 2.14, the market's prediction of the average annual CPI increase over the next ten years.

I would attribute most of that rally to the herd like movement toward perceived safety as concerns about emerging markets intensified and a number of 2013 4th quarter earnings reports and/or forward guidance for the 2014 1st quarter disappointed investors.

Last Friday, bonds received a lift after Eurostat reported a lower than expected inflation rate in Europe. 

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Recent Developments:

As expected, the FED reduced its monthly asset purchases by $10B starting in February. The FED will reduce the purchase of treasuries to $35B and mortgage backed securities to $30B. FRB: Press Release--Federal Reserve issues FOMC statement--January 29, 2014

Treasury and investment grade corporate bonds rose in price and declined in yield last Wednesday when the Fed made this announcement:

Closing Prices 1/29/14:

TLT: $107.87 +0.88 (+0.82%) 
IEF: $101.98 +0.48 (+0.47%) : iShares 7-10 Year Treasury Bond ETF
LQD: $115.93 +0.23 (+0.20%) : iShares  Investment Grade Corporate Bond ETF 
ZROZ: $90.94 +1.00 (+1.11%) : PIMCO 25+ Yr Treasury STRIPS ETF

The market was spooked last Friday when Eurostat's reported that inflation rose at a .8% annualized rate in January, eurostat.ec.PDF, and the unemployment rate rose to 12% on a seasonally adjusted basis in December. epp.eurostat.ec.PDF

The HSBC January manufacturing PMI for China was reported at 49.6, down slightly from the earlier flash reading of 49.6. Any reading below 50 indicates contraction. markit

The government estimated that the 2013 4th quarter real GDP grew at a 3.2% annualized pace. News Release: Gross Domestic Product Current dollar GDP increased by 4.6%. This is the first of several estimates. The next estimate is scheduled for release on 2/28/14.  Consumer spending rose 3.3%, higher than the average 2.2% increase since the end of the recession. Businesses increased spending on equipment by 6.9%. Exports grew by 11.4% while imports increased by .9%. The price index for gross domestic purchases increased 1.2% in the 4th quarter and at 1.7% excluding food and energy. The personal savings rate was estimated at 4.3%.

Last Friday, the government reported that the core personal consumption index increased 1.2% Y-O-Y in December. Including energy and food, the PCE price index was up only 1.1% for the year. News Release: Personal Income and Outlays

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HCP Inc 

HCP, a recent purchase, increased its quarterly dividend to 54.5 cents per share from 52.5 cents. That is about what I expected. As I noted when discussing my purchase, I may not live long enough to see a doubling in the HCP dividend rate.  Bought 50 HCP at $36.31 (12/31/13 Post)

Last Friday's Closing Price: HCP: $39.15 +0.26 (+0.67%)

Any gain is appreciated when the S & P 500 declines by .65%.

Equity REITs have done well, for the most part, since the start of 2014. One of my best performers in January was the 100 share position in Realty Income that closed last Friday at $40.78 +0.01, and went ex dividend earlier in the week for its monthly distribution. Bought:  100 Realty Income (O) at $36.96 (December 2013).

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PPNs MOU and MBC

I own two "principal protected" unsecured senior notes issued by Citigroup Funding, and guaranteed by Citigroup, that pay the greater of 3% on a $10 par value, or some higher percentage based on the performance of the Russell 2000 during each annual coupon period, provided there is no Maximum Level Violation that causes a reversion to the 3% minimum coupon.  Both PPNs mature this year.

The decline in the Russell 2000 has increased the odds that MOU will not suffer a Maximum Level Violation on or before the end of its last coupon period which will be on 3/3/2014. This is a snapshot taken from an earlier post with the details:


Snapshot taken from Stocks, Bonds & Politics: Update on Exchange Traded Bond and Preferred Stock Table as of 11/14/13

As noted above, the Maximum Level for MOU during the current annual period is 1,255.12. One close above that number on or before 3/4/2014 (End Date) causes a reversion back to the 3% minumum coupon.

The Russell 2000 closed at 1164.64 on 12/31/13, which was getting close to the Maximum Level number, but has since declined some. The close last Friday was 1130.88.

If there is no Maximum Level Violation in the remaining days of the coupon period, and the Russell 2000 closed at 1131 on the END DATE, then MOU's last coupon would be 23.4% (Ending Value of 1131 Minus the Starting Value of 916.5=214.5 Divided by the Starting Value of 916.5=23.4%) Russell 2000 Index Chart; RUT Historical Prices | Russell 2000

The February 2011 coupon was 27.93%. (Snapshot at MBC & MOU). The last coupon for 2012 was 3.7%, snapshot at Item # 3 MOU)

MBC is also looking good, at least for now, with a Maximum Level number at 1,298.41 and a Starting Value of 998.78.

I am not interested in buying more, but I am content to allow this game to run its course.

Citigroup 3.00% Principal Protected Notes linked to Russell 2000 Index (MOU)

Citigroup Financial Inc. 3.00% Min Coupon Princ Protected Nts for Russell 2000 Index (MBC)

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1. Bought 50 ARCPP at $21.33-ROTH IRA (see Disclaimer):

Snapshot of Trade:

2014 Roth IRA Bought 50 ARCPP at $21.33
Closing Price Day of Trade 1/22/14: ARCPP: $21.36 +0.16 (+0.75%) 

Security and Company Description: The American Realty Capital Properties Inc. 6.7% Cumulative   Preferred  Series F (ARCPP) is an equity preferred stock that pays cumulative and non-qualified dividends at the fixed coupon rate of 6.7% on a $25 par value. 

Prospectus 

Dividends will be paid monthly at $.13958333 per share. The first monthly dividend, payable on 2/17/14, will be higher at $.19+ since the first payment period will include more than 30 days. American Realty Capital Properties Announces Monthly Common Stock and Series F Preferred Stock Dividends for February 2014 That first payment went ex dividend on 1/29/14.  

The prospectus contains a typical Dividend Stopper provision that prevents the issuer from paying a cash dividend to common shareholders while deferring the cumulative preferred dividend. As long as a cash dividend is paid to the common shareholders, the issuer has to pay the preferred dividend in full. 

Paragraph (6)-Dividend Stopper Provision

Prior Trades: None. This is a new issue. 

Related Trades: I recently bought 100 shares of the common. Item # 4 Bought 100 ARCP at $12.74-Roth IRA (12/31/13 Post) 

Recent Earnings Report: I discussed the third quarter report in the previously linked post.

American Realty Capital Properties Announces Third Quarter 2013 Operating Results and $0.21 AFFO Per Share

Rationale: This security was purchased for income generation, with capital appreciation being a secondary objective. The dividend yield at a total cost of $21.33 would be about 7.85%.

I generally discuss the potential benefits and risks of REIT preferred stocks in a 2009 Gateway Post:
Stocks, Bonds & Politics: REIT CUMULATIVE PREFERRED LINKS IN ONE POST/Advantages & disadvantages

The primary benefits are income generation and the priority of dividend payments over the common shareholder. Additional benefits for a REIT preferred stock, compared to preferred stocks issued by highly leveraged bank holding companies, is that the preferred dividends are cumulative and the common shareholder has to be paid a dividend whenever there is net income in order for the REIT to maintain its tax status. The cash payment to the common shareholder is the security blanket for the preferred shareholder.

A non-REIT or non-BDC could theoretically eliminate their non-cumulative preferred dividend even with net income available to pay that dividend. This preferred stock from American Realty also has the benefit of making monthly payments. 

Risks: As previously discussed in connection with fixed coupon equity preferred stocks, interest rate and volatility risks are significant.

Price volatility is related to the equity preferred stock's low priority in the capital structure and their issuance by leveraged institutions.

A recent example of price volatility, with a strong downside bias, occurred in August 2011. Stocks, Bonds & Politics: Item # 1 Fear and Enhanced Volatility in Certain Classes of Income Securities

Many of these securities with $25 par values plummeted into the single digits during the Near Depression period, even when the issuer never missed a dividend payment. The fear which dominated pricing decisions was that these securities would become worthless.

Stocks, Bonds & Politics: Embracing Volatility as A Risk Management Tool In the Sub-Asset Class of Equity Preferred Stock (5/13/2009 Post)

Future Buys and Sells: I will consider buying another 50 share lot, possibly in a taxable account, when and if the price slides below $21.

Closing Price Last Friday: ARCPP: $21.40 +0.04 (+0.19%) 

2. Sold 50 EAA at $24.69-Roth IRA (see Disclaimer): This transaction is just another example of small ball. Ultimately, when cutting to the chase, I am not happy when an income alternative involves the purchase, near par value, of a long term bond with a 5.75% coupon. That pretty much says it all.

Snapshot of Trade:



Snapshot of History:



Snapshot of Profit:

2014 Roth IRA 50 EAA +$40.49
Item # 1 Bought 50 EAA at $23.6-Roth IRA

Security Description: The Entergy Arkansas Inc. 5.75% Series First Mortgage Bonds 2040 (EAA) is a first mortgage bond issued by a distribution subsidiary of Entergy Corp. (ETR). The coupon is 5.75% on a $25 par value with a 11/1/2040 maturity. The issuer has the option to call at par, plus accrued interest, on or after 11/1/2015. Again, the interest rate risk is asymmetric between the issuer and the owner of this security.

(If a bond is subject to a make whole redemption, then the risk would be more symmetric. The typical make whole provision in a long bond prospectus would basically require the issuer to pay the sum of all remaining interest payments and the principal amount discounted to present value using the treasury rate, plus a small premium, for a bond maturing at the same time. In a period of low rates, the discounting of that sum would be smaller than when rates are higher. The issuer would not be able to refinance at a lower interest rate given the high redemption price caused by the make whole. Consequently, the buyer would enjoy the higher than prevailing rates without having the security taken away with nothing more than a par value payment)

Prospectus

After my trade, Moody's confirmed the rating of this bond at A3.

Rationale: I am concerned about the balance between risks and benefits. The potential benefits are relatively small given the low coupon and price near par value with the issuer retaining an optional call right. The downside risk caused by a rise in rates, particularly a sudden increase, is more pronounced in my opinion than the potential benefits. The end result of that balancing act is a small 50 share purchase followed by a quick exit.  

The low inflation number in Europe did cause me to buy back another first mortgage bond as a partial replacement for the disposition of NPI shares discussed below. I will discuss that trade in the next weekly post.

Future Buys and Sells: I will take another look when and if the price sinks below $23.

I am playing small ball with all of the first mortgage bonds issued by the Entergy distribution subsidiaries. I currently own 100 ELB and 50 EFM, and bought back last Friday 50 EMQ at $24.93 after looking at the inflation numbers for the U.S. and Europe released last Friday.

A few weeks ago, I sold EMQ when it popped and bought the functionally equivalent EFM. The profit on that 50 share transaction was just $68.97, but I also increased my current yield. Item # 2 Paired Trade: Sold 50 EMQ at $26.49 and Bought 50 EFM at $24.9-Roth IRA. LB noted that the $68.97 profit was tax free.

Closing Price Last Friday: EAA: $24.24 -0.23 (-0.94%) 

3. Added to JABAX at $29.54 (see Disclaimer):

Whenever the market has a really bad day, I will generally select one mutual fund and add at least $250 to it. When the S & P fell during the week ending 1/24/14, culminating in a -2.19 decline on 1/24/14, I decided to add $250 to the Janus Balanced Fund; T (JABAX) This fund has a 4 star Silver rating from Morningstar.

Snapshot of Purchase: 



Closing Price Day of Trade: JABAX: 29.54 -0.35 (-1.17%) The bond part of the portfolio cushioned the decline.

I took a snapshot of my last distribution from this fund, which included a $172.67 long term capital gain, in the introductory section of a December 2013 Post.

This link to a PDF of the last Annual Report may work: Janus Balanced Fund The annual period ended on 9/30/13. The discussion by the managers of that fund starts at page 3. A list of holdings starts at page 12. U.S. treasury bonds and notes made up 13.2% of the portfolio as of 9/30/13 (page 8).  Common stocks had a 53.7% weighting at that time. The expense ratio was at .83% for the Class T shares.

Through 9/30/13, the average annual total return was 8.31% over ten years, better than the returns of the S & P 500 index. (page 9)

I will add to this fund whenever the spirit moves me. I have not sold any shares.

4. Added 150 FAX at $5.8 (see Disclaimer): 

Snapshot of Trade:

2014 Added 150 FAX at $5.8
Security Description: The Aberdeen Asia-Pacific Income Fund (FAX) is a leveraged closed end bond fund that owns corporate and government bonds issued by companies and governments located in the Asia Pacific region.

Portfolio Composition as of 10/31/13:


As noted in this table, the fund is weighted in investment grade bonds with 34.4% of the portfolio invested in AAA rated bonds. Australian government bonds are rated AAA. Please note the currency exposure in this table which is a notable risk for this fund.

CEFConnect

SEC Filed Shareholder Report (period ending 10/30/13): Aberdeen Asia-Pacific Income Fund, Inc.

Sponsor's Webpage: Asia-Pacific Income Fund

FAX Page at Morningstar

Data Date of Trade 1/28/14:
Closing Net Asset Value Per Share: $6.48
Closing Market Price: $5.82
Discount: -10.19%
Average 1 Year Discount: -6.24%
Average 3 Year Discount: -3.13%
Average 5 Year Discount: -3.87%

Dividends are paid monthly. The current monthly rate is $.035, partly supported by a ROC. At that rate, the dividend yield would be about 7.24% at a total cost of $5.8 per share. I am currently reinvesting the dividend and will likely continue doing so as the long as the discount remains above 7%. The fund went ex dividend for its monthly distribution shortly after my purchase.

Prior Trades: My last purchase was a 200 share bought last October. Item # 2 Bought: 200 FAX at $6.08 (10/24/13 Post) I also bought 100 shares at $6.35. Item # 6 Bought 100 FAX at $6.35 (6/15/13). As noted in that last linked post, I was able to buy this bond fund at a greater than 30% discount to its net asset valuer per share during the Dark Period. I purchased 200 shares at $3.39 in October 2008 and quickly sold those shares for a $241.81 profit (see snapshot in Item # 6 Bought 100 FAX at $6.35 (Prior Trades Section)Some Nibbles Got Filled: JZE, PJS, INZ and FAX (October 10, 2008 Post).

Rationale and Risks: The previous two discussion, linked above, outline the rationale and risks, so I will just highlight a couple of issues here.

Since my last purchase, the Australian Dollar and other Asia Pacific currencies have continued to slide against the USD. That slide would have a negative impact on the value of bonds denominated in those currencies and owned by a fund priced in USDs.

AUD/USD Currency Conversion Chart (Australian Dollar)
USD/INR Currency Conversion Chart (India's Rupee)
USD/IDR Currency Conversion Chart (Indonesia Rupiah)
USD/MYR Currency Conversion Chart (Malaysia Ringgit)
USD/SGD Currency Conversion Chart (Singapore Dollar)

At the moment, currency risk is at the top of my worry list for this fund.

A normal CEF risk has not yet abated for this fund. I am referring to the possibility that the discount to net asset value could increase after a purchase or at least stay persistently higher than the average discounts over the prior 1, 3 and 5 years. This fund continues to be priced at an unusually high discount compared to the 3 and 5 year averages.

Closing Price Last Friday: FAX: $5.77 0.00

5. Sold 307.721 Shares of NPI at $13.10  (See Disclaimer): 

Snapshot of Trade (excludes fractional shares):



The profit/loss numbers do not include .721 fractional shares that will be liquidated by Fidelity on the settlement date at $13.1

Snapshot of Profit/Losses-Net Realized Profit of $99.86 on the Shares:

2014 NPI 307 Shares +$99.86
Item # 1 Bought: 100 NPI at $12.25 (11/19/13)Item # 5 Added 50 NPI at $12.16 (8/10/13 Post); Item # 5 Bought 58 NPI at $13.4 & 42 at $13.17 (6/15/13 Post)

I did make a profit on my shares bought with the monthly dividend payments. I will also receive one more monthly dividend payment which went ex dividend earlier in January.

The first purchased lots were sold at a small loss. I successfully averaged down that allowed me to turn the trade into a profitable one.

Security Description: The Nuveen Premium Income Municipal Fund (NPI) is a highly leveraged closed end fund that invests in tax free municipal bonds

CEFConnect Page for NPI

NPI - Nuveen Premium Income Municipal Fund, Inc.

Rationale: I still believe that leveraged long duration bond funds are living on borrowed time. I do not believe that inflation is dead or gasping for breath. Inflation pressures are certainly building throughout the developing world.

Long Term Chart: Consumer Price Index for All Urban Consumers: All Items- St. Louis Fed
Consumer Price Index, 1913- | The Federal Reserve Bank of Minneapolis

With the wind down of QE, which has driven intermediate and long term rates to abnormally low levels, I continue to anticipate a rise in yields for longer maturity bonds, even as the FED continues to keep the federal funds rate at or near zero.

Historically, a ten year treasury would be priced at 2%+ over the anticipated inflation rate in a free market uninfluenced by abnormal FED monetary policies. The current anticipated average annual inflation rate over the next ten years has been hovering near 2.25%, implying a fair market yield of 4.25% for the ten year treasury.

While a continuation of ZIRP beyond QE will restrain the 10 year treasury in finding its true market price, I would still anticipate a serious rise in intermediate and longer term bond yields over the course of the next 12 to 18 months. Consequently, I am playing these long duration leveraged bond CEFs close to the vest. The recent price movements of the 10 year and longer term treasuries are inconsistent with this view. Daily Treasury Yield Curve Rates I view their rises in price and decline in yields to be a temporary blip caused by a typical herd like move toward perceived "safety".

I am not avoiding these leveraged long duration bond CEFs, but I am in a hyper trading mode for them. I am slightly more comfortable holding individual long term bonds compared to leveraged long term bond funds like NPI.

NPI has a leveraged adjusted duration of 16.51 years as of 12/31/13. NPI - Nuveen Premium Income Municipal Fund, Inc.

Investor Alert - Duration—What an Interest Rate Hike Could Do to Your Bond Portfolio - FINRA

Get to know your bond fund: Duration | Vanguard

Notwithstanding the following assessment, I will continue to keep long bond exposure since I recognize that no human can accurately predict the future. I have upgraded the likelihood of the alternate scenario which would be positive for bonds. That scenario involves abnormally low inflation continuing for several years, with brief periods of deflation, caused by strong deflationary forces including worldwide surpluses in plant and labor and the drags caused by governments and consumers reducing their spending of borrowed money. That view was expressed by Don Albert in an interview found now at the Daily Ticker and in his book: The Age of Oversupply: Overcoming the Greatest Challenge to the Global Economy: Daniel Alpert: 9781591845966: Amazon.com: Books

Closing Price Last Friday: NPI: $13.19 +0.02 (+0.15%)

6. Sold 50 GLW at $17.34 (The $500 to $1,000 Flyers Basket Strategy)(see Disclaimer)

Snapshot of Trade:

2014 Sold 50 GLW at $17.34

Snapshot of Profit:

2014 GLW 50 Shares +$285.6
Bought 50 GLW at $11.98 (9/5/12 Post)

Rationale: There were enough issues raised by Corning's last earnings report that caused me to harvest my profit in yet another example of small ball. A secondary concern is Apple's multi-year contract with GT Advanced Technologies (GTAT) to supply Apple with Sapphire material, an alternative to Corning's gorilla glass. GT Advanced Technologies Inc. Announces Results for Third Quarter Fiscal Year 2013; Signs Multi-Year Sapphire Materials Agreement With Apple(R) Apple also recently a document with the Foreign Trade Zone Board that suggests to some that the new Arizona sapphire plant, which may become operational in February, will be producing products for an IPhone, but this is mostly guesswork for now.

Apple also recently filed patents relating to the use of sapphire in glass display windows. TechCrunchApple Inside To become a widespread replacement for gorilla glass, the sapphire material would need to decline significantly in price. CORNING's ResponseMIT Technology Review; "Corning's Glass Challenges Intensifying"-Motley Fool Article

I am in no position to assess these kinds of technical issues, nor do I have the background knowledge that would permit me to make anything remotely close to an intelligent forecast about the pace of technological developments. When faced with this kind of uncertainty, my response is to simply take my profit and move on.

For the 2013 4th quarter, GLW reported core E.P.S. of $.29 on core revenues of $2B. SEC Filed Press Release Gorilla glass volumes declined by 10% in the quarter, while LCD display revenues dropped 5% Y-O-Y. The company forecasted price declines for LCD glass displays in the 2014 first quarter.

Earnings Call Transcript - Seeking Alpha

Closing Price Last Friday: GLW: $17.21 -0.17 (-0.98%)

7. Added 100 of DPG at $18.58 (see Disclaimer): This add brings me up to 300 shares with 100 of those shares owned in a Roth IRA and 200 in a taxable account.

Snapshot of Trade:



Security Description: The Duff & Phelps Global Utility Income Fund (DPG) is a leveraged closed end stock fund that invests in electric, gas and water utilities, telecommunication companies and MLPs.

CEFConnect Page for DPG

Sponsor's Website: Duff & Phelps Global Utility Income Fund — Home

DPG Page at Morningstar (shows some ROC dividend support)

I noted in a prior post that the ROC was benign since the fund earned the dividend, but long term capital gains for the last fiscal year were washed out by a loss carryforward.

Data From Day of Purchase 1/30/14:
Closing Net Asset Value Per Share: $21.13
Closing Market Price: $18.62
Discount: -11.88%
Discount at $18.58 Price: -12.06%
Average 1 Year Discount: -9.29%
Average 3 Year Discount: -6.98%

Last Friday (1/31/14), the net asset value per share increased by 6 cents to $21.2, creating a discount to net asset value of -12.26% based on a closing market price of $18.6.

The fund is currently paying dividends quarterly. The last distribution was $.35 per share with a 12/12/13 ex dividend date.

The expense ratio is high. For the last fiscal year, net operating expenses with leverage costs was reported at 1.23%. Gross operating expense totaled 1.92%.

Last SEC Filed Shareholder Report: Duff & Phelps Global Utility Income Fund (period ending 10/31/13)

Prior Trades: After purchasing this last 100 share lot, I took a snapshot of my 200 share position held in the taxable account which includes those newly purchased 100 shares:


This last purchase raised my average total cost per share to $18.02 from $17.38. Item # 1 Bought 100 of the CEF DPG at $17.3 (December 2012)

I am not reinvesting the dividend.

Roth IRA Position: Item # 3 Swap Trade Roth IRA: Sold 100 of 150 GYB at $18.03 & Bought 100 DPG at $17.31 (December 2012)

Rationale: Given the expansion of the discount to net asset value since my last purchase, and the decent income generation, I decided to average up. This fund returned 20.14% during the last fiscal year based on net asset value, which was fine given the defensive characteristics including its exposure to dividend paying utility and telecommunications stocks.

When I first bought shares in this stock CEF, I referenced this article published by Morningstar and titled "Looking for Income? Try This Global Utilities-Focused Fund"

Risks: I would just reference the prior posts dealing with this fund. The risks are fairly typical for a leveraged stock closed end sector fund that buys securities worldwide. There will be some currency risks, the normal CEF risks (e.g. expansion of discount after purchase), and the risks associated with leverage (e.g. borrowing costs, buying assets which decline in price with borrowed money adding to the woes, etc.) The fund did not have any emerging market currency exposure. The last shareholder report shows the following:

I am primarily interested in the income generation with some potential for capital gains.

Closing Price Last Friday: DPG: 18.60 -0.02 (-0.11%)

I noticed last Friday that my two MLP ETNs were bucking the market and rising in price:

AMJ: $46.60 +0.48 (+1.04%): JPMorgan Chase Alerian MLP Index ETN

MLPG: 36.37 +0.20 (+0.55%): UBS AG E-Tracs Alerian Natural Gas MLP ETN

The Vanguard REIT ETF also rose last Friday, bucking the downtrend: VNQ: $67.32 +0.36 (+0.54%) : Vanguard REIT ETF

The SPDR Utilities ETF, which includes utility stocks in the S & P 500, also closed up last Friday: XLU: 39.10 +0.32 (+0.83%): SPDR Select Sector Fund Utilities ETF The broader Utilities ETF sponsored by Vanguard also had an up day in a down market. VPU: 85.57 +0.59 (+0.69%): Vanguard Utilities ETF

Vanguard Utilities ETF (expense ratio .14%; 77 stocks)

XLU - Utilities Select Sector SPDR Fund (expense ratio .16%, 31 stocks)

At my age, I view negative correlations to be material in my asset allocations. 

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