The preceding table is my current mini-portfolio of closed end funds, a portfolio within a portfolio. In this portfolio, I have made a slight shift toward stocks by buying more CEFs with stock exposure and selling some of the bond CEFs. I published the last table for the CEFs in August: Bought 100 IGD at 10.94 Several of this CEFs, including all of those from Blackrock and Nuveen, have just gone ex dividend for their monthly or quarterly distributions. An article about closed-end fund in Wikipedia highlights some of the important distinctions between CEFs and ETFs. Other ones explaining the differences can be found at TradingMarkets.com and TheStreet.
I do not display the table of my ETFs. I recently added several stock ETFs including DTN, DEW, OEF, DTD, PPH, XLP, DHS, YCS, CDZ.TO, & DBU as well as the bond ETFs PLW BSCE, BSCF, BSCH, CBO.TO, CLF.TO, and PGX, all of which I have previously discussed over the past few weeks. I also own currently the ETFs ADRU, PHB, BAB, FVL, XLK and the ETN MLPI.
My new Kindle was received yesterday, and LB has already downloaded a book into it over the howls of protest made by RB. The book is called The Strategic Bond Investor: Strategies and Tools to Unlock the Power of the Bond Market by Anthony Crescenzi, Mohamed El-Erian.
The NY Fed manufacturing survey for September fell 3 points to 4.1, below the 8 consensus. Empire State Manufacturing Survey (full report in pdf)
In a recent poll, one in four Americans believed that the U.S. government will do the right thing most of the time. /cnn .pdf
A CNN/Time poll shows that the pistol packing Grandma, Sharron Angle, is now leading the forever somnolent Harry Reid in the Nevada Senate race. One of Sharron's famous sayings is that the population needs to resort to our "Second Amendment remedies" in case the nation continues on its current path. Her statement can be heard by following the link contained in this article at the WP. Besides being in favor of giving prisoners massages as part of a scientology ritual, Sharron was not exactly enthusiastic about continuing social security and medicare prior to receiving the GOP nomination, clearly stating that she wanted to phase out both social security and medicare: YouTube Some of Sharron's other positions, including abolishing the tax code and opposing mothers working, are summarized in article from the Examiner.com.
The best thing that could happen to the Democrats long term, meaning 2012, is to have as many of these tea party candidates elected now as possible, and then to have Sarah run for President.
1. Added 100 of the CEF EOI at $12.78 on Tuesday (see Disclaimer): Although I prefer buying stock ETFs at a large discount to net asset value, I made an exception to that rule for EOI since I am trying to dig myself out of a small hole for that security. EOI was one of the CEFs bought in 2007 after I sold a number of mutual funds and pared my stock portfolio in response to the signal given by my Vix Asset Allocation Model. VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern EOI and a few other CEFs with similar strategies and large dividends were bought as a counter-weight in case my new model was giving a false signal. It was believed, erroneously as it turned out, that those CEFs would provide some decent protection on the downside due to the call writing strategy as well as the steady stream of dividends. (see generally Buy High & Sell Low /Retrospective on the Good & Bad- 10/2008 and CLOSED END INVESTMENT COMPANIES: Hopefully Lessons Learned and To be Applied-5/09)
The strategy seemed to be working okay until September 2008 when it started to fail as the market cascaded downward. The strategy may have been a modest success with a shorter and shallower bear market, as the reinvestment of dividends at lower prices could have produced better returns upon the return of the next cyclical bull market. I quit reinvesting the dividends in 2008 and started to take the monthly distributions in cash.
This is a link to a list of EOI's holdings as of 6/30/2010: Eaton Vance Investment Managers - Portfolio Holdings This is a link to the sponsor's main web page for EOI: Eaton Vance Investment Managers - Enhanced Equity Income Fund. Dividends are paid monthly and the current rate is $.1164 which was reduced from $.137 in January (see "distribution history" near the bottom of the preceding link). Assuming the $.1164 rate remains in effect for an entire year, the yield at a total cost of $12.78 would be around 10.93%.
I only bought 100 shares since I do not have to dig myself out of a big hole since I only own 114.411 shares (100 shares purchased in open market) prior to Tuesday addition of a 100. Also, as I just mentioned, this CEF is selling near its net asset value and has supported its dividend in the past with returns of capital which is viewed as a negative by me.
NAV information can be found at the Eaton Vance site for all of its CEFs and at the Closed-End Fund Association.
EOI closed at $13 on Wednesday.
2. Sold 150 of the CEF PIE at $16.76 AND Bought 100 of the ETF PHB at $18.15 on Tuesday (see Disclaimer): Powershares is the sponsor for both of these ETFs. I discussed prior purchases of the ETF PIE in Bought 50 PIE at 10.01 & Bought 50 PIE at 14.04 in 2/2010. PIE is an ETF that invests in Emerging Market stocks based on technical considerations. I intend to use the proceeds later on to buy another emerging market ETF. PIE's expense ratio is regarded by me as too high at .9% .
The ETF PHB is a new purchase for me. It went ex dividend yesterday. It is called PowerShares Fundamental High Yield Corporate Bond Portfolio (PHB), and the expense ratio is high for a bond ETF at .5%. Nonetheless, it does offer something different in attempting to pick higher quality junk bonds, and then rebalancing monthly. This is a quote from the prospectus:
"The Underlying Index is comprised of U.S. dollar-denominated bonds registered for sale in the United States whose issuers are public companies listed on major U.S. stock exchanges. The Underlying Index is rebalanced at the end of every month and weighted according to a composite RAFI weight that is calculated for each eligible company. Composite RAFI weights are comprised of individual RAFI weights calculated for each company for each of the following four factors: book value of assets, gross sales, gross dividends and cash flow. Each company thereby receives a composite RAFI weight equal to the ratio of its sales (or cash flow, dividends or book value) to the aggregate sales (or cash flow, dividends or book value) across all companies in the sample. If a company does not pay any dividends, the composite calculation does not give it a zero weight on that metric, but rather computes its weight as an equally weighted average of the remaining three metrics. Companies that receive a negative composite weight are removed. All issues in each index must have a minimum of one year call protection. Poison puts and make-whole provisions are allowed. The Underlying Index is divided into two distinct maturity cells: 1—5 years and 5—10 years. The largest issue per maturity cell per issuer is selected. If there is more than one issue with the same amount outstanding, then the most recent issue is selected. As a result, this Underlying Index will have up to two bonds per issuer selected." Page 8:
This is a link to PHB's holdings. Dividends are paid monthly which is always viewed positively. It does not look to me based on the dividend history that there is a fixed amount per month.
The Claymore fund has filed with the SEC some target date junk bond ETFs. www.sec.gov The target years range from 2012 through 2020. If and when these are offered, I will probably buy at least one. I bought three similar Claymore offerings for investment grade corporate bonds. Items 1 and 7 Claymore Introduces Term Corporate Bond ETFs/Bought 100 of BSCF at $20.18 (2015 term date); Bought 100 BSCH at 20.13; Item # 4 Bought 100 BSCE at $20.16; and see generally Coping with the Federal Reserve's Jihad Against Savers & Responsible Americans & the Potential Major Correction in Bonds Down the Road
3. RB Buys 300 of the CEF Royce Focus Trust (FUND) at $6.22 on Tuesday (see Disclaimer): LB did not have anything to do with the purchase. Instead, LB was working on a modification to trading rule 1,343,239,018 (X)(1)(b)(iii) when the lame brain took control over the trading desk, saying it wanted "to buy some fun." The RB did not know exactly how to buy FUN on the stock exchange. And, not being a whiz at spelling anyway, RB thought that FUN must be spelled "FUND", since that was the only symbol close to what the RB was trying to capture last Tuesday and surely the stock exchange had to be selling the fun RB was after. In closing, LB did not want to say this, better to keep some of the skeletons in the closet here at HG, but it is already widely known that the RB can neither spell nor count and in fact wanted to quit school five minutes into the First Grade complaining about the stress of it all.
The LB just wants everyone to know what it has to put up with here at HQ, which is the only reason for summarizing how 300 shares of FUND ended up in Headknocker's portfolio. What a load the LB has to carry, nothing but a lot of dead weight, worse than dead weight actually, since the RB and the Old Geezer are constantly interfering with the LB's formulation of plans, rules strategies and millions of other sundry details that must be carefully considered to advance the HK's capital position.
FUND is a CEF selling at close to a 14% discount to its NAV. As with the other Royce CEFs FUND quit paying a managed distribution in 2009. I do not expect that this CEF will start to pay dividends again until it exhausts its tax loss carry forward and then earns money which has to be distributed net of expenses.
FUND is a leveraged CEF. The NAV can be found at the Closed-End Fund Association web site, at the WSJ.com and at the Royce Focus Trust (FUND). Of the 3 Royce CEFs this one owns a relatively small number of stocks, 60 as of the last shareholder report. It had a fairly significant weighting in gold and silver mining stocks as of 6/30/2010, at close to 16% of assets. Berkshire was its largest individual holding as of 8/31/2010, followed by Mosaic and Seabridge Gold: Royce Focus Trust (FUND)
This is a link to the last SEC filed shareholder report for the 6 month period ending in June 2010: www.sec.gov (FUND holdings start at page 47)
On Tuesday, FUND closed at $6.17 and had a NAV of $7.14, creating a discount of -13.59%. The close on Wednesday was at $6.21 and the NAV rose 1 cent to $7.15.
4. Sold 50 of DUK at $17.70 on Tuesday (see Disclaimer): While Duke Energy is a core electric utility holding in my main taxable account, I bought 50 shares in a satellite account as a trade. This particular satellite account is attached to a savings account and I view all of the stock holdings in that account as temporary placeholder for funds normally devoted solely to earning interest in an online savings account. Since that savings account is currently paying just over 1%, I have elected to use some of those funds to buy stocks that have dividend yields, mostly in the 4% to 6% range. Duke (DUK) was just one of those holdings.
DUK closed on Tuesday at $17.62 and at $17.58 yesterday.
5. General Electric (owned): GE received a boost yesterday after the Citigroup analyst Deane Dray started coverage with a buy rating and a $19 target price, estimating the GE Capital may generate 50% earnings growth next year.
The Old Geezer, over the objection of other staff members, has been buying GE over the past two years mostly in the $12 to $16 range. I currently own close to 500 shares. The following quote is from a discussion in Item # 9: Bought GE at 15.48 from a post last December:
" The OG is feeling sorry for GE. Slashed its dividend by almost 70% when other American industrials have been raising their dividends. Having even an old guy in the SUV Capital questioning the vaunted management expertise at the company, and with good reason. GE Capital appears to have been caught with its pants down as the world entered a recession. But, the OG is a creature of ritual. One ritual is to buy a few shares of GE whenever the spirt moves him. So far, including the brokerage commission (total cost figures shown), the following shares were bought in 2009: 50 shares at 12.54 on 1/23; 30 shares at 11.16 on 2/18; 30 shares at 12.02 on 6/24; and 40 shares today at 15.48 (excluding commission on that one). Dividends are being reinvested to buy additional shares."
The most recent purchases were in June at 15.64 and in July at 13.88. It is interesting to me that I made a note in early March that the stock was trading at below $7 but could not pull the trigger to buy more. Sold GE Capital Bond /Buy of 50 JWF in IRA Most of my buying in early March 2009 was concentrated in consumer staple stocks and bonds, with some purchases of other industrial companies that did not have the GE Capital baggage. I did add some shares of NYX, JOE, MDT, WIN, some LTs and European hybrids during that period, but I shunned GE at less than $10. Stocks & Politics: March 2009
Due to working on other matters, the remaining trades for Wednesday will be discussed in the next post.