Wednesday, June 8, 2011

Added 30 to BCF at 14.26/Sold 100 NQS at 14/U.S. Government DEBT Using GAAP at 62 Trillion Dollars?

Apparently, Google has known for at least a week that its search box in blogger does not work.  Known Issues for Blogger: search

USATODAY claimed in a front page article yesterday that the true U.S. debt, based on standard accounting rules, is actually $62 trillion or $534,000 per household.  That figure includes unfunded liabilities.  RB said not to worry, the Chinese will finance U.S. profligacy. Then LB added that a Chinese official warned yesterday against holding an "excessive" amount of U.S. assets.  Reuters MarketWatch Well, maybe Zimbabwe will come to the aid of our destitute Uncle Sam, RB noted with satisfaction as to its knowledge about current affairs. 

Our next President, Sarah, has never been one who believes in making factual representations.  In the modern day GOP, "conservative" values do not include being accurate or telling the truth.  PolitiFact did a fact check on Sarah's statements made in a Fox interview with Greta Van Sustern, one of the "journalists" at Fox who are unlikely to ever challenge statements made by their tribe's representatives.  Fox News Video -

What are the odds of a Greek government "debt restructuring" before the end of this summer?  And, if there is to be default with lenders taking massive charges on their holdings, what will be the repercussions on the European banks?  According to Reuters, two year Greek government bonds are now yielding 23.08%. 

Randall Forsyth points out in his Barrons column that real median family income has fallen 2% since 1990. 

Andrew Sorkin takes Goldman's side against Senator Levin and his subcommittee.    NYT  

The OG has noticed that many men in Congress apparently take great pride in showing off their bodies to female admirers who are not their spouses, the latest being the liberal Democrat from NY Anthony Weiner. The OG does not understand what all of the fuss is about, noting that he is proud of his abs to die for, but is just far too modest to show off. LB bookmarked this page for later use as evidence in the OG's commitment proceedings. 

The P.M. London fix for gold on 6/7 was $1545. 

Late last month, GS lowered its year end target for the S & P 500 to 1,450 from 1,500.  Reuters Are you a buyer or seller at 1,450 and what is your estimation of the likelihood of the S & P hitting that target before year end?  If my VIX Asset Allocation model signals the start of a Stable Vix Pattern, then I will have no choice under LB's trading rules except to increase my recently reduced stock allocation.

Bernanke claims that the recent slowdown is transitory while acknowledging that growth has been "somewhat slower than expected" and at a rate "that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed persons". Until the Fed sees a "sustained period of job creation," the FED "cannot consider the recovery to be truly established".  Interestingly, he spent a considerable time talking about commodity prices.   FRB: Speech--Bernanke, The U.S. Economic Outlook--June 7, 2011  After reading that speech, I can see why the market did not find much comfort in his words. I would characterize the tone as downbeat, an assessment shared by some analysts interviewed for a Reuters' article.  

1. Added 30 of the Stock CEF BlackRock Real Asset Equity Trust (BCF), at $14.26 on Monday (See Disclaimer):  The current quarterly distribution of this fund is  currently 27.18 cents per share, BCF Distributions, which gives me close to a 7.58% yield at a total cost of $14.26. In recent quarters, that dividend has been supported by a return of capital. The recent dividend declaration is for 27.18 cents and goes ex dividend on 6/13, with the distribution payable on 6/30/11. 

The sponsor's web site can be found at BCF : Fund Profile.

The fund is rated at two stars by Morningstar

As suggested by the name, this fund invests in natural resource stocks. This is a link to the last filed Form N-Q, which contains the fund's holdings as of 1/31/2011. BlackRock Real Asset Equity Trust Please note that the firm does use a buy-write strategy. 

The last filed SEC shareholder report is the Annual Report for the F/Y ending 10/31/2010:  This report includes several Blackrock CEFs. The BCF section starts at page 52.  

I have done okay with this fund. Prior to this last purchase, I owned 254.2750 shares in a taxable account, where I have been taking the dividends in cash:

BCF Taxable Account as of 6/4/11

I did reinvest one quarterly distribution, buying 4.275 shares at $8.39 back in September 2008, but I have elected to take the remaining distributions in cash. Prior to this last purchase, I had not bought shares in BCF in this account since I made a 50 share purchase at a total cost of $5.65. That number reflects adjustments for return of capital made by my broker. The actual purchase cost, noted in a post, was  at $6.6 (2/26/2009 Post). I am a long term holder of this fund. 

I also own some shares in the Roth IRA, viewing this fund as providing some ballast to the heavy concentration of bonds in that account: 

BCF Roth IRA +664.66

In that account, I last added shares  at $9.69 (July 2009). The cost basis shown would not include any tax basis cost adjustment for return of capital since that issue is relevant only in a taxable account. 

I discussed several closed end funds that invest in natural resource stocks in a post from 2009: Closed End Funds: Energy and Natural Resources Funds

One of my general long term scenarios is that emerging nations will increasingly devour a dwindling supply of natural resources,  thereby creating a secular long term bull market in commodity stocks.  Like any long term bull market, there will be ups and downs, but I suspect that the long term trend will be up over the next 20 or so years. After that, the OG will probably not care too much.

A voice was heard to say, "Stock Stud B.S., if RB had been allowed to buy a million of Berkshire at $16 back in 1974, then HK would be well on the way to buying Canada, all of it, now HQ is reduced to buying 30 shares of a stock CEF, this last buy is just too embarrassing, RB wants a divorce from this operation, set the RB free from its ball and chain, Mr. Lame Brain".

LB rarely responds to the NIT WIT's noise, since details and facts are not going to be processed by the RB, much like the TBs in that regard. LB would just point out that HK had about $3,000 in 1974, not quite enough to buy a million of BRKA at $16. RB replied "that was not its problem, LB needs to work harder or better, RB has already made the sacrifice of giving up its plans to buy Switzerland".   

2. Sold 100 of the Leveraged Long Term Muni Bond CEF NQS at $14 (see disclaimer):  I have been reducing my small exposure to leverage municipal bond funds with long durations, using GTC AON Limit Orders. My order to sell NQS was filled yesterday, recording a minuscule profit while capturing a few monthly tax free dividends.  The fund does have a good yield at close to 7.4%. But a long term leveraged municipal bond fund is a little too scary for the OG at the present time. 

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