Thursday, September 8, 2011

Bought Back 200 Artis REIT at 13.21 CADs/ Bought 300 of the Bond CEF MMT at $6.49/Acquiring Relevant Information/

I am busy on other matters, so I will discuss two of the trades made yesterday in the next post. 

I mentioned in yesterday's post that I sold some junk silver coins earlier in the week.  I have never paid for that type of investment. Instead, when I was no older than 13, I started to take those coins out of circulation at their face value. I knew then that the government was taking the silver out of newly minted dimes, quarters, and half dollars starting in 1965 because silver had become too expensive.  It did not require much thinking to realize that the coins then in circulation had more value than the face amount and were likely to increase in value.  I had enough information at the age of 13 to evaluate the opportunity and to seize it. At a minimum, I had to make an effort to acquire the necessary information and then make a rational evaluation of that information.  Individual investors frequently fail to make that effort due in large part to a potential lethal combination of laziness and right brain decision making. Power to the RBs, a voice was heard to say in reply.

Unfortunately, forming opinions with little or no accurate factual information is the rule rather than the exception. While there will always be unknowns and unknowables, the odds of making mistakes increase when the RB rules and no effort is made to acquire relevant and available information before forming an opinion and taking action. 

If I had not made an effort to acquire relevant information, I would not have recognized the opportunity when it was presented to me.

There was only so much silver coins that I could put away based on my income then, consisting mostly of mowing lawns at $2 per yard including hand clipping.  Or worse, working for my father during the summer. I still have some of those pay stubs as a reminder.  

Among the coins sold last Tuesday were 9 Peace silver dollars.  My total cost basis was $9. The silver in those coins was worth almost $300 yesterday. 

My mistake was not selling all of that junk silver in 1980, for roughly the same amount, and using the proceeds to buy a 30 year treasury bond yielding 14%. I recognized that opportunity too, but did not seize it. Instead, I kept the coins after rejecting an offer, continued to roll over 3 month bank certificate of deposits yielding 14% or so, and then started to invest in stocks again with gusto in August 1982.   

In looking back, I still probably have every dollar that I made during those years before college, in one form or another. Some funds were used to finance the junk silver coins, or to acquire my first gold piece at the age of 13. Back then, bullion gold was not available for purchase, but you could buy gold with numismatic value. I recall buying when I was 13 a brilliant uncirculated Liberty Head $5 gold piece for $30, minted in the 1880s by the U.S., and I still own that coin. Other funds were used to buy my first stock, HCA, just after it went public in the late 1960s. I still have the baseball cards from the 1950s, many of which are more valuable than the gold, and are stored with the gold in a bank lock box.

I wonder how many Hank Aaron  Hartland statues bought in 1958 are still around, in pristine condition, with the bat:

That kind of item cost three or four bucks new.

In my circle of friends and acquaintances, I was the only kid doing these things back then. Everyone else spent their money almost as soon as it arrived, never on anything of consequence or long term durability, nor with any possibility of increasing in value.

1. Bought Back 200 of ARTIS REIT at 13.21 CADs-Toronto Exchange Yesterday ( Canadian Dollar (CAD) Strategy)(see Disclaimer): The Canadian REITs that I have bought and sold pay dividends on a monthly basis. Since I buy them on the Toronto exchange, I will receive the dividends in Canadian dollars, after payment of the 15% Canadian withholding tax, which is what I want. The general idea is to increase my holdings of Canadian dollars by investing in income producing Canadian securities. The current dividend rate for Artis is 9 cents per month. Artis REIT This gives me about a 8.8% yield at a total cost of 12.21 CADs. 

This is a link to the firm's website: Artis REIT

This is a link to the last quarterly report that I found at the firm's website: 

Artis owns retail, office and industrial properties primarily in western Canada , but has been buying properties in the U.S.  A recent U.S. acquisition is an office property under construction in Phoenix that is 100% pre-leased to the General Services Administration. 

This link has a location map of Artis' properties. By clicking the red dot or the province, more information is provided. 

I have previously bought and sold this stock: Bought 200 AX-UN.TO @ 13.41 CAD Sold 200 Artis REIT at 13.88 CAD I am content to collect the dividends and to make whatever I can on the shares. 

2. Bought Back 300 of the Bond CEF MMT at $6.49 Yesterday (see disclaimer): This brings me back up to 1000 shares. I sold 300 shares recently at $6.89 (July 21, 2011 Post). Those shares were bought at $6.61. So I sold those shares at a profit after collecting some monthly dividends and bought them back at a lower price. In the world of bond CEF trading, that is viewed as a win. 

MFS Multimarket Income Trust (MMT) closed at $6.49 in trading yesterday. 

The current monthly distribution rate is $.0425. MFS Announces Closed-End Fund Distributions At a total cost of $6.49, the yield would be about 7.86% with a continuation of that rate.  

This CEF is currently rated 4 stars by Morningstar. As of Tuesday's close, the shares were selling at a -9.74% discount to net asset value which was then $7.19 per share. The fund does use some leverage. The page at Morningstar shows a leverage ratio of 15.16%.  As of 4/30/11, the average annual interest rate on the borrowed funds was 1.24%. 

This is a link to the sponsor's website: MFS Multimarket Income Trust This fund owns a lot of junk bonds as shown on that page. It does have some investment grade bonds (23.12% weighting in BBB and over 17% A or better). Most of the junk is concentrated in BB at 30.04%, which is a higher grade than most of the individual bonds bought in my junk bond ladder strategy. The effective average maturity is 8.23 years as of 7/31/2011. 

This is a link to the last SEC filed shareholder report: MFS MULTIMARKET INCOME TRUST

CEFA page on MMT. Yesterday, the net asset value per share $7.16. Based on a close of $6.49, the discount was -9.36.

I am not a long term holder of bond CEFs and have been flipping them constantly, content with making small profits on the shares and collecting a few dividends. I have held some shares in a few funds for longer than a year.  

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