On the surface; not too shabby. These days when I see that type of yield my first inclination is to see how much of the payout was a return of capital. Well according to this the dividend for April was $0.45 of which $0.405 was a return of capital and the rest was net income. Ouch. I did not look back at other dividends to see what portion of past payouts were a returning of capital but maintaining a 10% "yield" is a big bogey for a fund to keep up with. I would not want a lot of exposure to closed end funds who are returning capital to make their payouts.
The Seeking Alpha version of yesterday's post drew an interesting comment. Here's a little taste.
But unless you get a dividend return, you ARE SPECULATING. The security is a SPECULATION, and you are a SPECULATOR. Bogle and 99.99% of the financial services industry are all confused on the semantics. Apple, Google, and Berkshire Hathaway are all speculations.
I missed the part about the dividend on the first run through so I stupidly replied by asking what makes an investment. Oh well. The dividend requirement is a new one on me. The important point to make here is this topic brings all sorts of ideas and emotional responses. It is a real hot button issue. I try my best to remove emotion at every turn.
Longtime reader DE left a good comment with a different take on working in some capacity in retirement. He says his goal is to be able to get to the point where he can "pick his busy," meaning he gets to the point where he determines what he does with his time in retirement. He says getting to that point requires that a person "needs to make as much coin and save, save, save in the salad years."
There is a new emerging markets infrastructure ETF out from iShares with ticker EMIF. I have a write up on it into TheStreet.com for sometime this week but it makes a good first impression in terms of what it owns.
24 comments:
Paying back your capital as a dividend? Isn't this what Madoff was doing? Ponzi scheme? Good catch Roger.
Shoot, these days you could argue that even investing with the expectation of receiving a dividend is speculating.
5:25, i don't think it is quite Madoff.
5:30, yeah its like what is market timing, someone once said picking when you get out of bed in the morning is a form of timing.
ETJ is a value-oriented, covered call fund that uses the additional strategy of selling naked puts to purchase assets management wants to own while getting paid for waiting for the asset to reach that price (if it does). ROC is probably mainly from delivery of called assets that hit their strike but that's a guess.
Can u tell us what u did (in broad terms) now that we are again below the 200 day ma??
Thanks
i typicaly don't do a trade unless it looks like it will close there for a second day which always been the case. the further means a day or two more b4 i blog about it.
Roger, you have referred to 200 day MA as somewhat of a line in the sand. Does that just mean get defensive (raise cash) get out of equities ( actually would have been a great call in October of 2007) and saved investors alot of grief) you may have another chance, add more to bonds? Any of the above?
The breach occurred in Dec 2007 s that is when I kicked it into gear. the specific action taken depends on what i think is going on and could include any of the things you mention.
of course it is all speculation. anybody that thinks otherwise have not read the history of equity markets or why they were created to start with.
When I buy a 100 shares of MSFT that you (the other side of my trade) sold, not a penny goes to MSFT, their R&D does not benefit, their top line does not benefit, their bottom line does not benefit.
I buy the stock on the speculation that the price will go higher, i do not buy it to fund MSFT operations.
Investors sell to the public (public offerings) when they want to cash out. Once it is a public equity it is all among speculators by definition.
Roger - in the past my local advisor was an advocate of the typical equity-bond asset allocation policy however abandoned this approach a few years ago and believes one has to adopt new approaches in order to preserve capital and try to deal with a sideways market. He has been endorsing vehicles like Hussman strategic growth, Hussman total return, covered call strategies, forex trades, managed futures, franklin adjustable rate income, etc. I would be interested to hear what alternative instruments you use for clients?
Is this generating more income for him?
SD that is world class funny.
anon, I have written about that countless times since the start of this blog. a google search for random roger alternative investing should get you started.
So if a speculator weighs the same as a duck.... they are made of wood? And therefore... a witch!!!
BURN THE SPECULATORS!!!!
This finger pointing witch hunt is starting to get out of hand :/
On the return of capital as a dividend payment. I had seen similar numbers like that in various funds and it never clicked until now what that really meant. Thank you all for contributing to that discussion. That has really opened my eyes.
good humor tie in about the witches.
reminds me of the SNL skit from the 70s where they are on the ship, something was wrong with bill murray's leg and the doctor wanted to amputate, he said he would also have to amputate his arm because it appeared to be attached to his leg (Murray was resting his arm on his leg).
I am aware of only one person who made a call to sell all mutual funds for domestic and international and only recently got back in, so he missed the carnage of the markets. On the fence right now but close to doing it again. Ulli G. Niemann
Here is his blog.
http://thewallstreetbully.blogspot.com
Did you notice he blogged about a BUY signal about 2 days before his SELL signal?
After adding to FAZ, SRS, QID, and SDS today…
I might be looking to close those positions if we get a cliff dive down to 880 on SPX tomorrow and bounce.
Note that in the spirit of good R/R, a close of the Ultrashort positions at support levels isnt necessarily a statement on the trend breakdown, but moreso an effort to reduce risk. I would like to see a bounce at these levels tomorrow, another lower high take shape, and then re-enter shorts again for the next wave down, should it occur. There is always the risk that the old Admin will come out and say something ridiculous to send the markets up well, ridiculously. Just below support would be a great place for them to do something like that.
The H&S top that looks to be in play on SPX is what got me thinking on this strategy. Since I have been short from the top, might as well cover at 880, expect a bounce up to 915-920ish, and then give em hell. That way, at least I know my boundary on the upside. 956 feels like a long way from here to ride a short position.
Here’s my tentative support levels for the Ultrashorts I have in play…
QID- Close position @ Q’s 34.
SDS- Close position @ SPX 880
SRS- Close position @ IYR 30
FAZ- Close position @ XLF 10.75
Re-enter short positions at the exhaustion of the bounce off of those support levels.
Of course, if we blow through those levels and dont look back, this strategy is likely out the window… but given the resiliency of this rally to date- I highly doubt that there wont be a bounce off those levels. Too many dip buyers still in the house.
Anon 5:16
i wouldn’t short the spx yet… it may have one foot in the grave with 2 closes below the 50 day ema.. but this week isn’t over yet. oh, i posted this link to the spx chart at another blog to show the tap on the lower BB..
http://stockcharts.com/h-sc/ui?s=$SPX&id=p36249577370&def=N&listNum=1
$spx closed under 50 day ema for second day in a row. i need at least one more day (and a fourth to confirm) before I turn bearish, again. $spx also tapped the low BB today… would love to see it close back above 897.
I am sitting at my highest cash exposure since we started in August 2007 pending this next move between 894 and 900, or perhaps test 880 and than bounce higher.
Stephen Drone
no big deal. He was as perfect as I've seen and would expect there to be some short term reversals. did you do better?
I cannot find investment results on his website for comparison.
steve, I cannot speak as a client of his but he is very open to answering emails directly sent to him or on his blog. I have only followed him for about 2 years now with his weekly free newsletter.
ulli@successful-investment.com
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