Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Wall Street Fire Sale Produces Closed End Fund Bargains

Stock-Markets / Stock Market Valuations Oct 28, 2008 - 01:24 PM GMT

By: Steve_Selengut

Stock-Markets Best Financial Markets Analysis ArticleThere's a bright light at the end of the tunnel--- finally. Most of the really well respected, long term investors are advising their audiences to hang in there, to stop the panic selling, and to look for the great companies that have withstood the economic downturns of the past.

Buffet, Bogle, Gross, Schwab, and company offer sound advice--- don't run and hide, it's time to hit the Wall Street Mall and go shopping! They've seen the indicators; they've been there before. So have many of you. Clearly, it's time for action.


With IGV stock prices down 50% or more, and income securities as low or lower, Chuck Jaffe points out in MarketWatch that the case for loading up on managed Closed End Funds (CEFs) is a strong one. The great companies are in garage sale mode, and managed CEFs are selling at an additional 25% below net asset value (NAV).

Jaffe writes: "With investments, investors can only guess at how big a bargain they are getting. The one exception is CEFs, where investors looking for both bargains and income streams get a price tag that shows the actual amount of their discount--- an intriguing choice for current market conditions."

Jaffe emphasizes that investors "look inside" the wide variety of CEFs out there, and there are excellent educational websites, like ETF Connect, for hands on research.  He quotes investment manager Jerry Paul, who feels that "the buying case is pretty clear", and that "the best times for closed end funds have been in crisis environments".

The CEF idea, in both equity and fixed income portfolios, boils down to this lightly edited commentary from an old friend that brainwashing book readers know as Deep Pockets: "Closed end funds are misunderstood investments and perhaps that is reflected in their volatility."

"Seems to me that the leverage on the funds would be the cause of concern, yet the taxable funds like Blackrock are not leveraged yet seem to have the same volatility as the leveraged funds. Credit risk could be another cause of concern, yet the insured municipal funds seem to be as volatile as the uninsured."

"As you have pointed out, overall income streams have been stable, yet double digit yields are all over the place. Fixed income assets are on SALE because of the decline in the bond market and thus the reduced net asset values."

"Additional opportunity exists because the Market Values of CEF stocks are at huge discounts to their already lowered NAVs. It is like the 25% markdown sale items are reduced by an additional 25% for no reason other then fear and misunderstanding."

"Looking at prior periods of panic in the markets, closed end funds historically have big rallies toward the end of bear markets. 2003 saw many closed end funds achieve returns of 25-30% in just twelve months. Those who locked in high rates during panic-selling enjoyed high income streams going forward, long after the markets turned up and current yields went down."

Deep Pockets also believes that there are flickering beacons of hope out there for a rally to commence in both markets before too much more blood is shed by the faint of heart. Here are some bright lights to focus on:

Light One: "The credit markets are beginning to thaw, with LIBOR rates coming down and commercial paper markets starting to function more normally. Some of the fear of systemic failure is abating"--- and the Fed cash infusion has not yet started.

Light Two: "Oil prices are dropping back into normal ranges, increasing the purchasing power of consumers", and reducing the costs of getting goods to market--- but hopefully not enough to discourage conservation and US development efforts.

Light Three: "The price of gold has fallen, a normal sign that fear and panic have lessened."

Light Four: "The dollar has risen to multi-year highs against many currencies increasing confidence that we will lead the global recovery"--- no matter how bad you paint the picture, there's always a recovery.

Light Five: "You just don't hear too much about inflation anymore"--- and prices just haven't fallen as they would if things were looking even worse.

Light Six: "The few up days lately on Wall Street have inspired huge volume, while the volume on down days is falling"--- remember, buyers tend to hold on for profits down the road.

Light Seven: "The 2009 P/E ratio estimates for S & P 500 companies are historically low."

Light Eight: "Dividend yields on common stocks are historically high."

Light Nine: One huge element of economic uncertainty will disappear in early November, and most would agree that this too has been discounted. Typically, the media will place more emphasis on good news during the honeymoon period.

The rally is in your hands people, let's get out there and party! How? Buy back into your 401(k) value funds, add to your personal portfolios (particularly those high yielding income CEFs), and stop taking losses on solid, mainstream, dividend-paying companies.

By Steve Selengut
800-245-0494
http://www.sancoservices.com
http://www.investmentmanagemen tbooks.com
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

Disclaimer : Anything presented here is simply the opinion of Steve Selengut and should not be construed as anything else. One of the fascinating things about investing is that there are so many differing approaches, theories, and strategies. We encourage you to do your homework.

Steve Selengut Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in