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Post by ECE Prof on Aug 2, 2022 16:55:57 GMT
There's probably still a trade to be had here, all things remaining constant, but I think you have to be prepared to hit the ripcord if the market returns to risk-off status. I suspect a lot of the recent gains have been due to the recent MARKET gain. In general, my limited experience has been that these vehicles tend to move with the market.Bingo. Exactly right. I do not want the price to go up. In fact, although I wanted to refill some shares that I sold and bought something else, I did not do it this month exactly for the price increase. I bought mainly VOO, CLM and ECC. If the premium was about 5%, I would have refilled those shares. The premium keeps going up and up due to the market price increase as people are pouring cash.
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Post by bizman on Aug 2, 2022 18:55:09 GMT
Add/Edit: Big risks pay off big, always.
Sorry, but this is wrong. Hope it works out for you but there are no guarantees, including that the sun will rise tomorrow. One day it won't. “Bearing higher risk generally produces higher returns. The market has to set things up to look like that’ll be the case; if it didn’t, people wouldn’t make risky investments. But it can’t always work that way, or else risky investments wouldn’t be risky. And when risk bearing doesn’t work, it really doesn’t work, and people are reminded what risk’s all about.” — Howard Marks
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Post by racqueteer on Aug 2, 2022 19:00:32 GMT
Don't forget the FIRST part, though. Even Cape wasn't shy about bailing out at times to retain portfolio value. Just as cef gains can exceed those of $SPX, they can also far exceed the LOSSES, paper or otherwise. Cape seemed to view these things as TRADING vehicles only; not as annuities with inheritance benefits. There's something to be said for either approach, mind; just be aware of the complications involved.
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Post by Deleted on Aug 2, 2022 19:03:53 GMT
So what I have learned so far is I need to learn more. Many thanks to everyone.
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Post by ECE Prof on Aug 2, 2022 19:33:59 GMT
I was just joking. But, I do take some calculated risks, and it has worked out, ok. Thanks for the laughs.
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Post by ECE Prof on Aug 2, 2022 19:46:18 GMT
racqueteer,"Cape seemed to view these things as TRADING vehicles only; not as annuities." Yes, indeed. He is not the only one. Many people use them as trading vehicles, and so, they use TA to get the maximum out of them. That is fine for them, if they are successful. But, Steelpony and I are looking as a sort of "annuity" vehicles. I learned it from Intruder first, when I was a TIAA guy. Then, I learned more from Steelpony how he was using it. I do have my state retirement (Two-life), SS (two life) annuities. The reason I use them as additional income stream, just in case we end up in the nursing homes. My new investments and reinvestment(s) this month will increase annual income slightly more than 1%. Imagine the growth rate at the rate of 1% a month.
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Post by johnsmith on Aug 4, 2022 17:50:32 GMT
PDI / PDO both being mostly bond funds, react essentially to interest rates.
Interest Rates go up, NAV goes down, Price goes down. Interest Rates go down, NAV goes up, Price goes up.
I essentially look to see: - Are they earning the dividend. - Is UNII going up or essentially there. (negative UNII becomes troublesome). - Discount to NAV.
PDO is a yes on all accounts. I invested quite a bit into PDO all the way down from 17 onwards. Haven't broken even yet.
I'd say as long as the CEF is earning, you should be fine. PDO has lower leverage, better earnings coverage and increasing UNII - so generally should be safe. PAXS is probably in the same boat.
There is one situation, where the CEF has to deleverage and that will permanently damage NAV, which I think happened to some of the PIMCO CEFs a while ago.
PDI, PTY (when dividends get reinvested at a discount to Market and at a premium to NAV actually adds to the NAV - so small gains there pretty much all the time.)
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Post by Fearchar on Aug 5, 2022 1:00:08 GMT
While I have posted positively regarding PDO/PDI due to unsustainably high mortgage rates; leverage rates are another matter to consider.
These funds are leveraged and as the FED raised rates, so to will the leverage expense. Ultimately, high leverage rates will make it impossible to maintain current distribution rates.
So, something of a dual will be taking place over the next year to 18 months.
Will mortgage and leverage costs drop reasonably soon?
Or might high leverage rates crack PDO/PDI's distribution rate before relief comes ?
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Post by ECE Prof on Aug 5, 2022 1:23:54 GMT
These funds are leveraged and as the FED raised rates, so to will the leverage expense. True, but it is a two-edged sword, because so can the bond earnings too. I expect that the earnings will surpass the expenses because the leverage ratio is less than 100%. It will come out in the UNII report. For example, PDI's UNII was $0.71 in May, but it went up to $0.76, (a nickel more) in June. So, again, it is never one-dimensional as many people think. In any case, I am waiting for the July report of UNII.
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Post by ECE Prof on Aug 5, 2022 22:37:31 GMT
XPDIX - NAV shot up by 0.65% today. PDI also went up today.
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