David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures. Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions. Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.
This is a subject that has concerned me of late. I have several closed end income funds that were purchased at a discount, that are now trading at nice premium. One for example, ZTR which has gone from a 10% discount to a 10% premium giving me over years worth of income in the capital gain. Although the income is still attractive, does your rule of thumb call for a rebalancing when the premiums reach a certain level.
Enjoy your artcles in RM and look forward to this new site
Ed, thanks for the kind comments. I have been rebalancing from closed end funds that I bought at a discount, that now trade at premiums, to ETFs that do roughly the same thing. You can see my bond portfolio (for the balanced funds, at Stockpickr.com.
At present, many closed-end funds are trading at premiums to NAV. To some degree, that is a negative sign for the market as a whole, but that is just one indicator among many.
This is a time to be satisfied with lower income levels. Ah, to be back in mid-2002, when the panic was thick, and spreads were too. I had the courage to act then, but few others did. That time will come again; as for now, we aren’t losing a lot to move up in quality.