Is everyone Glad? For those who are not Glad traders Glad/3% has kept us from entering yet this cycle on these Cornerstone CEFs. We have not had a higher high and higher low on any of these CEFs so we have not entered a trade yet.
Even the staunchest critic should admire the retracement of CRF today...over 4%. This is swinging to the low point in the cycle when we will enter for the swing back up to the next EX(take a look). It has happened in 90% of the last 30 cycles. It is like a s Swiss precision movement.
Hard to argue as we see it in real time unfolding before our eyes....;-)
As Bullwinkle was so good to point out, CFP has filed what's called a N-2 for a RO(Right's offering). What the hell is a RO then:
Investors will be given 1 right for every share they own, and every three rights will enable them to buy 1 share of the fund for the greater of 102% of NAV or 90% of the market price.
CFP currently trades at 5.65 so if one owns 100 shares at 5.65 and they elect to exercise their rights, they will have 100 shares @ 5.65 and 33 shares at the market price on April 1 times 0.9. If CFP closes at 5.65 on April 1, then shareholders will receive their shares for 5.65*0.9 or 5.08. This results in an average price of 5.37 which is a 13% premium to their most recent NAV of 4.65.
So what does that mean for GLAD/3%. Well it means what we can expect for the three Cornerstone stocks in GLAD/3%(CRF, CFP and CLM)is some volatile markets over the next 4(four) months. CFP's worse month for Glad was back in July/August 2011, when the RO was offered in April. So it takes a few months typically to catch up to the membership(stock holders) that things are bad and then as usual, the majority sell on the lows.
How did GLAD/3% do at its worse. CFP was the worse with a one month loss of 1.35(Jul/Aug 2011). The other stocks did much better with actual gains. CFP gained in most all of the surrounding months. It was just the one bad month. So, what to do...Trade On!!
I will back off maybe a little in share count these next few months but Glad has seen us through in the past and I am believing the same for the future. I am excited to find out...
Again, a teaching moment:
If you look at CFP over the last four cycles in 2013, you will see the same sell off post EX date.
1)The January Glad entry was Dec 24(initial) @ 5.03, Dec27th(10 cent rule)@ 4.87. Close @ 5.56 for 1.19 profit.
2)The next Glad entry was Jan 18 @ 5.51. Close @ 5.85 for .34 profit.
3)The next Glad entry was Feb 25th @ 5.59. Close @ 5.93 for .34 profit.
4) The next Glad entry was Mar 28th @ 5.92. Close @ 6.22 for .30 profit.
Total profit this year, to date, 2.17. Based upon today's close @ 5.65, that is over a 38% profit to date. Based upon 12 cycles/year that is a 115% annualized return.
Stay with the Rules and Trade Glad...;-)
Btw, I am expecting a Glad entry on these Cornerstone funds within the next three trading days. The previous 4 cycles, I just spoke about, had an average entry on X+8...that's tomorrow...;-)
A complicating factor seems to be CFP's share offering priced at 5.54. The N-2 filing was Apr 17. The only place you can find this info is CFP msg board or SEC site (CFP company id = 0001399186).
There's some sentiment that CRF and CLM pps will have a draw-down meanwhile.
Here is a good teaching moment for all Glad traders. Suppose with CFP for example, we had gotten in on a Glad day of a (X+3) entry date instead of its defined X+4 entry date.
X+3 did fit the Glad criteria, but the Rules state we wait for first entry until (X+4) which was not filled because it did not fit the Glad criteria. OK, we would have gotten filled @ 6.15. The Stop (mental) entered on that close was the hi(6.18) + the low(6.10) divided by two or 6.14, then x .975, or 5.99 which is our 2.5% Stop.
The 18th saw a high of 6.08 and a low of 5.92 for an average of 6 , so no Stop. On the next day we got an average of 5.93 with less than 2x avg daily volume so you would have been stopped out on the close of 5.84 for a 31 cent loss on the month. We would have calmly taken our chips off of the table and traded next month.
Here is Glad working in real time. Observe the three Cornerstone stocks today. Glad has kept us out of this milieu as they seek a bottom before they cycle up to X-1.
I am Glad and you should be too...;-)
I guess I jumped the gun and got back in with CFP on X+5. I did increase my share numbers by 2.2% plus my monthly car payment so I feel I did OK, but with the Friday drop in share price I could of done better.
I will continue to monitor the process and hopefully will enhance my account totals. Thanks for sharing reits.
You will probably come out all right but the whole purpose of the Glad entry( hi/lo criteria )is to keep the catastrophic losses away from us by not trying to outsmart the model.
There are probably a dozen months I could show you, but real quickly lets look at Sept 11, 2008. We might have decided to sail our own ship and enter at 10.65 on X+2, but the next day was so much better at 9.80, we added more, but the next day was better yet @ 9.05 so we added more, but wait the next day was way better @ 8.65, wow, buying there just saved us 2.00 from our original entry. Surely we'll make a killing now...I have been exactly at that place and much worse.
I was buying Pork Bellies in the '90's on a sure knowledge I thought I had that the summer surge was just ahead. It wiped out my entire portfolio, for the second time. I was still to lose much more a few years later when I lost my entire third portfolio and part of my house, trading naked strangles on the ^OEX. But hey, I was sailing my own ship!!
My example, the last price on X-1 was 8.10. That series of errors cost that trader, if equal lots each day, -2.55, -1.70, -.95 and -.75 for a one month $5.95 loss or 56% or 670% annualized loss.
Well Doc, how much better would GLAD/3% have done(Are you listening doctor_sickens?)? It would have done an annualized 670% better as there were no GLAD/3% entries that month.
I have designed GLAD/3% to avoid such trades. Trust me you might have better success being the master of your own ship(Arwen), but the majority as with 90% of the market traders/investors will eventually have diminishing returns while those inside the Glad camp will statistically return 30% annualized profits, collecting the monies from those outside the camp, who continue buying high and selling low.
This is not rocket science but it is the hardest thing in the world you will ever attempt, as your example illustrates. I still wish you much success whether you stay with Glad or not...
Just a reminder to have a good weekend and remember to place your stops in a memo to yourselves for ARR and JTP. We don't like to think about Stops but we need to keep our eyes open when we enter trades and to take our medicine if necessary.
ARR stop 6.19.
JTP stop 8.72.
Remember, you take the high and the low of each day and divide by two. If that number is below your stop, exit your total position, but only if the days volume is less than 2x the average daily volume.
Remember to place limit orders to purchase more ARR, for Monday, @ 6.13, per the 3% Rule. JTP has risen too far for the 10 cent Rule for purchase of more shares. Tough problem to have...;-)
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"Just a reminder to have a good weekend and remember to place your stops in a memo to yourselves for ARR and JTP. We don't like to think about Stops but we need to keep our eyes open when we enter trades and to take our medicine if necessary. "
ARR stop 6.19.
JTP stop 8.72
How do you dertermine the stop price ?
stop at 6.19 purchase at 6.13?
Sorry Doc, maybe you have a system but it is way to complex for my little add brain and trading ,sure i sold arr at the right time, but i could of done that by myself, just like buying after a spo,,, anyway with costs included not worth it. Gl.
I am going all in silver with everything i do not need for the next ten years. GL.