First you have to understand how they calculated their Net Asset Value. They used the "Fair Value" method to place a subjective fair value on each of the investments in their large (1B) portfolio.
On p. 14 of their 6/30/11 10-Q:
"Determination of Net Asset Value
As part of the fair valuation process, the independent valuation firm engaged by the Board of Directors performs a review of each debt and equity investment and provides a range of values for each investment, which, along with management's valuation recommendations, is reviewed by the Audit Committee. Management and the independent valuation firm may adjust their preliminary evaluations to reflect comments provided by the Audit Committee. The Audit Committee reviews the final valuation report and management's valuation recommendations and makes a recommendation to the Board of Directors based on its analysis of the methodologies employed and the various weights that should be accorded to each portion of the valuation as well as factors that the independent valuation firm and management may not have included in their evaluation processes. The Board of Directors then evaluates the Audit Committee recommendations and undertakes a similar analysis to determine the fair value of each investment in the portfolio in good faith.
Determination of fair values involves subjective judgments and estimates not susceptible to substantiation by auditing procedures.
Accordingly, under current accounting standards, the notes to our financial statements will refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements."
You can also refer to p. 111 Determination of Net Asset value on their 9/1/2011 N-2:
The key sentence is: "Determination of fair values involves subjective judgments and estimates not susceptible to substantiation by auditing procedures."
Well, that may explain why despite there were nine non-performing loans with a total aggregate cost of about 154.85M and was given a total fair value of around 50M (a loss of about 100M) in their 6/30/11 10Q, yet it had placed high enough "fair values" on the rest of the investments in their portfolio in not only offseting the 100M "loss" (or write off) on those nine performing loans but also enough to increase their last quarter (6/30/11)'s NAV to 10.36 (from the previous 10.33)
Of course, please understand that I am not criticizing the accuracy of using this fair value method using in the calculation of their NAV because there would be no way for me to understand their complete portfolio well enough to judge the accuracy of fair value they had placed on each of their investments.
My two grains of salt are: Anyone that is long is a very courageous investor. This market volatility index is such that you must have strong seat belts. Seriously, the FED has defacto devalued the dollar by 20% with the QE1 and QE2. The only reason the devaluation has not converted into inflation is that there no loan demand, or no money velocity. The business climate is at a standstill because of the politic of Obaminable. Business perceive too much risks, therefore stays put and wait the 2012 election. The 15 trillion deficits at some point will become taxes, so the democrats would like, or a huge budget cut, so the Republican would like. November 2012 will decide. Should the Democrats win, many business will move to greener pastures or will not take place. The US will become a 2 bit European county with huge social programs that kills any business climat. You can see that for the Democrats money is evil, actually money will solve our problems. Europe is having the problems that our Founding Fathers had, paying the debt cause by the revolutionary war. Washington prevail and the Federalization of the debt took place and the US capital moved to the south, to Washington, from the North New York, the demand the Virginian wanted. Will Germany has the same judgment that Washington had? So far there has been only one Washington, no German is on the horizon. Coming back to PSEC, few stocks can be long and BDC are not part of them. PSEC fetch an excellent return of 15.98% excluding the 10 years US treasury yield. Not many stock can match this return. Until we solve our housing and debt problem, looking multi years is too dangerous for me.
<Bottom line J: You are the epitome of a "pumper & dumper.">
Even worse, he is a clown who enjoys reading his own blather. He clogs the board every day with as much unintelligible babble as the typical poster does in an entire year. Not that long ago, he said to sell PSEC at $8.20 because NAV was going to collapse, they couldn't cover the divy, blah blah blah. Now that the stock is over $9 with NAV increasing he is moving the goalposts. I'm sure those people who took his advice to sell PSEC at $8.20 are not amused.
A couple weeks ago he was telling people to sell all their stocks becuase Greece would implode, the Europe was going to meltdown, yadda yadda yadda blah blah blah. Yet here he is blowing enough hot air on the forum to melt a couple of glaciers at the North Pole. I try to IG him but he posts so much that people respond to his hundreds of posts still clog the board. I think he gets up every morning, puts his finger to the wind and decide to trash the PSEC message board with more imaginary trades and doomsday babble. What a goofball!
You completely took that out of context. Furthermore, you edited the statement.
The "Determination of fair values" was referring to private equities for which market quotes do not exit. A more accurate quote reads:
"We value these securities quarterly at fair value as determined in good faith by our Board of Directors based on input from our Investment Adviser, a third party independent valuation firm and our audit committee... The determinations of fair value by our Board of Directors may differ materially from the values that would have been used if an active market and market quotations existed for these investments."