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UBS ETRACS Mthly Py 2xLvg Closed-End ETN Message Board

  • mauihope2000 mauihope2000 Jan 5, 2014 3:25 PM Flag

    Past performance

    Take a good look at the past performance of the underlining CEFs. For instance, most of the Eaton Vance funds IPO'd at $20 and paid about a 10% yield. Today they are generally 40% lower and the dividends are half of what they were? That's generally true of many of the underlying. Yes you can add back the dividends paid but imagine what the past performance would have been if doubled with leverage. Share price down 80% and dividends about 20% of where they began? I long ago concluded that many of the underlying were not sustainable.
    Do yourself a favor and take a GOOD LOOK at what the effects of leveraging will have on this group of CEF's.
    JMO. Please don't take my word on this and do your own research.

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    • what you say is 100% true , BUT the cefs in this are mostly stocks and just a few bonds .
      the EV as well as the BLK have done well with good divis , this year I feel by looking at current prices which most ,of,
      are selling at a discount,along with income markets starting to settle.
      makes this a buy, look at EOS

      Sentiment: Strong Buy

    • Good morning are correct that most, if not all, of the EV funds had an IPO price of $20 with an expected yield of 10% ...but ..they don't use leverage ( ETY ) and have been booking some very nice returns over the past few years ...27%+ in 2013 and double digit in 2012 ...EV management is in the middle of buying back shares in the open market to reduce the discount to NAV ...and have a ways to go ...6-7% of the 10% authorized ...ETY, which will be a Top Holding in this UBS offering ...trades at a 10% discount to NAV ...yields about 10% ...most of which is tax free and non-destructive ROC the taxation is microscopic on the $1.00 per share we receive ...and we also evade former Speaker Pelosi's invented NIIT tax ...( 3.8% on top of capital gains rate in 2013 )
      Simply put ...everyone who purchased ETY on the IPO at $20 per share ...and reinvested the dividends ..has more money than when they started ....despite the market price being $10.80 ish ....
      ETY ...holds zero fixed income investments Detroit Municipal or Trump Taj Mahal casino paper or even California bonds that are almost certain to default ....
      ETY sells S&P 500 index CALLS against its $1.7 Billion stock portfolio ..last year ..when the market took that nasty downturn in one day ...the fund's asset value jumped up the value of the 17,000 S&P calls they held massively increased has a nice defensive component ...
      The fund holds over $500,000,000 in capital loss carryforwards they WILL NOT be handing you a year end capital gains tax bill a lot of funds will be doing in 2014 ...
      My point being that these option income type funds are not the " gloom & doom " you have portrayed in your comment ...they use NO LEVERAGE ...cost about 1.1% per year to run at a 10% discount to actual value ...yield a monthly payment that annualizes at 10% ....and fund management is buying literally millions of shares back from the public float ( 2.7 million so far )

    • Another thing to consider is CEFL is an ETN. You may not have the option to hold it for a recovery in price. The note could be paid off at a huge loss to you. An ETN is not like an ETF.

    • during 2008 and 2009 most cef's were crushed.. so if we have a repeat of that time frame cefl will get crushed.. if we have a flat to up market cefl could payoff.. look at mlpl ... it has done well... morl not so much... so cefl just depends on the market in general.. cefl also tracks some bond funds as well

    • Also consider that some of the funds had to add leverage after '09 hoping to boost performance. Debt leverage works great when things go up. It can be devastating on the downside. So here leverage is leveraged. Also consider that all the funds have their own fees in the range of 1-2%. So fees on fees. The 2x makes this more of a trading vehicle in my mind. Not something to buy and hold. Income not worth the risk.
      Of course I'm not an investor here just taking a hard look.
      All opinions are my own.

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