Hi Mike -I need help with FCX-B and FCX. The Freeport preferred pays 1/10 the price of gold in 2005. With the 6% yield I can make 20% if gold stays the same. More if it goes up. I bought this because I think their is a good risk/reward with gold. I like getting paid a dividend while I wait. And, I like my junk bonds to be almost contra-cyclical to the stock market - helps with the total diversification risk. BUT, Owning FCX-B, has a large risk is the political climate in Indonesia. Lately the preferred has dropped in price, while the stock has been stable. I can't understand why?
I am trying to hedge against the Indonesian risk. I could short (write puts) on FCX, but if gold rises, I loose out. Also, I loose the help with diversification risk. Not being very liquid the spreads are too wide for an option spread. (also, if I sell puts on FCX and buy ASA calls, I would loose money if gold stays the same) I looked at shorting the Indonesian CEF's. But with a 55% discount, they look like buys. Is their an Indonesian stock, that is a proxy to their market, that I can short... or better yet, get some premium by selling in the money calls?
Any ideas?
How are you coming with your CEF report?
TIA, Dan |
