Monish, This is actually one of the easier questions and will show you the intellect of the average investor. GAB is down 19% YTD on NAV. Not horrible, but, IMHO, hardly the stuff of which premiums are made. However, they distribute 10% a year to shareholders. That distribution includes capital gains, dividends, interest and return of capital. Shareholders think they have a high yield bond when they are really simply getting a wasting asset. All of the 10% distribution CEFs tend to sell for premiums. Ditton for the high yield leveraged CEFs, otherwise known as the gambler's junkyard. Scudder High Yield, KHI, for example, is selling at a 30% premium.
I have often told mutual fund muckety mucks that yield will always sell. Of course, I meant real yield, not "high income, watch the principal disappear." I guess they only learned half that lesson. <g>
As far as the public goes, Barnum seems to be right: a sucker is born every minute. Just take a gander (not Joel Gander <g>) at this chart: siliconinvestor.com |
