FAX -- I just rebuilt part of my trading position in this Aussie/Asian leveraged bond CEF. I do this periodically when the discount to NAV rises to double digits (it's currently more than 12%) and sell my trading position when the discount gets into single digits. This trade has been consistently profitable for me over the years. I usually keep a core FAX position, since it provides diversification from the US dollar and higher income than USD money market funds. Its current price is $5.45 for a yield of 7.7%.
FAX has around 45% high quality (mostly sovereign AAA) Aussie bonds, and the rest is a smorgasbord of Asian bonds, around 35% US dollar denominated, ranging in quality from A to below investment grade (20% below investment grade). It's leveraged around 25%. And it has somewhat high expenses. It is subject to periodic swoons, when one can buy it at a high discount to NAV and do well, provided he remembers to sell it when the discount narrows.
You can check out FAX here:
etfconnect.com
and here:
biz.yahoo.com
FAX is subject to currency as well as interest rate risk. However, the currency risk can be viewed as a hedge against the US dollar, rather than as a risk.
Currently the Aussie dollar has crashed against the US dollar to around 80 cents in a spectacular 5-week fall, probably driven by hedge funds getting out of commodities and commodity currencies in a hurry.
futuresource.quote.com
But Australia is a fine country, in my view. They have almost no national debt, run consistent budget surpluses, and their trade balance is also in surplus due to huge commodity exports to Asia. Their social security is fully funded and run like a true pension fund. They have universal health care. Their immigration policy, aided by the fact they are an island, is geared toward attracting the best and the brightest from around the world, etc., etc. So, long term, I am bullish in the Aussie dollar versus the US dollar. |
