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Strategies & Market Trends : Bonds & Bond Funds
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To: peter michaelson who wrote (43)12/21/2008 6:10:37 PM
From: Lance Bredvold  Read Replies (3) of 161
 
Peter;
I have been interested in your subject matter in a peripheral sort of way. Not really following or understanding much of the discussion. However, I did inherit a bunch of FAX about 8 years ago and had followed it in my Father's account since the 80's. I regarded it as a foolish investment back then but have continued to read what people say about it on various boards.

I have been amazed at the positive feelings from so many people after I had watched the original managers force increases in size of the fund to their own benefit and advised my Father on that process through investigation. I've forgotten the terms, but basically FAX would offer perhaps a 20% increase in number of shares to existing shareholders at 5 or 10% discount to current NAV and below the market price. Any shares which were not paid for by existing shareholders became available to outside investors at a discount. Thus, if an existing shareholder could not afford or decided he did not want more shares, his portion of FAX was diluted by more than any increase in the total market value of the company. So we were forced to buy more even in conditions where the only real beneficiary was the management company (which I believe used to be a Boston outfit and moved to Vancouver--I know that one of my Father's expensive full cost brokerages sold FAX to him at initiation or shortly thereafter in the early 80's).

I tried to get out of FAX when administering the trust after the price had fallen all the way from $11.00 which Dad had paid to $4.50 in early 2000. The decline in price was more than dividends received. However, I still had some shares left which my brother willingly took. He was happy with the performance and I was amazed. Went up to $6.++ during the next few years. So a few weeks ago I added up all the dividends paid since we purchased the stock 20+ years ago and there was an apparent return of less than 3% as I recall. It went up for a few years when every factor worked in it's favor, but now we are back to a less beneficial situation with much money gone into managing and advertising and such.

If FAX looks good to you, I have significant doubts about whether I should investigate some of the other funds you are talking about. I could have done far better putting my money in bank accounts or bonds of almost any kind than into FAX over the last 20 years (I think). And I don't intend to spend more time digging into it again as I regard it as a waste of my time.

But maybe I'm nuts. Best, L.
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