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Strategies & Market Trends : Value Investing

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To: gizwick who wrote (51491)	5/7/2013 5:45:03 PM
From: MCsweet	2 Recommendations Read Replies (1) of 78774

It is great income while it lasts, but CEFs (as well as bonds themselves) are at or near historically high valuations and in sell offs CEFs can go from premiums to 10-20% discounts. Then it becomes extremely painful to not only lose on NAV, but to see a big premium fund go to a big discount. The probability of such an occurrence now is unlikely, but when interest rates start rising, fund NAVs will start declining and dividends will get cut (due to higher cost of leverage). At that time, it will be ugly for CEF investors IMO, particularly owners of premium CEFs. It is not a game I would play, but if you do play it don't be the last one out the door. MC

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