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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: JimisJim who wrote (24123)	12/26/2015 9:02:04 PM
From: Elroy	Read Replies (1) \| Respond to of 34328

they achieve their 2X leverage by buying lots and lots of sr. unsecured debt That's interesting. I can't say I understand it one bit. How would buying unsecured debt achieve 2x leverage on a specific BDC? For example, perhaps PSEC has some unsecured debt they've issued. Are you saying BDCL will buy that unsecured PSEC debt in the bond market and, therefore achieve 2x leverage on their PSEC equity position? That doesn't make any sense to me. Does it make sense to you? =============== As for the actual performance of BDCL over the years that I've owned it, it has done about as expected. The BDC stocks in general have declines, as has BDCL, and the payout of BDCL has been 18%-24% depending on where the BDCL share price is on a given day. So it has basically worked in a declining BDC share price environment. If it failed in a rising environment, that would suck!

To: JimisJim who wrote (24123)	12/26/2015 9:58:15 PM
From: Elroy	Respond to of 34328

I know you said you don't want to discuss this anymore, which is fine, but I'm just going to point out that what you wrote appears to be wrong. and they achieve their 2X leverage by buying lots and lots of sr. unsecured debt I've breezed the BDCL prospectus, and it says that BDCL itself is senior unsecured debt. It buys 2x the Wells Fargo BDC index, which is an index which trades and pays distributions based on a composite of BDC stocks. BDCL appears to buy 2x the index using your investment and an equal amount of borrowed cash. I have no reason to believe that BDCL doesn't work as understood, with the index moving in line with the underlying BDC stocks, and the 2x leverage generating 2x the move and 2x the distribution, less fees. It doesn't matter much to me whether fees are 1.5% or 3% per year, I would expect the index, on average, to pay out about 9% to 11% per year since that's the averge BDC payout, and the 2x note to pay out 18% to 22%. If the real payout is 17% to 21% or instead 19% to 23%, it doesn't matter much to me. That is also just noise. I could read the entire 74 page prospectus on BDCL, but I'm 90% sure I wouldn't get much benefit from it. BDCL (I think) pays out about 2x the BDC industry distribution and moves about 2x the movement of the underlying industry, as far as I understand. That's what BDCL is designed to do. As I wrote I'm not a conspiracy guy, so I believe that it will do that, roughly. It has done that basically for the past few years, so I'm not sure there is much of anything to be gained by looking for secrets written in the prospectus that tell me the whole thing is designed to lose money in perpetuity.