sereneinvesting.com

Here are two noteworthy tidbits I came across today:

Oil-fund investors beware:

Matthew Hougan from IndexUniverse wrote a good piece about how the current contango in the oil futures market can severely damage your investment returns if you pick the wrong vehicle (such as USO).

Peter Schiff explains why he is actually right and the market wrong (so far)

“Guru” Peter Schiff successfully shrank his investors’ assets in 2008 by a much wider margin than the average markets. Miraculously this didn’t stop him proclaiming that his market forecast was actually correct. When several people then pointed out that despite of having had the right outlook, he still managed to lose more than half his managed assets, he felt compelled to write a gloomy diatribe, explaining why the markets got it wrong so far.

I have to admit, the guy has some nerve. But in a world where clowns like Cramer are heralded as investment experts despite plenty of evidence to the contrary, I guess there is also a place for failed gurus like Schiff.

Sometimes I don’t really have good ideas for longer updates, but several shorter thoughts. I guess I need a new section for these scatterbrain updates. Maybe you guys get some ideas of your own out of them, but as always, do your homework first.

Single stocks (GE):

I’m generally not a proponent of single stocks, but GE is getting interesting. It’s almost trading at Book Value, which is around $ 10 a share. The company still makes money and yet the price keeps falling and falling, making it more and more attractive.

Preferred stock ETFs (PGX, PGF, PFF):

I like preferred stock ETFs at these levels. I’d prefer them to levered closed-end funds that have given up most of their discounts. Regarding the question which one to buy, they will all perform similarly. However, the most liquid one, PFF, can often be purchased at a small discount to NAV during the day, at least lately. The other two in comparison usually trade at premiums. That makes the choice a lot easier.

High Yield (PHK, PFN, PFL, HYG, JNK, PHB):

Some closed-end high yield funds are trading at ridiculous premiums to NAV. In 2008 PIMCO turned in a disastrous performance with most of their closed-end offerings. Many of their muni funds lost about 40 %, and their high yield funds did even worse. PHK, PFN and PFL got absolutely smoked, dragged down by their leverage. Rightfully they were trading at huge discounts towards year’s end. However, lately these discounts turned into huge premiums. People just never seem to learn.

If you want high yield exposure, buy a Vanguard mutual fund. Be careful with junk ETFs such as HYG, JNK or PHB. Most of them trade at premiums to NAV and they are usually concentrated in the most liquid names. If any of those companies goes down, your fund will take a sizable hit. I’d prefer the greater diversification offered by Vanguard.