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Closed-End Fund Commentaries


Does Your Global Fund Have Emerging Market Exposure?
Aug. 01, 2017 - Morningstar, Inc. -  Think your global equity fund is living up to its name? We reveal global equity funds' economic exposure to emerging markets

Moderate Growth for Q2

Jul. 24, 2017 - First Trust -  Since the start of the economic recovery in mid-2009, real GDP has grown at an average annual rate of 2.1%. The second quarter of this year doesn’t look much different. Our calculations suggest real GDP grew at a 2.5% annual rate in Q2, exactly the same as the consensus forecast.

S&P 500 Index Companies Continue To Reward Shareholders

Jul. 22, 2017 - First Trust -  View from the Observation Deck
1. Today's blog post shows the surge in the amount of capital that S&P 500 Index companies have committed to stock dividends and stock buybacks since the quarter (Q1'09) in which the index bottomed in the last bear market.
2. As indicated in the chart, using first quarter data points,the S&P 500 Index increased its combined outlays (dividends + buybacks) from $83 billion in Q1'09 to $234 billion in Q1'17 (preliminary), or an increase of 181.93%.

Alternatives Update - 2nd Quarter 2017
Jul. 20, 2017 - First Trust -  The capital markets continually offer up uncertainty and confusion. A “Chekov’s gun” mindset to market analysis will likely result in terabytes of data mining, great mental anguish, but perhaps little else. Rarely do any markets follow the careful sequencing of a well-crafted spy novel or a tightly written screenplay. 

Closed-End Fund review – Second Quarter 2017
Jul. 20, 2017 - First Trust -  Second Quarter 2017 Overview
The second quarter of 2017 was another solid one for diversified closed-end fund (CEF) investors. The average fund was up 3.50% for the quarter and is now up 8.82% year-to-date (YTD). It was a broad based rally again this quarter with equity funds up on average 2.91%, taxable fixed-income funds up 4.10% and municipal funds up 3.60%.

Infrastructure Offers Alternative Income Stream
Jul. 19, 2017 - Morningstar, Inc. -  The UK Government has announced £6.6bn of contracts for the new High Speed 2 rail link this week - how can investors get a slice of the action?

Closed-End Fund review – Second Quarter 2017
Jul. 18, 2017 - First Trust -  Macro Overview
Equities posted a strong second quarter of 2017, with the S&P 500 Index up 3.09%. Equity market volatility remained subdued, despite weaker oil prices, while interest rates declined for much of the quarter.

Hey Government: It’s Time to Get Serious!

Jul. 17, 2017 - First Trust -  At eight years, the current economic recovery is the third longest on record. Personal income, consumer spending, household assets, and net worth, are all at record highs. Stock markets are at record highs. Corporate profits are within striking distance of their all-time highs. Federal tax receipts are at record highs.

Still Waiting For The Great Rotation Out Of Bond Mutual Funds

Jul. 15, 2017 - First Trust -  View from the Observation Deck
1. As indicated in the chart,with the exception of 2013 and 2015, investors appear to have had a big appetite for bond mutual funds since 2007,which was just one-year prior to the punishing 2008-2009 financial crisis.
2. From 2007 through April 2017,investors poured a net $1.31 trillion into bond funds,according to the ICI.Year-to-date through April 2017, net inflows totaled a whopping $89.33 billion, up from $36.35 billion over the same period in 2016.

Debt-Laden Companies? #FakeNews?
Jul. 10, 2017 - First Trust -  Remember the weak May payroll report – just 138,000? Didn’t think so. But, back then, that first report on May was reported as a massive economic slowdown that should stop the Fed from further rate hikes.

The Bull Keeps Running
Jul. 03, 2017 - First Trust -  In March 2009, the stock market started its current bull run. At first, it was a V-shaped bounce from the 2008 Panic lows after mark-to-market accounting was changed.

The Big Banks Just Got The Green Light To Boost Their Dividend Payouts

Jun. 29, 2017 - First Trust -  View from the Observation Deck
1. Today’s blog post comes on the heels of the news that all 34 banks subjected to the Federal Reserve’s annual stress testing process all passed, meaning they had sufficient capital to withstand a massive financial shock and deep recession, as well as the wherewithal to return more capital to shareholders via dividend increases and stock buybacks.
2. It was the first time since the annual tests began in 2011 that all of the financial institutions received passing grades, according to The Wall StreetJournal.

A Measured Approach to Bank Loans and High Yield
Jun. 24, 2017 - Morningstar, Inc. -  Bronze-rated Eaton Vance Floating-Rate and High Income has an impressive management team and long-term record, but high fees temper our enthusiasm.

A Measured Approach to Bank Loans and High Yield
Jun. 24, 2017 - Morningstar, Inc. -  Bronze-rated Eaton Vance Floating-Rate and High Income has an impressive management team and long-term record, but high fees temper our enthusiasm.

QE Didn’t Work
Jun. 19, 2017 - First Trust -  Last week the Federal Reserve hiked the federal funds rate by ¼ of a percentage point for the fourth time since December 2015. The funds rate is still below the rate of inflation, which means the Fed is still a long way from becoming tight.

Less Loose
Jun. 12, 2017 - First Trust -  When the Federal Reserve raises rates by another quarter percentage point on Wednesday, you’re going to see many stories about monetary policy getting tight and the potential threat that poses for the economy in general and the bull market in stocks in particular.

Bond CEFs and Rising Rates
Jun. 08, 2017 - Morningstar, Inc. -  How will bond CEFs perform as the Fed raises rates?

Retail Equity REITs Under Pressure In 2017
Jun. 08, 2017 - First Trust -  View from the Observation Deck
1. Today’s blog post is timely due to the rise in the number of announced store closures in the U.S.As of 6/3/17,there were nearly 5,100 planned store closures for 2017, according to Business Insider.
2. Credit Suisse estimatesthat the number of announced closures could rise to 8,640 by the end of 2017,and expects 20% to 25% of malls(roughly 220 to 275 shopping centers) to shut down over the next five years, according to Business Insider. From 2000 through 2016,the biggest year for store closures was 2008, with 6,163.That was year-one of the financial crisis.

Investor Views: "I Swapped Stock Picks for Closed-end Funds"
Jun. 07, 2017 - Morningstar, Inc. -  Retired investor Robert Long tells Morningstar why investment trusts form a core part of his portfolio

Long Housing, Short Autos
Jun. 05, 2017 - First Trust -  Late last week automakers reported selling cars and light trucks at an annual rate of 16.7 million units in May, down 3% from May 2016. If you look at a twelve-month moving average, sales peaked back in April 2016 and have been trending lower, ever since.

Closed-end Funds - Shorter-Term Trusts 
May. 30, 2017 - Wells Fargo Advisors -  Summary
>> A closed‐end fund (CEF) structure with a shorter termination of three to seven years after its initial public offering (IPO) has been a recent innovation that has dominated the primary market in the past few years.

We Don’t See No Stinkin’ Bubbles! 
May. 30, 2017 - First Trust -  Now that we’re eight years into a bull market, some investors just assume something has to go wrong. As a result, we see lots of stories and get lots of questions about “bubbles,” as in "what market or sector is in a bubble already?"

An Update On The “Trump Rally”
May. 30, 2017 - First Trust -  View from the Observation Deck
1. Donald J.Trump's victory on 11/8/16 appears to have injected some optimism into the equity markets via his pro-growth, pro-U.S. policy ideas, in our opinion.
2. From 11/8/16 (date Donald Trump won the U.S. presidential election) through 5/26/17,the S&P 500 Index posted a total return of 14.23% (not shown in chart), according to Bloomberg.

The Outlook For S&P 500 Index Earnings Reflects Strength Through Year-End

May. 23, 2017 - First Trust -  View from the Observation Deck
1. Today's chart is intended to give investors some visual perspective on where equity analysts think earnings are headed. Earnings estimates are subject to change.
2. From Q1’15 to Q4’17 (see chart), S&P 500 Index earnings are expected to rise from $26.21 per share to an estimated $35.25 per share, or an increase of 34.50%.

Tax Cut Politics 
May. 22, 2017 - First Trust -  While some investors are freaking out about investigations, tweets, or the personality of President Trump, we are still watching policy. So far, some regulation has been rolled back and more is on tap, the Supreme Court has a more market friendly make-up, and there is a hiring freeze on many government agencies. These policies will help economic growth, but they are not enough to get it above 2.5% annually.

A Snapshot Of Moving Averages
May. 16, 2017 - First Trust -  View from the Observation Deck
1. In today's post, we are showing the percentage of stocks in a number of major U.S.stock indices that are trading above their respective 50-Day and 200-Day moving averages.
2. Moving averages tend to smooth out day-to-day price fluctuations and can be a useful tool for traders to identify both positive trends and reversals, in our opinion.

A Healthy US Consumer
May. 15, 2017 - First Trust -  News of the consumer’s death has traveled fast.
It’s not hard to find stories of beleaguered and battlewearied consumers. Famed retail giants are slashing revenue and earnings outlooks, creating worries about retail space in general and malls in particular. Auto sales are slowing, auto loan delinquencies are rising, while delinquent student loans create their own paroxysms of fear in analyst minds.

Target-Term Funds: What's Old Is New Again in CEFs
May. 11, 2017 - Morningstar, Inc. -  Target-term funds are back in fashion.

The Real Rate Of Return On The 10-Year Treasury Is Real Low

May. 09, 2017 - First Trust -  View from the Observation Deck
1. As of the close of 4/28/17,the yield on the 10-Yr.T-Note was 2.28%, while the trailing 12-month Consumer Price Index (CPI) headline rate stood at 2.40%, according to Bloomberg.
2. That translated into a real rate of return (yield-inflation) of -0.12%. From 1965 through April 2017,the average real rate was 2.41% (6.41% avg.Yield - 4.00% avg. CPI), according to Bloomberg.

Reasons to be Bullish

May. 08, 2017 - First Trust -  We wish we had a dollar for every time we’ve heard that the bull market in equities is only due to loose money. We have consistently disagreed, arguing that although the Federal Reserve is loose, the bull market is primarily a function of the rebound in profits after the disaster in 2008-09.

Prepare for Q2 GDP Surge
May. 01, 2017 - First Trust -  Economic data is volatile. Weather, seasonal adjustments, calendar flukes, and measurement errors all affect the data. Nonetheless, those with a political axe to grind, or an economic forecast of recession or boom, will grab one piece of data and act as if they have discovered the Holy Grail.

First Quarter GDP (Advance)
Apr. 28, 2017 - First Trust -   The first estimate for Q1 real GDP growth is 0.7% at an annual rate, slightly below the consensus expected 1.0%. Real GDP is up 1.9% from a year ago.
 Business investment in equipment and structures were the largest positive contributions to Q1 real GDP growth. Slower growth in inventories was the largest drag on real GDP.

Closed-End Fund review – First Quarter 2017
Apr. 28, 2017 - First Trust -  First Quarter 2017 Overview
Following a calendar year when the average closed-end fund (CEF) was up 8.59%, many categories of the CEF marketplace continued their positive momentum in 2017. Indeed, the average CEF was up a solid 5.17% during the first quarter of 2017.

The Rebound in Homebuilder Sentiment has Outpaced the Rebound in Homebuilder Stocks

Apr. 27, 2017 - First Trust -  View from the Observation Deck
1. Today's post shows that the homebuilding industry has essentially recovered from its downturn with respect to homebuilder sentiment, but valuation levels of homebuilder stocks still reflect a deep discount to their peak in 2005.
2. The National Association of Home Builders Market Index (SA) measures builder sentiment. An index reading above 50 indicates that sentiment is positive.

France and the Euro
Apr. 24, 2017 - First Trust -  When the French elected François Hollande as President in 2012, the global left rejoiced. Mr. Hollande ran on a platform of protecting workers from capitalism. He wanted to raise the top income tax rate to 75%. Analysts predicted a political turn to the left across Europe, if not beyond.

Sell in May and Go Away! What is so Scary?
Apr. 18, 2017 - First Trust -  View from the Observation Deck
1. The old axiom in the stock market about selling your stocks at the close of April and then buying back in at the start of November once made some sense from a seasonality standpoint.
2. When the U.S. was more of an industrialized economy it was not uncommon for plants and factories to close for a month or longer in the summer to retool and allow employees to vacation.

Still Plowing Away
Apr. 17, 2017 - First Trust -  As we wrote three months ago, it’s going to take much more than animal spirits to lift economic growth from the sluggish pace of the past several years. Measures of consumer and business confidence continue to perform much better than before the election. But where the economic rubber hits the road, in terms of actual production,…not so much.

A Snapshot Of What Investors Are Paying For Stocks
Apr. 11, 2017 - First Trust -  View from the Observation Deck
1. Today’s blog post features a table showing the price-to-earnings (P/E) ratios of a few major stock indices.Our goal is to provide investors with a global perspective on where valuations have been and where they are projected to go.
2. We believe that a 10-year perspective is appropriate because it captures where valuations stood prior to the 2008-2009 financial crisis.

This Recovery Isn’t Boom or Bust
Apr. 10, 2017 - First Trust -  Last Friday, payroll employment data, from a survey of businesses, showed the US created just 98,000 jobs in March. The consensus of forecasters had expected job growth of 175,000. The other jobs number, which comes from a survey of households, showed 472,000 new jobs in March.

Technology Stocks Have Delivered Strong Returns In The Current Bull Market

Apr. 04, 2017 - First Trust -  View from the Observation Deck
1. From 3/9/09-3/31/17 (current bull), all four of the technology-related indices featured in the chart outperformed the S&P 500 Index.
2. The average annualized total returns for the period were as follows: ISE Cloud Computing Index (+29.95%); Dow Jones Internet Composite Index (+27.72%); Philadelphia Semiconductor Index (+23.00%); S&P 500 Information Technology Index (+22.33%); and S&P 500 Index (+19.28%), according to Bloomberg.

WSJ Leak: Fed May Shrink Balance Sheet

Apr. 03, 2017 - First Trust -  If you read us regularly, and we hope you do, you know that we write each week about a topic we think is both important and timely. Last week, we were either clairvoyant, or extremely persuasive

7 Cheapest Gold Rated Investment Trusts
Apr. 03, 2017 - Morningstar, Inc. -  It is getting more difficult to snap up closed-end funds on the cheap, as discounts narrow following a significant stock market rally

2017 & 2018 Earnings Snapshot
Mar. 28, 2017 - First Trust -  View from the Observation Deck
1. Today's blog features corporate earnings projections for 2017 and 2018. We provide updates on an ongoing basis.
2. The 75.56% plunge in the price of crude oil from the close of 6/20/14 through 2/11/16 resulted in a sharp decline in the earnings of energy-related companies in 2016. The 82.11% rise in the price of crude oil from the close of 2/11/16 through 3/27/17, however, projects to a triple-digit rise in earnings in 2017 (see chart).

The Fed is A Proxy for Government
Mar. 27, 2017 - First Trust -  Well, that was fun! The GOP’s attempt to reform healthcare hit a brick wall of politics. Conservative Republicans wanted to completely “repeal” Obamacare, while moderates and leaders were willing to keep much of it as long as it cost less. Moving one way or the other lost too many votes. Democrats refused to participate. So, the bill died.

Investors Continue To Favor Passive Funds Over Actively Managed Funds

Mar. 21, 2017 - First Trust -  View from the Observation Deck
1. Today's blog features corporate earnings projections for 2017 and 2018. We provide updates on an ongoing basis.
2. The 75.56% plunge in the price of crude oil from the close of 6/20/14 through 2/11/16 resulted in a sharp decline in the earnings of energy-related companies in 2016. The 82.11% rise in the price of crude oil from the close of 2/11/16 through 3/27/17, however, projects to a triple-digit rise in earnings in 2017 (see chart).

February Housing Starts
Mar. 16, 2017 - First Trust -   Housing starts rose 3.0% in February to a 1.288 million annual rate, beating the consensus expected 1.264 million. Starts are up 6.2% versus a year ago.  The rise in starts in February was entirely due to single family units; multi-family starts declined. In the past year, single-family starts are up 3.2% while multi-family starts are up 13.0%.

S&P 500 Index Top-Line Growth Estimates
Mar. 14, 2017 - First Trust -  View from the Observation Deck
1. Today's blog post provides investors with a three-year look into the expected revenue growth rates of the companies that comprise the S&P 500 Index.
2. On 3/10/17,the S&P 500 Index stood at 2,372.60, or 0.97% below its all-time high of 2,395.96,set on 3/1/17, according to Bloomberg. The current bull market in stocks entered its 9th year after the close of trading on 3/9/17.

Robots Create Jobs, Don't Steal Them
Mar. 13, 2017 - First Trust -  If robots are supposed to take all our jobs, they’re not very good at it. Nonfarm payrolls rose 235,000 in February, rising faster than even the computer models thought they would. This was the 84th month in a row of private sector job growth, the longest streak on record.

The New CEFs on the Block
Mar. 09, 2017 - Morningstar, Inc. -  PIMCO made headlines last month when it launched an interval fund (PIMCO Flexible Credit Income) and registered to raise $1 billion in assets. The last closed-end fund, or CEF, to raise more than $1 billion in assets was Goldman Sachs MLP and Energy Renaissance Fund (GER) in the fall of 2014.

A Snapshot of U.S. Styles/Market Caps
Mar. 07, 2017 - First Trust -  View from the Observation Deck
1. Today's blog post is intended to expose potential opportunities within the growth and value styles of investing, as well as by market capitalization (market cap).
2. At any given time, the equities markets are likely being led up or down by one of the three market cap classifications (large-cap, mid-cap or small-cap).Often this leadership role can be held for a multi-year period.

Watch Reserves, Not Rates
Mar. 06, 2017 - First Trust -  As Washington DC melts down, entrepreneurs keep moving, people keep working and spending; the economy keeps growing. The Federal Reserve keeps meeting and speaking, too, but now it appears they will actually act.

U.S. Equities Have Boosted Their Global Standing In The Current Recovery

Feb. 28, 2017 - First Trust -  View from the Observation Deck
1. The current U.S. economic recovery commenced in Q3’09, according to the National Bureau of Economic Research.The last U.S. recession ran from December 2007 through June 2009.
2. As indicated in the chart,the total market cap of U.S. exchange traded equities rose from $12.73 trillion on 9/30/09 to $25.20 trillion on 12/31/16, or an increase of 97.96%.

Trade Is Not Our Enemy
Feb. 27, 2017 - First Trust -  We think it was Art Laffer who said it best. Let’s say the US invented a cure for cancer and China a cure for heart attacks. If China decided to ban the cure for cancer, should the US retaliate by banning the cure for heart attacks?

Time for a Rate Hike
Feb. 21, 2017 - First Trust -  According to the futures market, there is a 38% chance the Federal Reserve raises rates when it meets in mid-March. If the Fed were to stand by what it has said the past several years, the odds should be much higher. But the market is used to the Fed finding reasons to put off justified rate hikes.

Some Perspective On The Performance Of The S&P 500 Index

Feb. 21, 2017 - First Trust -  View from the Observation Deck
1. Are U.S.stocks overvalued? While there are many metrics that can be used to argue one side or the other, we believe there is room for an eyeball test using historical returns.
2. The last bar in the chart (shaded gold) represents the average annual total return for the S&P 500 Index since 1926. Since it covers such a long period, it tends to change modestly with each passing year.

A Snapshot Of Fixed-Rate Bond Yields & Total Returns
Feb. 14, 2017 - First Trust -  View from the Observation Deck
1. The purpose of today's blog post is simply to show investors how traditional fixed-rate bonds have performed over the past 1-, 3- and 5-years.
2. We believe that the information in the chart can help investors establish realistic expectations with respect to fixed-rate bond yields and performance potential moving forward.

Keep It Simple, Stupid (KISS) 
Feb. 13, 2017 - First Trust -  The biggest tax debate in Washington right now is not between Republicans and Democrats, but between Republicans and Republicans. Both sides of the debate seem to understand that the US tax code, particularly the fact that the US has the highest corporate tax rate of any industrialized country, is harming the competitiveness of US companies.

Would the Dissolution of the Fiduciary Rule Bring Back CEF IPOs?
Feb. 09, 2017 - Morningstar, Inc. -  It's unclear whether the rollback of this rule would help ignite this dormant market, but probably not.

A Snapshot of Growth vs.Value Investing
Feb. 07, 2017 - First Trust -  View from the Observation Deck
1. Today's blog post is an update of one we do on an ongoing basis. Investors can compare today's snapshot to the one we did on 10/27/16 (click here to view).
2. Growth style investing tends to outpace value style investing when the earnings growth rates of companies accelerate faster than the broader market,such as right after the economy exits a recession

Room to Grow
Feb. 06, 2017 - First Trust -  The US economy has grown at an average annual rate of only 2.1% since the recovery started in mid-2009, far slower than during the economic expansions of the 1980s and 1990s.

Biotechnology Stocks Have Not Been This Cheap In A Decade

Jan. 31, 2017 - First Trust -  View from the Observation Deck
1. From 12/31/06 through 12/30/16,the S&P 500 Biotechnology Index posted an average annual total return of 13.92%, compared to 9.57% for the S&P 500 Health Care Index and 6.94% for the S&P 500 Index, according to Bloomberg.
2. Over that 10-year period,the average year-end P/E ratio on the S&P 500 Biotechnology Index was 19.00.As indicated in the chart, the year-end P/E estimates for 2017 and 2018 are significantly below the period average.

Unlocking Historic Value in Real Assets as the Economy Shifts Gears
Jan. 30, 2017 - Cohen & Steers -  With prices of U.S. financial assets near all-time highs, we believe real assets offer an investment opportunity in inexpensive assets poised to move higher. The two views of relative value shown below offer a similar takeaway: real assets appear significantly undervalued on a historical basis. We believe the combination of a strengthening economy, rising inflation prospects and attractive relative value signal a potentially compelling opportunity for allocating to real assets.

Closed-End Fund review – Fourth Quarter 2016
Jan. 27, 2017 - First Trust -  2016 Overview
2016 was a very solid year for diversified closed-end fund (CEF) investors with the average fund up 8.59% on a share price total return basis according to Morningstar. Unlike 2015 when most of the gains were limited to municipal CEFs, the gains in 2016 were broad—with many categories posting meaningful total return gains.

India by Numbers
Jan. 25, 2017 - Aberdeen Asset Management -  India’s growth prospects have brightened considerably, particularly with the steady progress that Prime Minister Narendra Modi’s new government has made with reforms. The economy is in much better shape than before; inflation is down, as are interest rates, and fiscal consolidation remains on track. Furthermore, the country has immense growth potential. Coupled with a huge domestic market and expanding middle class, India’s longer-term opportunities look attractive.

How U.S.& Other Developed Market Equities Have Fared Since Japan Peaked in 1989

Jan. 24, 2017 - First Trust -  View from the Observation Deck
1. China’s growth story has garnered a lot of attention from investors and the financial media over the past 10 to 15 years.Some pundits believe that China could one day supplant the U.S. as the world’s largest economy.We’ll see.
2. The same type of tale wasspun aboutJapan in the late 1980s.It did not come to fruition.In fact,China surpassed Japan to become the second-largest economy in the world in 2010, according to The Wall StreetJournal.The U.S. is still the largest.

Alternatives Update - 4th Quarter 2016
Jan. 23, 2017 - First Trust -  In the 4th quarter, Alternative Investment (“Alternatives”) returns were for the most part directionally the same as in the 3rd quarter with commodities being a notable exception by switching from negative to positive. The magnitude of returns were, however, generally more muted (see Figure 1). 

American Carnage?

Jan. 23, 2017 - First Trust -  A memorable part of President Trump’s inaugural speech pointed to mothers and children trapped in poverty, rusted-out factories, a flawed school system, and crime and gangs and drugs. He described these problems as “American carnage” and stated emphatically that it “stops right here and stops right now.”

Another Plow Horse Quarter
Jan. 17, 2017 - First Trust -  Animal spirits are back!
Confidence surveys have soared since the election. The Conference Board’s future expectations measure hit the highest level since 2003. The NFIB small business confidence index rose at its fastest pace ever. Other surveys are up, too.

A Snapshot Of The S&P 500 Index Earnings Beat Rate
Jan. 17, 2017 - First Trust -  View from the Observation Deck
1. As we head into corporate earnings season featuring Q4’16 results, we thought it would be a good time to review the percentage of S&P 500 Index companies that top their earnings estimates on a quarterly basis.The index currently has 505 constituents.
2. From Q4'12 through Q3'16 (16 quarters),the average quarterly earnings beat rate for the 500 companies that comprise the index was 69.2%, matching the results posted a year ago in Q4’15.

Some Insight Into The S&P 500 Index Dividend Payout
Jan. 12, 2017 - First Trust -  View from the Observation Deck
1. As of the close of 2016, 418, or 83%, of the constituents in the S&P 500 Index distributed a dividend to shareholders, up significantly from 351 at the end of 2002 (not shown in chart), according to S&P Dow Jones Indices.The bear market in stocks that proceeded the bursting of the bubble in the technology sector in March 2000 ended in October 2002.
2. For comparative purposes,since 1980,the highest number of dividend-paying stocks in the S&P 500 Index at year-end was 469 (1980), according to S&P Dow Jones Indices.

One More Reason for CEF Investors to Forget 2016
Jan. 12, 2017 - Morningstar, Inc. -  Winter melancholy and the infinite sadness of shrinking taxable CEF distribution rates.

Big Government Causes Slow Growth
Jan. 09, 2017 - First Trust -  In 1930, Pluto was declared the ninth planet. In 2007, it was demoted to “dwarf planet” status by astronomers after considering new evidence. There are now only eight planets.

S&P 500 Index Top-Line Growth Estimates
Jan. 03, 2017 - First Trust -  View from the Observation Deck
1. Today's blog post provides investors with a three-year look into the expected revenue growth rates of the companies that comprise the S&P 500 Index.
2. On 12/30/16,the S&P 500 Index closed the year at 2,238.83, or 1.45% below its all-time high of 2,271.72,set on 12/13/16, according to Bloomberg

3 Recommendations for Fund Companies Not Named Vanguard
Dec. 27, 2016 - Morningstar, Inc. -  How the rest of the industry can compete against the Vanguard juggernaut.

2017: Dow 23,750, S&P 2700 
Dec. 26, 2016 - First Trust -  We have used the metaphor of the “Plow Horse” to define the US economy since 2009 – an economy driven by new technology and entrepreneurship (fracking, the cloud, smartphones, big data…), but held back by the friction of a growing and burdensome government.

The Potential for Tax-Advantaged Income From Preferred Securities
Dec. 21, 2016 - Cohen & Steers -  Preferred securities currently offer some of the highest yields in fixed income. But after tax, they may also provide an income advantage—regardless of your tax bracket—that exceeds most other fixed income choices. The reason is that distributions from many preferred securities are taxed as qualified dividend income (QDI), rather than as regular interest income, which helps investors keep more of what they earn.

Rising Rents Matter More to REITs Than Rising Rates
Dec. 21, 2016 - Cohen & Steers -  A quarter-point rate hike may get a lot of attention—but for REITs, it’s not the big story. The big stories are 81 months of job growth, a 9-year low in unemployment and the jolt to economic and inflation forecasts amid the prospect of tax cuts and fiscal spending. And when rents are rising, history shows that REITs can deliver strong returns despite higher interest rates.

OPEC Production Cuts Solidify Case for Oil Recovery
Dec. 21, 2016 - Cohen & Steers -  As signaled in September, the Organization of the Petroleum Exporting Countries (OPEC) convened in November to establish a production target to help stabilize the global oil market. The agreed upon supply cuts should accelerate and solidify the rebalancing of oil markets already underway, supporting our base case for higher oil prices over the next two years.

Investors Continue To Favor Passive Funds Over Actively Managed Funds

Dec. 20, 2016 - First Trust -  View from the Observation Deck
1. Those investors directing capital into mutual funds and exchange traded funds (ETFs) favored passive investing over active management for the 12-month period ended November 2016.Here is a link to last year’s post measuring the same period with similar results (click here to view).
2. Passive mutual funds and ETFs reported net inflows totaling $479.8 billion, compared to net outflows totaling $358.8 billion for those actively managed (see chart).

Greedy Innkeeper or Generous Capitalist?

Dec. 19, 2016 - First Trust -  The Bible story of the virgin birth is at the center of much of the holiday cheer this time of year. The book of Luke tells us that Mary and Joseph traveled to Bethlehem because Caesar Augustus decreed a census should be taken. Mary gave birth after arriving in Bethlehem and placed baby Jesus in a manger because there was “no room for them in the inn.”

A November to Forget for Muni CEF Investors
Dec. 15, 2016 - Morningstar, Inc. -  This year's strong rally in municipal CEFs has sharply corrected as inflation expectations soar.

The Fed Turns Hawkish

Dec. 14, 2016 - First Trust -  The Federal Reserve unanimously decided to raise rates in 2016 – finally! – by a quarter of a percentage point earlier today, as the markets expected. The federal funds rate is now set to hover between 0.50% and 0.75%.

Sector Performance Via Market Capitalization Since The Presidential Election

Dec. 13, 2016 - First Trust -  View from the Observation Deck
1. From 11/8/16 through 12/12/16,small-capitalization (cap) stocks outperformed both mid- and large-cap stocks, as measured by the S&P 500 Index, S&P MidCap 400 Index and S&P SmallCap 600 Index (see top line of table).
2. As indicated in the table, there were two sectors in the S&P 500 Index that posted negative total returns in the period. All of the sectors in the S&P MidCap 400 Index and S&P SmallCap 600 Index posted positive total returns.

Rally is Real, Not “Hope & Faith”
Dec. 12, 2016 - First Trust -  Since the presidential election, the S&P 500 is up 8.4%, the Russell 2000, a small cap stock index, is up almost 20% and the Dow is closing in on 20,000. Financial stocks have surged.

Interest Rates Spiked In November And Investment Grade Bond Prices Fell

Dec. 06, 2016 - First Trust -  View from the Observation Deck
1. Intermediate-term interest rates moved markedly higher following the presidential election.In general,asinterest ratesrise,fixedrate bond prices tend to fall, particularly those of the highest credit quality.
2. From 11/8/16 through 11/30/16,the yield on the benchmark 10-year Treasury note (T-note) surged 52 basis points,from 1.86% to 2.38%, according to Bloomberg. Its yield stood at 1.60% on 9/30/16.

Caution on Dollar-Meddling
Dec. 05, 2016 - First Trust -  If there’s one theme tying together many of the policies President-Elect Trump and Congress will try to enact, it’s making the US a better place to invest. This includes peeling back Obamacare, drastically cutting the top tax rate on corporate profits, moving from the depreciation of business investment to immediate and full expensing, and allowing more investment in energy infrastructure.

Populist Uprising or Conservative Revival? 
Dec. 01, 2016 - First Trust -  Steve Moore, economic advisor to President-Elect Donald Trump told a DC-newspaper, The Hill, and the Republican leadership; “Just as Reagan converted the GOP into a conservative party, Trump has converted the GOP into a populist working-class party.” (The Hill, Jonathan Swan, 11/23/2016)

Resetting the REIT Cycle
Nov. 30, 2016 - Cohen & Steers -  We see a buying opportunity shaping up in U.S. REITs, as valuations have improved and Donald Trump’s election has primed the pump on growth and inflation expectations. While much is still unknown, we see potential for the kind of policy upheaval that could change the shape of real estate fundamentals and values for the better through stronger demand and slower new supply.

U.S. Crude Oil & Natural Gas Rig Counts Are Trending Higher

Nov. 29, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post illustrates the dramatic reduction in the number of active U.S. crude oil and natural gas rigs since energy prices peaked in 2014, as well as a bit of a rebound in the counts in the second half of 2016.
2. Rig count cuts are generally done in an effort to curb production in response to declining energy prices. Rig counts tend to rise when energy producers sense that higher prices are not only coming, but are sustainable.

Higher Rates Won’t Crush Housing
Nov. 28, 2016 - First Trust -  In the past 7 ¾ years, we have consistently urged investors to separate their politics from their investing. It’s way too easy to say, “Their guy is in the White House; so everything must be awful – and if anything good happens, it must be fake, or a ‘sugar high’.”

The U.S.Dollar Is Once Again Testing The Upper Limits Of Its Recent Range

Nov. 22, 2016 - First Trust -  View from the Observation Deck
1. Today’s chart is an update of a previous post we did back in August showing the fluctuations in the U.S. Dollar Index (DXY) since mid-2014.
2. From 6/30/14 through 11/18/16, the U.S. Dollar Index rose from a reading of 79.78 to 101.21, or a gain of 26.86%, according to Bloomberg.

Big Boom for Stocks 
Nov. 21, 2016 - First Trust -  The S&P 500 hit a low of 666 on March 6, 2009 and was up 213%, excluding dividends, through November 4, 2016. Since then, the S&P 500 is up another 4.6%, and closed just 0.5% from a new all-time high last Friday.

Investor Sentiment In Equities Shifted After Midyear
Nov. 15, 2016 - First Trust -  View from the Observation Deck
1. Today’s blog post features the total return performance of the S&P 500 Index and its 11 major sectors over three specific time periods.
2. The shift in investor sentiment that we eluded to pertains to the sell-off in those sectors that performed extremely well for the 12- month period ended 6/30/16 (see chart). We are referring to Utilities, Telecommunication Services, Real Estate and Consumer Staples, which posted total returns ranging from 18.66% to 31.47%.

Revolution

Nov. 14, 2016 - First Trust -  Elections have consequences and the impact on U.S. economic policy of last week’s election will be enormous. We’re sure we’ll be writing about all of these issues in much greater depth over the next several months, but, for now, here’s a broad outline of what to expect.

Libor to Bank-Loan CEFs: Float On
Nov. 10, 2016 - Morningstar, Inc. -  With the U.S. election in the rearview mirror, the biggest question on investors' minds is when the Federal Reserve will raise rates again (it did so in December 2015, increasing its target rate by 25 basis points). According to the CME's FedWatch, as of early November, the market assigned a 76% probability to a 25- to 50-basis-point hike in December, which would move the target federal-funds rate to 50-75 basis points from 25-50 basis points.

Saving Private Sector
Nov. 09, 2016 - First Trust -  In the movie “Saving Private Ryan,” multiple brave soldiers give their lives to save one (the last-surviving of four brothers) in World War II. During a final, chaotic and riveting battle scene, Ryan is miraculously saved, but with tremendous loss of life. A bloody and dying, married, teacher from Pennsylvania – Captain Miller (played by Tom Hanks) – tells the farm boy from the Corn Belt – Private James Ryan (played by Matt Damon) – to “earn it.” “Earn” the sacrifice!

A Snapshot of Bond Valuations
Nov. 08, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post is one we do on an ongoing basis so that investors can monitor fluctuations in bond prices relative to changes in interest rates and the global economy.
2. From 5/31/16 through 11/4/16 (chart period),the yield on the benchmark 10-year Treasury note (T-Note) declined by seven basis points, from 1.85% to 1.78%, according to Bloomberg. It was as low as 1.36% (7/8/16) in the period.

OPEC Philosophy Shift Solidifies Case for Oil Recovery
Nov. 07, 2016 - State Street Global Advisors -  With most equity markets now in positive territory for the year, the crop from which to harvest tax losses this year seems rather modest. But that certainly was not the case for all of 2016, underscoring why tax loss harvesting is not simply a year-end event. Effective harvesting should take place throughout the year, as unexpected market events like the Brexit can create opportunities for investors to harvest portfolio gains as well as losses to manage their tax bill.

Unexpected Returns
Nov. 03, 2016 - First Trust -  Third Quarter Overview
The third quarter was another solid period for diversified closed-end fund (“CEF”) investors. The average CEF was up 2.37% for the quarter and is now up 13.01% year-to-date. Equity CEFs were positive on average by 3.79%, taxable fixed-income CEFs were up on average 5.04%; municipal CEFs, on the other hand, were lower on average by -0.84% for the quarter.

Q3 Productivity (Preliminary) 
Nov. 03, 2016 - First Trust -   Nonfarm productivity (output per hour) increased at a 3.1% annual rate in the third quarter, much faster than consensus expected gain of 2.1%. Non-farm productivity is unchanged versus last year.  Real (inflation-adjusted) compensation per hour in the non-farm sector increased at a 1.7% annual rate in Q3 and is up 1.1% versus last year. Unit labor costs rose at a 0.3% rate in Q3 and are up 2.3% versus a year ago.

Finding the Signal Through the Noise: Does High Yield Have Room to Run?
Nov. 01, 2016 - State Street Global Advisors -  The high yield market is on pace for its fifth best annual performance in 20 years,1 and assets under management for the high yield corporate bond ETF market hit a record at the end of the third quarter as investors seek yield in a world where yield is hard to come by.2

A Snapshot of Micro-Cap Stocks vs. Small-Cap Stocks
Nov. 01, 2016 - First Trust -  View from the Observation Deck
1. While there is no official set of parameters that define a micro-capitalization (micro-cap) stock,the U.S. Securities and Exchange Commission (SEC) defines them as companies with a market value of less than $250 or $300 million. Some money managers may stretch it to the $1 billion mark or so in order to expand the universe of stocks and/or increase liquidity, in our opinion.
2. As of 2015,there were over 20,000 publicly traded companies and more than 60% of them were micro-caps, according to The MicroCap Conference, which defines a micro-cap company as one that is valued at less than $500 million. Micro-caps account for less than 3% of total equity market capitalization.

Brexit Redux? 
Oct. 31, 2016 - First Trust -  It’s not like we all don’t know that certain media outlets favor certain candidates. Some outlets seem “more fair” than others, but some go to absurd lengths to spin the news

Third Quarter GDP (Advance)

Oct. 28, 2016 - First Trust -   The first estimate for Q3 real GDP growth is 2.9% at an annual rate, beating the 2.6% the consensus expected. Real GDP is up 1.5% from a year ago.
 The largest positive contributions to the Q3 real GDP growth rate were consumer spending, net exports, and inventories.

A Snapshot Of Moving Averages
Oct. 25, 2016 - First Trust -  View from the Observation Deck
1. In today’s post, we are showing the percentage of stocks in a number of major U.S.stock indices that are trading above their respective 50-Day and 200-Day moving averages.
2. Moving averages tend to smooth out day-to-day price fluctuations and can be a useful tool for traders to identify both positive trends and reversals, in our opinion.

Growth Stepping Up
Oct. 24, 2016 - First Trust -  Real GDP has been soft in the past year, growing only 1.3% in the year ending in the second quarter. In the four quarters before that, however, real GDP grew 3%. That’s what it’s supposed to be like in a Plow Horse economy, with real GDP growth averaging around 2%, sometimes a little faster, sometimes slower

Sector Performance Via Market Capitalization
Oct. 18, 2016 - First Trust -  View from the Observation Deck
1. From 12/31/15 through 10/17/16,small-capitalization (cap) stocks outperformed both mid- and large-cap stocks, as measured by the S&P 500 Index, S&P MidCap 400 Index and S&P SmallCap 600 Index (see table).
2. In that period, the only sector that posted a negative total return was Health Care. It was down in the S&P 500 and S&P SmallCap 600 Indices. Ironically, it performed well in the mid-cap space.

Alternatives Update - 3rd Quarter 2016
Oct. 18, 2016 - First Trust -  In the third quarter, Alternative Investments (“Alternatives”) were a mixed bag with regards to performance (Figure 1). Six of eleven categories had positive returns with the remaining five posting negative returns. The strongest performing categories were primarily focused in the credit markets and the higher equity beta related strategies (hedged equity, event driven). 

Does Growth Kill or Is There No Growth?
Oct. 17, 2016 - First Trust -  Two weekend articles, in major US newspapers, left us shaking our heads. The Washington Post wrote that "economic growth actually kills people," while The Wall Street Journal published a piece saying, ironically, we should get used to slow growth - it's normal.

Income-Starved Investors Are Flocking to Closed-End Funds
Oct. 13, 2016 - Morningstar, Inc. -  Over the past year, income-starved investors have flooded in to closed-end funds. Closed-end funds typically offer very attractive yields compared to mutual funds thanks to their use of leverage. The average long-term municipal bond closed-end fund, for example, had a distribution rate of 5% at the end of September. The mutual fund average was just 3%. 

PIMCO CEF Cuts Distribution, Shares Plummet
Oct. 13, 2016 - Morningstar, Inc. -  The risk of buying CEFs at huge premiums comes to fruition.

OPEC Philosophy Shift Solidifies Case for Oil Recovery
Oct. 12, 2016 - Cohen & Steers -  On September 28, 2016, the Organization of the Petroleum Exporting Countries (OPEC) announced plans to establish a production target to help stabilize the global oil market. While the ongoing recovery in oil fundamentals does not hinge on OPEC, we believe supply cuts would accelerate the rebalancing process, supporting our base case for higher oil prices over the next two years.

Some Insight Into The S&P 500 Index Dividend Payout
Oct. 11, 2016 - First Trust -  View from the Observation Deck
1. Today's chart provides a comparison of the contributions to the S&P 500 Index's dividend payout, by sector, using current levels (9/30/16) versus the end of 2006.
2. We chose 12/31/06 levels in order to highlight where contribution levels stood prior to the 2008-2009 financial crisis.

Inflation Ready to Rise
Oct. 10, 2016 - First Trust -  One of the key excuses for the Federal Reserve to hold off raising rates again and again, and to raise them very slowly, is that inflation remains extremely low

S&P 500 Index Dividend-Payers Still Distributing Lots Of Cash To Shareholders

Oct. 04, 2016 - First Trust -  View from the Observation Deck
1. S&P 500 Index companies paid out $98.30 billion in stock dividends in Q2'16,up 4.1% from the $94.45 billion distributed in Q2'15.
2. It marked the seventh consecutive quarter in which cash dividend distributions exceeded $90 billion.Over the past 35 quarters through Q2’16,the average dividend payout was $70.8 billion.

Cut Spending to Grow Economy
Oct. 03, 2016 - First Trust -  Austan Goolsbee, former Chairman of President Obama’s Council of Economic Advisors, was interviewed by Paul Gigot on Fox News this past weekend and asked about slow economic growth. He argued that “a lack of ‘aggregate demand’ around the world and in the United States” is reducing business investment and slowing economic growth.

Indonesia by Numbers
Sep. 30, 2016 - Aberdeen Asset Management -  With a population of over 250 million, Indonesia’s growth potential is undeniable. President Joko Widodo, or Jokowi as he is more widely known, has been pushing for reforms in the Southeast Asian archipelago. The country is making steady progress. It has vowed to improve infrastructure and open opportunities to foreign investors, which should bode well for its long-term prospects.

2nd Quarter GDP (Final)
Sep. 29, 2016 - First Trust -   Real GDP growth in Q2 was revised up to a 1.4% annual rate versus a prior estimate of 1.1%. The consensus expected 1.3%.
 The largest upward revisions were for business investment, inventories, and net exports.

The Growth In State Tax Collections May Be Better Than Some Think

Sep. 29, 2016 - First Trust -  View from the Observation Deck
1. The latest data on state tax collections in the U.S. is as of Q1’16.We have provided data going back 40 quarters (10 years) to Q2’06.
2. Totalstate tax collectionsregistered gainsin 34 of the 40 quarters,on a year-over-year basis,or 85% of the time.Five of the six quarters where growth rates turned negative occurred during the 2008-2009 financial crisis.

The Recovery In Financials Could Include Rising Dividend Payouts

Sep. 27, 2016 - First Trust -  View from the Observation Deck
1. As indicated in the chart, from 2004-2007,the financial companies in the S&P 500 Index accounted for nearly 30% of the S&P 500 Index’s dividend payout. In that period, no other sector even reached 15%.
2. The chartshows a steep plunge in the contribution from financial companiesin 2009 and 2010.This was an unfortunate byproduct of the 2008-2009 financial crisis.

It’s Still the Fed, And It’s Not Magic
Sep. 26, 2016 - First Trust -  We hate to do this and we hope we don’t put you to sleep so early in the week, but it’s time to talk about monetary policy. Specifically, the “transmission mechanism” of monetary policy

Rate Hike Looks Set for December
Sep. 21, 2016 - First Trust -  The Federal Reserve kicked the rate hike can down the road once again, but looks very likely to raise rates in December.

Technology Stocks Have Delivered Strong Returns In The Current Bull Market

Sep. 20, 2016 - First Trust -  View from the Observation Deck
1. From 3/9/09-9/19/16 (current bull), all four of the technology-related indices featured in the chart outperformed the S&P 500 TR Index.
2. The average annualized total returns for the period were as follows: ISE Cloud Computing TR Index (+29.99%);Dow Jones Internet Composite TR Index (+28.05%);Philadelphia Semiconductor Index (+23.12%);S&P 500 InformationTechnology TR Index (+21.70%); and S&P 500 TR Index (+19.00%), according to Bloomberg.

The Glass Half Empty
Sep. 19, 2016 - First Trust -  We get called perma-bulls, wrongly we think, becausewe were late to call 2008 a Panic, and because we've pushedback against the doom and gloom of the past 7 1/2 years. Time and again over the past several years, we’ve argued the Plow Horse economy would continue to grow   

This Covered Call Index Tends To Beat The Broader Market In Low Return And Negative Return Climates

Sep. 15, 2016 - First Trust -  View from the Observation Deck
1. From 2001-2015,the CBOE S&P 500 BuyWrite Index (an index designed to measure a covered call strategy) outperformed the S&P 500 Index in six of the 15 calendar years. It is has lagged year-to-date thru 9/13/15 (see chart).
2. Over that 15 year period (2001-2015), the S&P 500 Index posted an average annual total return of 5.00%, compared to 3.93% for the CBOE S&P 500 BuyWrite Index, according to Bloomberg.

Size Matters When It Comes to CEF Premiums
Sep. 15, 2016 - Morningstar, Inc. -  Thirsty investors are pushing some CEF share prices into the stratosphere.

Infrastructure Investors Due an Income Boost from Chancellor
Sep. 13, 2016 - Morningstar, Inc. -  Looking for alternative assets for your income portfolio? The infrastructure sector is poised for a cash injection as the new Conservative Government seeks to boost the economy

Leveraged Loans (Senior Loans) Could Be One Of The Beneficiaries Of Higher Interest Rates

Sep. 13, 2016 - First Trust -  View from the Observation Deck
1. Conventional thought says that it is prudent to shorten the duration of one's bond holdings when interest rates are on the rise. With respect to pricing,fixed-rate bonds are particularly vulnerable to rising interest rates.
2. Today’s post seeks to illustrate that investors may shift capital in and out of floating-rate corporate securities based on the rise or fall of either short-term or longer-term interest rates.

Fundamentals, Not Headlines
Sep. 12, 2016 - First Trust -  The S&P 500 dropped 2.5% on Friday while the yield on the 10-year Treasury note rose to 1.67%, the highest since June. You’ll have to excuse us if we’re unimpressed.

QE Is Not A Magic Elixir
Sep. 06, 2016 - First Trust -  In the Wild West, traveling salesmen sold Magic Elixirs that cured anything that ailed you. These days, the elixir is Quantitative Easing (QE) – it supposedly saved the world from Armageddon, lifted stock prices, drove down bond yields, and, according to at least one analyst, created the fracking boom.

The Bull Market In The S&P 500 Index May Be Picking Up Steam After A Sluggish 2015

Sep. 06, 2016 - First Trust -  View from the Observation Deck
1. From 1981 through 2015, the average number of stocks in the S&P 500 Index that finished the calendar year in positive territory was 312, according to data from S&P Dow Jones Indices.
2. As indicated in the chart,the number of stocks in the index that were up through the first eight months of 2016 totaled 355, outpacing each of the previous five-year averages.

The U.S.Dollar Index Has Been Range Bound Since March 2015

Aug. 30, 2016 - First Trust -  View from the Observation Deck
1. The U.S.dollar hasstrengthened significantly relative to other major world currenciessince the middle of 2014.A strong dollar can make U.S.goods and services less competitive,with respect to price, in the global marketplace.
2. From 6/30/14 through 8/29/16 (period in the chart),the U.S.Dollar Index rose from a reading of 79.78 to 95.58,or a gain of 19.80%, according to Bloomberg.When measuring the index from 6/30/14 to its high (100.33) for the period on 3/13/15,the index rose by 25.76%. From 3/13/15 (high) through 8/29/16, however,the index was down 4.73%.

Bull Market Has Further to Run
Aug. 29, 2016 - First Trust -  Now, the pessimists can’t stop talking about profits. S&P 500 reported earnings are down 3.4% and the government’s economy-wide measure of corporate earnings are down 4.9% from a year ago.

2nd Quarter GDP (Preliminary) 

Aug. 26, 2016 - First Trust -   Real GDP was revised to a 1.1% annual growth rate in Q2 from a prior estimate of 1.2%, matching consensus expectations.
 The largest downward revisions were for net exports, government purchases, and inventories,

S&P 500 Index Stock Prices Relative To Their 52-Week Highs

Aug. 23, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post updates three previous posts done on 7/7/16 (click here to view), 5/17/16 (click here to view) and on 2/16/16 (click here to view).
2. The S&P 500 Index, which is capitalization-weighted, posted a total return of 13.22% for the 12-month period ended 8/22/16, according to Bloomberg.On a price-only basis,which excludes dividends,the index was up 10.74%

Dividend Growth Slows but Closed-End Funds Pay Out
Aug. 23, 2016 - Morningstar, Inc. -  As UK dividends recorded the slowest growth among its global peers in the second quarter of 2016, we reveal 6 investment trusts with decades of dividend increases

Shut Out the Pessimists
Aug. 22, 2016 - First Trust -  You know the economy is getting better when the pessimists’ theories on economic doom have been so wrong for so long they have to start recycling the old ones.

Is a Passive Approach Appropriate in the Non-Investment Grade Debt Markets?
Aug. 19, 2016 - First Trust -  Introduction
Investors have debated the merits of active and passive investing for decades with proponents on each side making valid points in support of and against each approach. The convenience of “buying the market” to gain broad exposure to an asset class in a low-cost investment is an elegant and enticing solution.

The U.S. Crude Oil Rig Count Is Rising But The Natural Gas Rig Count Is Not

Aug. 18, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post illustrates the dramatic reduction in the number of active U.S. crude oil and natural gas rigs since energy prices peaked in 2014.
2. Rig count cuts are generally done in an effort to curb production in response to declining energy prices. Rig counts tend to rise when energy producers sense that higher prices are not only coming, but are sustainable.

Tender Offers
Aug. 15, 2016 - Wells Fargo Advisors -  When the market price of a CEF's shares trades at a persistently wide discount to its net asset value (NAV), its board may decide to announce a tender offer, which would usually allow shareholders to tender a portion of their shares to be purchased by the CEF at some point in the future at a narrower discount than the prevailing discount.

Beware of Popular Narratives

Aug. 15, 2016 - First Trust -  Narratives matter. They affect political outcomes and influence investment decisions. Narratives serve a purpose, but in serving that purpose they are often highly misleading, especially when they are invented to cover up a mistake, or to convince people to vote a certain way. These days, there are three main narratives impacting investors.

Investors Embrace Property and Smaller Companies Trusts
Aug. 12, 2016 - Morningstar, Inc. -  Property and smaller companies close-ended funds captured investors' attention on Morningstar.co.uk in July following the EU referendum

Morningstar’s Top Tips For Investing in CEFs
Aug. 11, 2016 - Morningstar, Inc. -  Investors willing to take the time to learn the ins and outs of CEFs will discover a relatively unfollowed and often mispriced slice of the market.

Retail Investors Continue To Invest In Foreign Stocks
Aug. 09, 2016 - First Trust -  View from the Observation Deck
1. Over the past 6½ calendar years (2010-6/16), retail investors funneled a net $399.85 billion into open-end World Equity mutual funds, according to data from the Investment Company Institute (ICI).
2. As indicated in the chart, all periods registered net inflows despite multiple negative total returns for the MSCI Daily TR Net World (Ex-U.S.) Index and MSCI Daily TR Net Emerging Markets Index.

June International Trade
Aug. 05, 2016 - First Trust -   The trade deficit in goods and services came in at $44.5 billion in June, larger than the consensus expected $43.0 billion.
 Imports rose $4.2 billion, led by crude oil, pharmaceuticals, and cell phones & other household goods. Exports increased $0.6 billion in June, led by civilian aircraft and corn.

Utilities Looking A Bit Rich After Staging Strong Rally In 2016

Aug. 02, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post is an update of one we did on 7/9/15 (click here to view).
2. The yield on the 10-year Treasury note fell from 2.32% on 7/9/15 to 1.45% on 7/29/16, or a decline of 87 basis points, according to Bloomberg.

GDP Distortions
Aug. 01, 2016 - First Trust -  As recently as two years ago, more than 70% of Americans thought the US economy was still in recession. We’re not sure what that figure is today – maybe pollsters are too busy with the election – but we’d bet it’s still very high.

Global Real Estate Securities
Jul. 31, 2016 - Cohen & Steers -  Investment Review
Global real estate securities rallied in July, adding to their healthy year-to-date gains. Stocks generally continued to move higher after the initial shock of the U.K.'s Brexit vote wore off in late June.

State Street Fee Revenue Drops on Weaker Market Conditions
Jul. 27, 2016 - WallStreetJournal -  State Street Corp.’s shares jumped nearly 7% after the trust bank reported a quarterly profit that beat Wall Street estimates on lower costs.

Consumer Stocks Have Outperformed The Broader Market Over The Past 10 Years

Jul. 26, 2016 - First Trust -  View from the Observation Deck
1. Today’s blog post compares quarterly total returns for the S&P 500 Index versus a 50/50 split between the S&P 500 Consumer Discretionary Index and the S&P 500 Consumer Staples Index.
2. For the 10-year period ended 6/30/16,the 50/50 split outperformed the S&P 500 Index in 21 of the 40 quarters.

Fed Policy Not in Tune With Data
Jul. 25, 2016 - First Trust -  If the Fed were completely honest and transparent, its statement on monetary policy on Wednesday would be only two words: “We goofed.”

June Existing Home Sales 
Jul. 21, 2016 - First Trust -  Existing home sales increased 1.1% in June to a 5.57 million annual rate, beating the consensus expected 5.48 million. Sales are up 3.0% versus a year ago.

The Search For Yield In the Bond Market
Jul. 19, 2016 - First Trust -  View from the Observation Deck
1. Today’s blog post shows where some major bond index yields stood at the close of 6/30/16, and also where they closed in June over the past three, five and seven years.
2. The U.S. economic recovery began in Q3’09, according to the National Bureau of Economic Research

Real GDP Accelerating
Jul. 18, 2016 - First Trust -  Forecasting economic growth from quarter to quarter is a humbling experience. Even when you get the trend right – and it’s hard to beat our forecast of Plow Horse growth – there’s always a quarter here and there that will throw you for a loop.

Gotta Catch This Muni CEF
Jul. 14, 2016 - Morningstar, Inc. -  Nuveen Municipal Value is one of our top picks, despite a recent manager change.

BlackRock CEO: Investors Are ‘Afraid’
Jul. 14, 2016 - WallStreetJournal -  BlackRock CEO Laurence Fink speaks after profit at asset manager slips and assets rise to record

June PPI
Jul. 14, 2016 - First Trust -  The Producer Price Index (PPI) increased 0.5% in June, coming in above the consensus expected rise of 0.3%. Producer prices are up 0.3% versus a year ago.
The rise in producer prices in June was broad-based, with final demand services, up 0.4% and final demand goods up 0.8%. Energy prices rose 4.1% in June while food prices increased 0.9%. Producer prices excluding food and energy rose 0.4%.

3 Reasons U.K. REITs May Withstand the Brexit Fallout
Jul. 13, 2016 - Cohen & Steers -  With negative sentiment swirling around the U.K., is it time to be a buyer of Britain? We believe many U.K. REITs are well positioned to weather economic uncertainty, aided by stronger balance sheets, greater focus on core assets and an emphasis on cash flow growth over development.

A Snapshot Of S&P 500 Index Dividend Increases In The Current Bull Market

Jul. 12, 2016 - First Trust -  View from the Observation Deck
1.. Today’s blog post is just one perspective of the recovery that Corporate America has staged since the end of the financial crisis in 2009, as measured by dividend increases of S&P 500 Index component companies.The current bull market in stocks commenced on 3/9/09.
2. Stock dividend distributions are one measure of a company’s financial well-being.Dividend increases are an important barometer because companies are not likely to raise their dividend payouts unless they can sustain it for an extended period of time, in our opinion.

Senior Loan & High Yield Review – 2nd Quarter 2016
Jul. 12, 2016 - First Trust -  In the second quarter of 2016, capital markets experienced a major reversal from the negative trends and high volatility of the first quarter. At the low-point, which was reached on February 11, 2016, the high-yield bond index was off 5.14% and the senior loan index was off 1.36% year-to-date, respectively

Ignore the Central Banks
Jul. 11, 2016 - First Trust -  How many times does Chicken Little have to wrongly squawk before investors get it? Yes, payrolls increased just 38,000 in May, and yes, British voters opted for political independence from the European Union. And, yes, Stock markets swooned. But, they will likely hit new highs this week. Just another head fake, brought to you by the bad news bears.

Bill Gross: the Market’s Game of ‘Monopoly’ Is Coming to an End
Jul. 06, 2016 - WallStreetJournal -  The game is ending, and some people haven’t even figured out the rules yet.

Watch Earnings, Not Fearful Forecasts
Jul. 05, 2016 - First Trust -  We wish we had a dime for every recession forecast we’ve heard in the past seven years. Like someone with hypochondria, fearful forecasters feel economic doom and gloom is right around the corner after every dip in economic data or shift in economic policy.

Commodity Prices Up Sharply In Q2’16
Jul. 05, 2016 - First Trust -  View from the Observation Deck
1. Commodity prices posted their third best quarterly showing in the past 40 quarters (10 Years) in Q2’16, as measured by the Bloomberg Commodity Total Return Index. It was the best quarter for gains since Q4’10.
2. The Bloomberg Commodity Total Return Index was up in 21 of the past 40 quarters, or 52.5% of the time.The index, however, has posted four quarters of double-digit losses since Q2’14 (see chart).

June ISM Manufacturing Index
Jul. 01, 2016 - First Trust -  The ISM manufacturing index rose to 53.2 in June, easily beating the consensus expected level of 51.3. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)

UK Small and Mid-cap Investment Trusts Fall Up to 20%
Jun. 30, 2016 - Morningstar, Inc. -  Closed-end funds invested in small and mid-cap stocks have dropped in price since the Brexit vote was revealed last week, creating an opportunity for the brave contrarian investor

Equity REITs Have Shined Relative To Financials Over The Past 15 Years

Jun. 28, 2016 - First Trust -  View from the Observation Deck
1. On September 16, S&P Dow Jones Indices will be adding an 11th sector to the S&P 500 Index:Real Estate Investment Trusts (REITs), according to its own release.
2. Currently,REITs are classified as an industry group within the financialsector.Today’s chartshowsthe relative performance of equity REITs and Financials for standard time periods.

Uncertainty Not All Bad 
Jun. 27, 2016 - First Trust -  If you listen to elite policymakers around the globe, they all seem to agree on one thing: the need to avoid “uncertainty.” In their thinking the battle against uncertainty is a never-ending struggle, and if only the world were more certain the economy would be doing much better

How Some Major Bond Indices Have Fared Over The Past Five Years

Jun. 21, 2016 - First Trust -  View from the Observation Deck
1. Today’s blog post is a simple exercise we can do to quickly assess how the various major bond categories are performing.
2. We are using a five-year time frame because it has historically been characterized as a long-term holding period for securities.

Policy Stagnation
Jun. 20, 2016 - First Trust -  Back in the 1970s, President Jimmy Carter told us that we were just going to have to learn to live with less. The mood among establishment economists in the late 1970s was gloomy. The world was running out of oil; inflation was an odd phenomenon that was beyond our control. Sure, we could get lower unemployment, but only by letting inflation get even higher. Somehow, the US had lost its post-war economic mojo and just wasn’t going to get it back.

Municipal CEFs: Hold the Door
Jun. 16, 2016 - Morningstar, Inc. -  The threat of rising rates caused a brief sell-off in municipal bond CEFs in May. Plus, muni CEFs aren't as expensive as they look.

Municipal Quarterly Update – 1st Quarter 2016
Jun. 15, 2016 - First Trust -  1st Quarter 2016 Municipal Market Performance and Highlights
• While municipal bonds posted positive total returns during the first quarter of 2016,munislagged other asset classes including U.S. Treasuries. The Barclays Municipal Bond Index returned 1.67% for the three months ended March 31, 2016,while the Barclays Municipal 10 Year Revenue Index had a total return of 1.98%. In comparison, the Barclays U.S. Treasury Index returned 3.20% for the three months ended March 31, 2016.(Source: Barclays, SIFMA.org)

Fed Projects Very Slow Path for Rate Hikes 
Jun. 15, 2016 - First Trust -  At her post-meeting press conference Fed Chief Janet Yellen emphasized that it’s important not to “overreact” to one or two reports on the economy. But that’s exactly what the Fed did by refraining from raising rates at today’s meeting and notably altering its projections for future rate hikes.

The Outlook For 2016 Earnings Indicates Recovery Mode For Q2, Q3 & Q4

Jun. 14, 2016 - First Trust -  View from the Observation Deck
1. Today's chart is intended to give investors some visual perspective on where equity analysts think earnings are headed following a disappointing showing by the S&P 500 Index in Q1’16.
2. As indicated in the chart,the consensus estimates from equity analysts tracked by Bloomberg reflect an upward trajectory for earnings over the next three quarters. Earnings estimates are subject to change.

Why Does Japan Still Charge Taxes? 
Jun. 13, 2016 - First Trust -  Investors often wonder why governments don’t operate more like households, balancing their budgets year by year. Seems like good advice, right? If households can’t live beyond their means forever, governments shouldn’t either. But, what if your household could borrow for free? In other words, what if you were Japan!

A Snapshot Of European Equities
Jun. 07, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post is an update of one we did on 2/2/16 (click here to view).
2. The 2016 earnings growth rate estimates (see chart) are in some cases much higher than they were back in February.This was due to 2015’s earnings being revised lower.

Brexit Is Freedom
Jun. 06, 2016 - First Trust -  Earlier this year, NHL hockey fans were asked to vote for the captains of the four teams to face off in this year’s new AllStar tourney. Three of the picks were players you’d expect: Jaromir Jagr from the Florida Panthers, Alex Ovechkin from the Washington Capitals, and Patrick Kane from the Chicago Blackhawks: True Gods of the Rink, who have scored hundreds of points.

A Snapshot Of Bond Valuations
Jun. 02, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post is one we do on an ongoing basis so that investors can monitor fluctuations in bond prices relative to changes in interest rates and the global economy.
2. From 1/15/16 (1/18 was a holiday) through 5/31/16 (chart dates),the yield on the benchmark 10-Year Treasury Note (T-Note) declined 19 basis points, from 2.04% to 1.85%, according to Bloomberg. It was as low as 1.66% (2/11/16) in the period.

Greece is Already Bankrupt 
May. 31, 2016 - First Trust -  One of the recurring pessimistic themes of the past several years is that Greece is about to default on its debt. Now that Greece is negotiating again, this fear is back. Some wonder if a major European financial firm, like Deutsche Bank, will also fail.

April Durable Goods
May. 26, 2016 - First Trust -  New orders for durable goods rose 3.4% in April (+3.9% including revisions to prior months). The consensus expected a gain of 0.5%. Orders excluding transportation rose 0.4% in April, slightly above the consensus expected increase of 0.3%. Orders are up 1.9% from a year ago while orders excluding transportation are down 1.4%.

U.S. Equities Still The Dominant Market On The Globe
May. 24, 2016 - First Trust -  View from the Observation Deck
1. Today’s post is an update of one we did on 8/25/15 showing the changes in total world equity market capitalization (market cap) over a 10-year period (8/21/05 thru 8/24/15).We have extended the chart through 5/23/16.
2. This snapshot is a reminder to all investors that, while stocks have the potential to build wealth over time,stock markets do not go up in a straight line.

Fed Teeing Up Rate Hike
May. 23, 2016 - First Trust -  Just a couple of weeks ago the odds of the Federal Reserve raising rates in June were slim to none. The federal funds futures market put the odds of a rate hike around 4%.

China’s economic stimulus: finally working, but for how long?
May. 19, 2016 - Aberdeen Asset Management -  We believe China’s substantial monetary and fiscal stimulus is finally translating into stronger economic activity. Whether this boost is sustained, or fizzles out under the weight of the large structural imbalances in the Chinese economy, may be one of the defining features of this year’s global economic and investment landscape. 

April Housing Starts
May. 17, 2016 - First Trust -  Housing starts increased 6.6% in April to a 1.172 million annual rate, easily beating the consensus expected 1.125 million. Starts are down 1.7% versus a year ago.

S&P 500 Index Stock Prices Relative To Their 52-Week Highs

May. 17, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post is an update of one we did on 2/16/16 (click here to view).Today’s chart reflects improvement across the board.
2. The S&P 500 Index, which is capitalization-weighted, posted a total return of -0.51% for the 12-month period ended 5/16/16, according to Bloomberg.On a price-only basis, which excludes dividends,the index was down 2.64%.

April PPI
May. 13, 2016 - First Trust -  The Producer Price Index (PPI) increased 0.2% in April, coming in below the consensus expected rise of 0.3%. Producer prices are up 0.1% versus a year ago.

Interest Rate Levels Do Not Portend A Bear Market In Stocks

May. 12, 2016 - First Trust -  View from the Observation Deck
1. Today’s blog post is intended to provide a little historical perspective as to where two key benchmark interest rates stood prior to U.S. equities, as measured by the S&P 500 Index,succumbing to bear markets.
2. A bear market in stocks is defined as a decline of 20% or more in the price level of a benchmark index,such as the S&P 500 Index

The Future of CEFs Gets Dimmer With DOL Ruling
May. 12, 2016 - Morningstar, Inc. -  Last month, the Department of Labor released its finalized rules on the Fiduciary Standard. We've discussed what that standard could mean for closed-end funds, particularly the IPO market, previously. This month, we will briefly revisit that discussion under the context of the new rules.

April Employment Report
May. 06, 2016 - First Trust -  Nonfarm payrolls increased 160,000 in April, missing the consensus expected 200,000. Including revisions to February/March, payrolls rose 141,000.

2016 & 2017 Earnings Snapshot
May. 03, 2016 - First Trust -  View from the Observation Deck
1. Today's blog features corporate earnings projections for 2016 and 2017. We provide updates on an ongoing basis.
2. The plunge in the price of crude oil since mid-2014 has resulted in a sharp decline in the projected earnings of energy-related companies in 2016 and a subsequent triple-digit projected surge in 2017.

Apple vs The Fed

May. 02, 2016 - First Trust -  Honest question: How much time does the Apple Inc. Board of Directors spend debating whether the Federal Reserve will hike rates once or twice more in 2016? We don’t really know the answer, but we would guess the best answer is zero.

First Quarter GDP (Advance)

Apr. 28, 2016 - First Trust -   The first estimate for Q1 real GDP growth is 0.5% at an annual rate, slightly below the 0.7% the consensus expected. Real GDP is up 1.9% from a year ago.  Consumer spending and home building provided the largest positive contributions to Q1 real GDP growth. Business investment, inventories, trade, and commercial construction subtracted from growth.

A Snapshot Of Major Emerging Market Stock Indices
Apr. 28, 2016 - First Trust -  View from the Observation Deck
1. Emerging markets continue to be a mixed bag. As indicated in the chart, economies steeped in natural resources,such as Russia and Brazil, have performed quite well due in part to the rebound in the price of crude oil.
2. Year-to-date through the close on 4/27,the price of a barrel of crude rose by 22.38% to $45.33, according to Bloomberg.The price of crude oil was up 72.95% from this year’s closing low of $26.21 per barrel on 2/11.

OPEC and the Ash Heap of History
Apr. 25, 2016 - First Trust -  Almost thirty-five years ago, President Reagan went to the British House of Commons and said “freedom and democracy will leave Marxism and Leninism on the ash heap of history.” Reagan chose his words carefully, using a phrase – the ash heap of history – very similar to the one used by the Russian Communist revolutionary Leon Trotsky against his political enemies. Within a decade, the Berlin Wall was no more and neither was the Soviet Union.

Closed-End Fund Review – First Quarter 2016
Apr. 24, 2016 - First Trust -  First Quarter Overview
After a difficult first six weeks of the year, most categories of the closed-end fund (CEF) marketplace rallied strongly during the second half of the first quarter. Indeed, the average CEF finished the quarter up 2.73% on a share price total return basis

A Snapshot of Growth vs.Value Investing
Apr. 19, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post is an update of a previous one. Investors can compare today's snapshot to the one we did on 2/11/16 (click here to view).
2. Growth tends to outpace value investing when the earnings growth rates of said companies accelerate faster than the broader market,such as right after the economy exits a recession.Growth has slowed of late.

The Q1 Curse Strikes Again
Apr. 18, 2016 - First Trust -  Remember the recession of 2011, or 2014, or 2015?
Each of those years started out with either a contraction or anemic first quarter economic growth. But despite these slowdowns, the US economy didn’t fall into recession. Instead, it was just more Plow Horse growth.

Why Core Bond Funds Still Make Sense
Apr. 18, 2016 - Morningstar, Inc. -  Even in the face of rising interest rates, bonds remain an important allocation for retired investors.

March CPI
Apr. 14, 2016 - First Trust -   The Consumer Price Index (CPI) increased 0.1% in March, coming in below the consensus expected rise of 0.2%. The CPI is up 0.9% from a year ago.  “Cash” inflation (which excludes the government’s estimate of what homeowners would charge themselves for rent) rose 0.1% in March and is up 0.4% in the past year.

It’s Time To Get Real
Apr. 14, 2016 - First Trust -  View from the Observation Deck
1. As of the close of 4/13/16,the yield on the 10-Yr.T-Note was 1.77%.That is just one basis point above its 1.76% close on 12/31/12 (we will reference this again), according to Bloomberg.
2. This morning’s release of the Consumer Price Index (CPI) headline rate showed that U.S. inflation stood at 0.9% in March, according to the Bureau of Labor Statistics.

No Market for Covered-Call CEFs
Apr. 14, 2016 - Morningstar, Inc. -  Covered-call closed-end funds can benefit when volatility rises, but recent returns have been disappointing.

Closed-end Fund Investors Favour UK Equities
Apr. 14, 2016 - Morningstar, Inc. -  Which are the top closed-end funds according to Morningstar readers? Equity trusts top the charts, in particular those offering exposure to developed market stocks

The Bears Get Excited Again 
Apr. 11, 2016 - First Trust -  Since March 9, 2009, stock market bears have used every negative piece of economic data to argue their case. Last week they were hyperventilating over first quarter real GDP growth estimates. After recent inventory data, the Atlanta Fed GDPNow Model said annualized growth will be just 0.1% in Q1. It could be zero, or even negative

Not A Bad Bull Market After All
Apr. 07, 2016 - First Trust -  View from the Observation Deck
1. Today’s chart features performance figures for some major domestic and foreign stock and bond indices in the current bull market, which for equities commenced after 3/9/09.
2. Nearly all of the average annualized total returns depicted in the chart compare favorably to a couple of long-term historical averages

Don’t Short the Participation Rate!

Apr. 04, 2016 - First Trust -  Last Friday was an interesting day. For years now, the US has consistently added jobs and the unemployment rate has steadily fallen. But, the Pouting Pundits of Pessimism keep arguing that a falling unemployment rate is only because of weak growth in the labor force.

Companies Are Repurchasing Stock At A Better Than Average Clip

Mar. 29, 2016 - First Trust -  View from the Observation Deck
1. Stock buybacks are one way that a company can return capital to shareholders, particularly those companies that reduce outstanding share count.
2. Companies with excess cash can also spend it on such things as capital expenditures,stock dividends, mergers and acquisitions (M&A) and R&D.

US Needs Sensible Debt Financing
Mar. 28, 2016 - First Trust -  Instead of imposing strict fiduciary rules on Wall Street, banks, investment houses, and financial advisors, the government should apply similar rules to the managers of the federal debt. This is particularly true because unlike the private sector – which faces tough market competition every day – the debt managers at the Treasury Department have a monopoly.

Aberdeen Asia Pacific Equities
Mar. 23, 2016 - Aberdeen Asset Management -  Should China’s stockmarket crash be a concern?
We believe Chinese equity markets are divorced from reality. In our view, when share prices are driven by the interaction between state-sponsored market manipulation and the speculative instincts of millions of retail investors, they cease to serve as a gauge of a company’s quality.

Commodity Prices Get Some Relief From Decline In The U.S.Dollar

Mar. 22, 2016 - First Trust -  View from the Observation Deck
1. Commodity prices declined in each of the past five calendar years (see chart), as measured by the Thomson Reuters/CoreCommodity CRB Commodity Index.
2. The U.S.Dollar Index (DXY) posted gains in four of those five years.The only exception was a slight decline of -0.51% in 2012

Money Misperceptions 
Mar. 21, 2016 - First Trust -  1 – The Panic of 2008 was not caused by tight monetary policy. 2 – Zero percent interest rate policy (ZIRP) and Quantitative Easing (QE) did not save the US or global economies. 3 – Monetary policy in the US is getting looser as the Fed hikes rates, and, 4 – negative interest rates in Japan and Europe are not working.

Should These Funds Close?
Mar. 20, 2016 - Morningstar, Inc. -  Morningstar.com readers fear these Vanguard, Fidelity, and other funds are getting too big to continue their winning ways.

Real Estate in a Class of Its Own

Mar. 15, 2016 - Cohen & Steers -  How the New Real Estate GICS Sector Classification Could Bring a $100 Billion Influx of Demand and Lower Volatility

Some Insight Into The S&P 500 Index Dividend Payout
Mar. 15, 2016 - First Trust -  View from the Observation Deck
1. Today’s chart provides a comparison of the contributions to the S&P 500 Index’s dividend payout, by sector, using current levels (3/11/16) versus the end of 2008.
2. We chose 12/31/08 levels in order to capture the fallout from the financial crisis.The U.S. was in a recession at that time.The recession lasted from December 2007 through June 2009, according to the National Bureau of Economic Research.

Don’t Fear Consumer Debt 
Mar. 14, 2016 - First Trust -  For decades, the issue of debt has often dominated discussions of economics. It’s especially true these days with a $19 trillion federal debt and the fact that home loans were at the heart of the Panic of 2008. Lately, some analysts have fretted about student loans and many think economic growth in this recovery has been driven by borrowing.

MLPocalypse Averted for Now
Mar. 10, 2016 - MLP HINDSight -  This month, we highlight some of the issues master limited partnership closed-end funds have faced in the past year and a half (and are likely to face in the future as the volatility in sentiment and oil prices is far from over). We discussed some of these concerns in the November CEF Monthly and will build on them here.

Retail Investors Partial To Foreign Equities Over The Past Two Years

Mar. 08, 2016 - First Trust -  View from the Observation Deck
1. From 1/14 through 1/16 (most recent monthly data), investors liquidated a net $46.68 billion from open-end mutual funds (does not include money market funds), according to the Investment Company Institute (ICI).
2. The major fund categories in the chart indicate that investors funneled the most capital into foreign equities, which is interesting considering all of the attention focused on the slowdown in global growth over the past two years.

Beware Trade-Recession Scare Story

Mar. 07, 2016 - First Trust -  Friday’s robust report on job growth ought to put the nail in the coffin on recent fears about a recession. Payrolls rose 242,000 and civilian employment, an alternative measure of jobs that includes small business start-ups, increased 530,000. In the past year, these two measures are both up approximately 2.7 million. Obviously, we’re not in a recession.

February Employment Report
Mar. 04, 2016 - First Trust -  Nonfarm payrolls increased 242,000 in February versus a consensus expected 195,000. Including revisions to December/January, payrolls rose 272,000.

A Snapshot Of The Top Performing S&P 500 Sector Indices Over Time

Mar. 03, 2016 - First Trust -  View from the Observation Deck
1. The first thing that pops out to us looking at the chart is the sheer number of defensive sectors that posted the highest total returns in the 16 respective periods.
2. Of the 16 periods featured in the chart, 13 of the sector indices that performed best, or 81.25%, are considered defensive in nature.They are Telecommunication Services, Consumer Staples, Health Care and Utilities.

Currency Mayhem 
Feb. 29, 2016 - First Trust -  With both the European Central Bank (ECB) and the Bank of Japan moving to a Negative Interest Rate Policy (NIRP), conventional wisdom says the US dollar will continue to strengthen. After all, the Fed is tightening while everyone else seems to be working overtime to ease policy.

Block Trading In The S&P 500 Index Has Turned For The Better

Feb. 23, 2016 - First Trust -  1. The S&P 500 Index set its all-time high on 5/21/15 at 2,130.82. From 5/21/15 through 2/22/16,the index declined by 8.70% to 1,945.50.
2. As indicated in the two charts, both block (10,000 shares or more) and non-block (< 10,000 shares) trading patterns in the S&P 500 Index have mostly signaled a selling bias since 5/21/15.

January CPI
Feb. 19, 2016 - First Trust -  The Consumer Price Index (CPI) was unchanged in January, coming in above the consensus expected decline of 0.1%. The CPI is up 1.4% from a year ago.

Preferreds May Present Buying Opportunity Amid Bank Profit Concerns

Feb. 18, 2016 - Cohen & Steers -  Growing worries over bank profitability have pressured bank stocks and credit, including preferred securities. We discuss why the pillars of the preferreds story remain intact—and why we believe market turbulence may present a compelling entry point.

No Sign of Recession in the Data

Feb. 16, 2016 - First Trust -  So far this year, the S&P 500 is down around 9% and has been down as much as 10.5%, a garden variety correction. But some pessimistic pundits, analysts, and investors are treating the correction as a harbinger of the recession they’ve predicted multiple times before, ever since the economy started to recover in mid-2009

The Average Stock In The S&P 500 Index May Be Down More Than You Think

Feb. 16, 2016 - First Trust -  View from the Observation Deck 1. Today's blog post is an update of a previous one. Investors can compare today's snapshot to the one we did on 1/7/16 (click here to view).

January Retail Sales
Feb. 12, 2016 - First Trust -   Retail sales increased 0.2% in January, beating the consensus expected 0.1% gain. Including revisions to prior months, sales rose 0.4%. Retail sales are up 3.4% versus a year ago.
 Sales excluding autos increased 0.1% in January (+0.2% including revisions to prior months), beating consensus expectations of no change. These sales are up 2.5% in the past year. Excluding both autos and gas, sales are up 3.8% versus a year ago.

Unlock the Potential of Muni CEFs
Feb. 11, 2016 - Morningstar, Inc. -  Closed-end funds can offer investors a superior way to invest in a diversified basket of tax-advantaged bonds, but the complexity of the CEF wrapper might understandably scare some investors away. This month we will attempt to demystify municipal-bond CEFs so that investors can unlock the potential within.

China, US Dollar and Oil Create Volatile Brew for 2016 Markets

Feb. 10, 2016 - State Street Global Advisors -  Concerns about growth in China, the impact of a strong dollar and ongoing pressure on the prices of oil and other commodities continued to weigh heavily on global markets as we enter 2016. Furthermore, all eyes continue to be on the Fed as market participants look for signs of the next rate move – whether, when, and how many.

Sector Performance Via Market Capitalization
Feb. 09, 2016 - First Trust -  View from the Observation Deck
1. From 2/5/15 through 2/5/16, large-capitalization (cap) stocks outperformed both mid- and small-cap stocks, as measured by the S&P 500 Index, S&P MidCap 400 Index and S&P SmallCap 600 Index (see chart).

January Employment Report
Feb. 05, 2016 - First Trust -   Nonfarm payrolls increased 151,000 in January versus a consensus expected 190,000.
 Private sector payrolls increased 158,000 in January. The largest gains in December were for retail (+58,000), restaurants/bars (+47,000), and manufacturing (+29,000). Government payrolls fell 7,000.

A Snapshot Of European Equities
Feb. 02, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post is an update of one we did on 11/5/15 (click here to view). Investors committed a lot of capital to European equities last year.

Municipal Quarterly Update – 4th Quarter 2015
Feb. 02, 2016 - First Trust -  The Barclays Municipal Bond Index returned 1.51% for the three months ended December 31, 2015, bringing the calendar year 2015 total return for the
index to 3.30% (6.60% on a taxable-equivalent basis) (see footnote 1*). Tax-exempt municipal bonds had the highest risk-adjusted returns of any asset class.
Municipal bond yields diverged from U.S. Treasuries. Even in the face of the current global economic malaise of slow growth, falling commodity
prices, and volatile equity markets,the Federal Reserve (“Fed”) finally raised its benchmark rate during the December meeting,the first rate hike since
2006. While the 10- and 30-year U.S.Treasury rates rose 21 basis points (bps) and 15 bps, respectively, to 2.27% and 3.02% from September 30, 2015
to December 31, 2015, 10- and 30-year AAA MMD yields decreased 11 bps and 22 bps, respectively,to 1.92% and 2.82% for the same period.

Fed Not Going Away 
Feb. 01, 2016 - First Trust -  Close your eyes (well, not literally). Imagine a huge manufacturing economy, in Asia, growing very rapidly. It became the second largest economy in the world, from ruin, in just a few short decades and produced 14% of global output. Now imagine it collapses.

As markets swing, momentum can be deceiving
Feb. 01, 2016 - BlackRock -  Weekly commentary overview
Stocks experienced several violent reversals last week before finishing strong. Stocks continue to find support in an old friend: central bank accommodation, most recently from the Bank of Japan.

December Durable Goods 
Jan. 28, 2016 - First Trust -  New orders for durable goods declined 5.1% in December (-5.5% including revisions to prior months), well below the consensus expected decline of 0.7%. Orders excluding transportation fell 1.2% in December (-1.7% including revisions to prior months), below the consensus expected decline of 0.1%. Orders are down 0.6% from a year ago while orders excluding transportation are down 3.2%.

How Large Company Stocks Have Performed In The New Millennium

Jan. 26, 2016 - First Trust -  View from the Observation Deck
1. Today’s blog post is intended to show how large-cap equities have performed over specific periods since the start of 2000. Keep in mind that this period includes two severe bear markets, multiple wars, recessions and a global financial crisis.
2. The first column captures the entire period.The second column represents the current bull market, which began the day after the close of trading on 3/9/09.The third column shows performance since the S&P 500 Index registered its all-time high on 5/21/15.

Q4: Sluggish Growth, No Recession
Jan. 25, 2016 - First Trust -  The recent turmoil in the equity markets would make more sense if the US economy were headed for recession. But the economic data aren’t cooperating.

The Energy Sector’s Influence On S&P 500 Index Earnings Is Waning

Jan. 21, 2016 - First Trust -  View from the Observation Deck
1. Even the strongest of themesrun their course in due time.Like the exceptionalshowing posted by technology stocks during the Internet Revolution, energy stocks have succumbed to gravity after rewarding shareholders for over a decade.
2. The price of crude oil closed trading at $26.55 per barrel on 1/20/16,significantly below its 2014-high of $107.26 per barrel (6/20/14) and its all-time closing high of $145.29 per barrel (7/3/08), according to Bloomberg. It was even below its closing price of $31.20 per barrel on 12/31/02, just a little over two-and-a-half months before the U.S. invaded Iraq on March 19, 2003.

Snapshot Of Bond Valuations
Jan. 19, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post is one we do ongoing so that investors can monitor fluctuations in bond prices relative to changes in interest rates and the global economy.
2. Perhaps the most notable change since our last post on 11/12/15 was the increase in the federal funds rate on 12/16/15. It represented the first hike in interest rates by the Federal Reserve since June 2006.

Fear is Overbought
Jan. 19, 2016 - First Trust -  The stock market is not the economy, and the economy is not the stock market. Nonetheless, many are convinced that the market correction of the past few weeks is a certain sign of impending recession. Never mind that China just reported 6.9% real GDP growth. Never mind that a barrel of oil costs less than $30, which means consumers are saving hundreds of billions of dollars per year on top of what the drop in natural gas prices has saved them.

When Interest Rates Rise
Jan. 15, 2016 - Cohen & Steers -  With the interest-rate environment becoming less accommodative, what will happen to preferred securities? We believe the answer is that some securities will perform much better than others. This was certainly the case in 2013, which we use as a case study to examine different aspects of the preferred securities market. As active managers, we seek structures, income rates and credit spreads that can help protect investors when rates rise.



Unmasking improvements in corporate Latin America
Jan. 14, 2016 - Aberdeen Asset Management -  With high-profile corporate scandals garnering media attention in Latin America, investors may be hesitant to invest in the region. However, with the adoption of best practices over the past several years, we believe that these incidents are relatively isolated, and mask the improvements throughout the region over the past decade. 

A Mixed Year in Closed-End Funds
Jan. 14, 2016 - Morningstar, Inc. -  At the start of 2015, major market concerns included rising interest rates in the United States, falling oil prices, a hard landing for China, and turmoil in the Middle East. Twelve months later, many of those issues remain at the top of investors' minds. The Federal Reserve did raise interest rates in December, but the path forward remains unclear--how fast and how high will rates eventually rise? 

S&P 500 Index Top-Line Growth Estimates
Jan. 12, 2016 - First Trust -  View from the Observation Deck
1. Today's blog post is one we do ongoing so that investors can monitor changes in the expected revenue growth of the companies that comprise the S&P 500 Index. It includes estimates for 2017.
2. The S&P 500 closed the trading session on 1/11/16 at 1923.67. It stood 9.72% below its all-time high of 2130.82 (5/21/15), according to Bloomberg.

December Employment Report
Jan. 08, 2016 - First Trust -   Nonfarm payrolls increased 292,000 in December, easily beating the consensus expected 200,000. Including revisions to prior months, nonfarm payrolls increased 342,000.
 Private sector payrolls increased 275,000 in December, while September and October were revised up a combined 51,000. The largest gains in December were for administrative & support services (+58,000, including temps), health care & social assistance (+53,000), construction (+45,000), and restaurants/bars (+37,000). Manufacturing payrolls rose 8,000 while government rose 17,000.

2016 & 2017 Earnings Snapshot
Jan. 05, 2016 - First Trust -  View from the Observation Deck
1. Today's blog is an update of a previous post.We refresh the data every 3-4 months or so. Investors can compare today's snapshot to the last one we did on 9/1/15 (click here to view).
2. With respect to the 2016 earnings growth rate estimates,the 7 indices in the chart with positive double-digit projections are as follows (Highest-Lowest): MSCI Emerging Markets; S&P SmallCap 600; S&P 500 Consumer Discretionary; S&P 500 Materials; Nikkei 225; S&P 500 Information Technology; and S&P MidCap 400.

December ISM Manufacturing Index
Jan. 04, 2016 - First Trust -   The ISM manufacturing index declined to 48.2 in December, below the consensus expected level of 49.0. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)
 The major measures of activity were mixed in December. The employment index fell to 48.1 from 51.3, while the supplier deliveries index dropped to 50.3 from 50.6. The production index increased to 49.8 from 49.2, and the new orders index rose to 49.2 from 48.9.

November Durable Goods
Dec. 23, 2015 - First Trust -  New orders for durable goods were unchanged in November, coming in better than the consensus expected decline of 0.6%. Orders excluding transportation declined 0.1% in November, coming in almost exactly at the consensus expected no change. Orders are up 1.2% from a year ago while orders excluding transportation are down 1.9%.

S&P 500 Index Companies Rewarding Shareholders Despite Modest Recovery

Dec. 22, 2015 - First Trust -  View from the Observation Deck
1. The period depicted in the chart captures the majority of the U.S. economic recovery following the 2008-2009 financial crisis. The previous recession ended in June 2009.
2. From 9/09-9/15, real GDP growth in the U.S. averaged just 2.2%, according to data from the Bureau of Economic Analysis.

November Industrial Production / Capacity Utilization
Dec. 16, 2015 - First Trust -  Industrial production declined 0.6% in November, coming in well below the consensus expected decline of 0.2%. Including revisions to prior months, production declined 0.7% and is down 1.2% in the past year. Utility output declined 4.3% in November, while mining declined 1.1%.

Covered Calls May Be Conducive For This Market Climate
Dec. 15, 2015 - First Trust -  View from the Observation Deck
1. From 2000-2014,the CBOE S&P 500 BuyWrite Index (an index designed to measure a covered call strategy) outperformed the S&P 500 in six of the 15 calendar years. It is outperforming year-to-date thru 12/14/15 (see chart).
2. Over that 15 year period (2000-2014), the S&P 500 Index posted an average annual total return of 4.24%, compared to 4.07% for the CBOE S&P 500 BuyWrite Index, according to Bloomberg.

November Retail Sales
Dec. 11, 2015 - First Trust -  • Retail sales increased 0.2% in November. The consensus expected a gain of 0.3%. Retail sales are up 1.4% versus a year ago.
• Sales excluding autos increased 0.4% in November (+0.3% including revisions to prior months). The consensus expected a gain of 0.3%. These sales are up 0.7% in the past year. Excluding both autos and gas, sales are up 3.4% versus a year ago.

The Force Awakens in Municipal Bonds
Dec. 10, 2015 - Morningstar, Inc. -  In a year with incredible volatility in both equity and fixed-income markets and with the Barclays U.S. Aggregate Bond Index up a paltry 0.88% for the year to date through November, municipal bonds and the funds investing in them have offered decent returns, especially after tax savings are considered. 

U.S.Dollar Strength & China Slowdown Help Push Commodity Prices Lower

Dec. 10, 2015 - First Trust -  View from the Observation Deck
1. While today’s blog post focuses on the negative influences that a strengthening U.S. dollar and the tempering of economic growth in China have had on commodity prices since mid-2014, we acknowledge that other influences,such as production levels, can also influence prices.
2. From 6/30/14 (rally in the U.S. dollar commenced) through 12/8/15,the U.S.Dollar Index (DXY) posted a gain of 23.43%, compared to a decline of 42.45% for the Thomson Reuters/CoreCommodity CRB Commodity Index (see chart), according to Bloomberg.

Gundlach says time is not right for Federal Reserve to raise rates
Dec. 09, 2015 - Investment News -  Jeffrey Gundlach, whose $51.3 billion DoubleLine Total Return Bond Fund has outperformed 99% of peers over the past five years, said the Federal Reserve may come to regret raising U.S. interest rates amid signs of a fragile economy and a crumbling credit market.

Respect the Auto Sales Surge
Dec. 07, 2015 - First Trust -  Cars and light trucks – SUVs, minivans, and pick-ups – have been a key bright spot in the economy the past few years, particularly with tepid growth in overall manufacturing caused by weak foreign economies and a stronger dollar. The pace seen in September, October, and November marks the first time in history that auto sales have exceeded an 18 million annual rate in three consecutive months.

November ISM Non-Manufacturing Index
Dec. 03, 2015 - First Trust -  The ISM non-manufacturing index declined to 55.9 in November from 59.1 in October, coming in below the consensus expected 58.0. (Levels above 50 signal expansion; levels below 50 signal contraction.)

Many Investors Could Be Underweight Mid- & Small-Cap Stocks

Dec. 01, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post focuses on equity asset allocation via market capitalization (market cap). In other words, how much capital do investors commit to U.S. large-, mid- and small-cap stocks.We use mutual fund and exchange-traded fund (ETF) asset levels as a barometer.
2. As indicated in the chart, as of 10/31/15, investors had committed a combined $4.7 trillion to the three large-cap categories, while committing just $831.0 billion and $605.0 billion, respectively,to the mid- and small-cap categories

Expect Strong Christmas Spending 
Nov. 30, 2015 - First Trust -  We are watching Christmas season sales data very carefully, but we also warn investors that the early data are not very useful. No matter what initial readings show, the underlying fundamentals look relatively strong.

A Snapshot of Growth vs.Value Investing
Nov. 24, 2015 - First Trust -  View from the Observation Deck
1. Today's blog post is an update of a previous one. Investors can compare today's snapshot to the one we did on 9/10/15 (click here to view).
2. Growth tends to outpace value investing when the earnings growth rates of said companies accelerate faster than the broader market,such as right after the economy exits a recession.

Giving Thanks! 
Nov. 23, 2015 - First Trust -  If the US were in the middle of an economic boom, like in the mid-1980s or late-1990s, it would be very easy to be thankful in the week ahead. Instead, a cornucopia of complaints seems to accompany what has been a plodding economic recovery, what we call the Plow Horse Economy.

Stop “QE” Insanity

Nov. 18, 2015 - WBI Investments -  Stop the Insanity!
In response to the 2008 Financial Crisis, governments around the world led by the U.S. Federal Reserve developed a series of monetary policy tools to try to stabilize the financial system.

Micro-Caps Have Been The Sweet Spot In The Small-Cap Space

Nov. 17, 2015 - First Trust -  View from the Observation Deck
1. While there is no official set of parameters that define a micro-capitalization (micro-cap) stock,the U.S. Securities and Exchange Commission (SEC) defines them as companies with a market value of less than $250 million.
2. The SEC refers to companies with market capitalizations below $50 million as“nano-cap”stocks.Due to their low valuations levels, micro-cap companies tend to receive little attention from equity analysts, according to U.S.News & World Report.

The Worst Recovery Ever…For Part-Time Jobs

Nov. 17, 2015 - First Trust -  Mark Twain has been attributed with saying “If you don't read the newspaper, you're uninformed. If you read the newspaper, you're misinformed.” And given the media’s portrayal of the job market recovery over the past six-and-a-half years, we can see where he was coming from.

The Enormous Long-Term Cost of Holding Cash

Nov. 14, 2015 - BlackRock Blog -  By definition, trauma leaves a scar. Fifteen years after the bursting of the tech bubble and more than eight years after the advent of the last financial crisis, many investors are still being impacted by the memory of those traumatic events.

It’s the Domestic Spending; Stupid
Nov. 13, 2015 - First Trust -  Washington DC is out of control. In Orwellian Newspeak, we hear liberals say tax cuts, “cost too much,” but deficit spending is an “investment.” If GOP politicians reduce spending growth from already inflated forecasts, they call it a “‘conservative’ spending cut.” And, politicians from both sides of the aisle pat themselves on the back for “working so hard” to reduce the deficit when it’s really the US taxpayer that provided the muscle. Surging tax receipts have lowered deficits in recent years, not fiscal discipline.

Hello From the Other Side of MLP Investing
Nov. 12, 2015 - Morningstar, Inc. -  After five years of strong returns, MLP CEF investors are rolling in deep losses.

Hello From the Other Side of MLP Investing
Nov. 12, 2015 - Morningstar, Inc. -  After five years of strong returns, MLP CEF investors are rolling in deep losses.

S&P 500 Index Top-Line Growth Estimates
Nov. 10, 2015 - First Trust -  View from the Observation Deck
1. Today's blog post is one we do ongoing so that investors can monitor changes in the expected revenue growth of the companies that comprise the S&P 500 Index.
2. The S&P 500 closed the trading session on 11/9/15 at 2078.58. It stood 2.45% below its all-time high of 2130.82 (5/21/15), according to Bloomberg.

Higher Rates, Higher Stocks 
Nov. 09, 2015 - First Trust -  What’s happened over the past few weeks is not supposed to happen, at least if you use traditional academic-style discount models to assess the stock market. Whether you prefer a dividend discount model or an earnings discount model, both say higher interest rates should reduce the value of equities.

A Snapshot Of Moving Averages
Nov. 03, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post is a follow-up to one we did last week showing the performance of the S&P 500 Index after it had registered its first correction in four years (click here to view).
2. The basic premise of that post was to show investors that the S&P 500 Index had recovered at least some of the losses it had sustained during the correction.

Light This Candle
Nov. 02, 2015 - First Trust -  The US stock market reminds us of Alan Shepard in 1961. Exasperated by the long wait in his Mercury Spacecraft “Freedom 7” while NASA engineers fiddled, he said, “Why don’t you fix your little problem and light this candle?” They finally did and he became the first American to go into space

 REITs Are a Permanent Allocation

Oct. 31, 2015 - Cohen & Steers -  Are you a strategic or a tactical investor? If your goals are long term, we believe REITs should be part of your portfolio at all times, through all types of markets— providing valuable diversification and return potential driven by the distinctive characteristics of commercial real estate.

Closed-End Fund Review – Third Quarter 2015
Oct. 27, 2015 - First Trust -  After the second quarter, where the average closed-end fund (CEF) was lower by 3.70% on a share price total return basis, the third quarter was another difficult quarter, with the average CEF lower by 6.28% on a share price total return basis, according to Morningstar

September Existing Home Sales 
Oct. 22, 2015 - First Trust -   Existing home sales increased 4.7% in September to a 5.55 million annual rate, beating the consensus expected 5.35 million. Sales are up 8.8% versus a year ago.
 Sales rose in all major regions. The increase was entirely due to single-family homes, while sales of condos/coops remained unchanged.

The Performance Of Health Care Stocks In The Recent Correction & Subsequent Rebound

Oct. 20, 2015 - First Trust -  View from the Observation Deck
1. Health Care is the only sector that has outperformed the S&P 500 Index in each of the past five years, including this one, according to S&P Capital IQ. It is a top theme in the market, in our opinion.
2. From 12/31/10-10/19/15, the S&P 500 indices in the chart posted the following cumulative total returns (Bloomberg): 301.7% (Biotech.); 252.3% (Managed Health Care); 143.5% (Health Care); 127.0% (Pharmaceuticals); and 90.6% (Health Care Equipment). The S&P 500 Index was up 79.01% over the same period.

GDP: Soft Headline, Solid Fundamentals

Oct. 19, 2015 - First Trust -  The most important part of the quarterly GDP reports is not the headline number. Instead, we like to focus on the underlying trend and what the details of the report mean for future growth.

Senior Loan & High Yield Review – 3rd Quarter 2015

Oct. 15, 2015 - First Trust -  Market Review
Senior loan and high-yield bond returns were negative in the third quarter after posting a strong first half. With equities leading the way lower at -6.44% for the S&P 500 Index in the third quarter, high-yield bonds fell -4.88%,making this the most challenging quarter for high-yield bonds since the third quarter of 2011. Senior loans were down a much more modest -1.35% in the quarter.

Just When You Thought It Was Over…
Oct. 15, 2015 - First Trust -  View from the Observation Deck
1. Today's blog is the third version of a post we originally did on 6/12/12, which depicted the rolling 12-month total returns of an of index comprised of intermediate-maturity Treasuries

Is My Business Development Company (BDC) Broken?

Oct. 13, 2015 - Closed-End Fund Advisors -  BDCs have had a rough 12 months with many investors wondering if the sector is broken. The 43 debt-focused BDCs ended October 7, 2015 at an average -13.9% discount, after healthy +7% average rebound from the -20%+ discount lows seen in recent weeks. 

The Fed DID NOT Save the Economy
Oct. 12, 2015 - First Trust -  Last week the Wall Street Journal (WSJ) opinion page published a piece by former Federal Reserve Chairman Ben Bernanke. The title was “How the Fed Saved the Economy.”

PIMCO CEFs Not Immune to Grossapalooza Hangover
Oct. 08, 2015 - Morningstar, Inc. -  It's been a rocky year for shareholders of Bill Gross' former CEFs, despite solid performance from the new management team; PIMCO High Income's shares have fallen 26% this year through September.

The Bull Market Still Lives 
Oct. 05, 2015 - First Trust -  Stock market corrections (usually defined as 10% pullbacks) are hard to understand. Often they happen in the midst of long-term bull markets. But why? Is it like getting the flu? Is it just emotion? Or, are corrections a necessary cleansing out of excess optimism? Our answer: we don't really know.

The Outlook For Corporate Earnings Remains Positive
Oct. 01, 2015 - First Trust -  View from the Observation Deck
1. As of 9/30/15,the S&P 500 Index, S&P MidCap 400 Index and S&P SmallCap 600 Index stood 9.89%, 11.65% and 12.39%, respectively, below their all-time highs, according to Bloomberg.
2. Today's chart is intended to give investors some visual perspective on where equity analysts think earnings are headed following the recent correction in the S&P 500 Index, registered in August, and a tough September.

Rebuilding the economy, reworking the market

Sep. 30, 2015 - Aberdeen Asset Management -  

While it is tempting to focus on the developments happening in Japan’s economy, investors should also consider events unfolding at the corporate level. With a selective approach, investment in Japan could see significant growth resulting from economic revitalization and structural reform.



Recreating a tiger: making India’s infrastructure work

Sep. 30, 2015 - Aberdeen Asset Management -  India is renowned for its assortment of wild and wonderful wildlife. The national animal is the majestic Royal Bengal Tiger but the country is also known for its eponymous elephant. The two animals are apt metaphors for the state of the country’s economy and politics over the last 30 years.

A Shutdown Would Be Positive
Sep. 28, 2015 - First Trust -  Sometimes, news really is important. The Pope’s visit to the U.S. was big, but the resignation of House Speaker John Boehner, effective October 30, was huge.

How to Deal With Continued Volatility
Sep. 28, 2015 - BlackRock Blog -  Investors should expect the current high volatility regime to persist. Russ explains how to contend with the rocky road ahead.

The Prospects For Owning Natural Gas Stocks Over A Particular 5-Month Stretch

Sep. 22, 2015 - First Trust -  View from the Observation Deck
1. The October through February time frame tends to capture the most critical months of the winter weather season in the U.S. with respect to both the anticipated and actual demand for natural gas, in our opinion.
2. In the past 10 October through February time periods,the price of natural gas increased in just 5 of the 10 periods (see chart). The ISE-Revere Natural Gas Index posted a positive total return in 6 of the 10 periods (see chart).

How Will Bond Funds React to Rising Rates?
Sep. 22, 2015 - Morningstar, Inc. -  A rundown of possible outcomes for certain Morningstar Categories when the Fed ultimately decides to hike interest rates.

Is Another Bear Market Ahead?
Sep. 22, 2015 - BlackRock Blog -  Russ updates his outlook for U.S. stocks in 2015 and beyond.

The Uber-Dove vs Black Swans
Sep. 21, 2015 - First Trust -  You couldn’t have missed it. Only stages full of GOP presidential candidates or the Super Bowl have ever had more media attention. Yes, we are talking about the Federal Reserve’s thundering announcement on Thursday – of nothing. The Fed decided to keep interest rates at zero, for at least the next few months, after holding them near zero for over six years.

How U.S. stocks performed in the 14 years since 9/11
Sep. 15, 2015 - First Trust -  View from the Observation Deck
1. In response to the terrorist attacks on the morning of 9/11/01 (Tuesday), U.S.stock exchanges shutdown early that day and were closed for the remainder of the week.They reopened on 9/17/01 (Monday).
2. The cumulative total return posted by the S&P 500 Index for the 14-year period featured in the chart was 137%.

Market Unease May Continue for Some Time

Sep. 14, 2015 - Nuveen Asset Management -  Markets calmed last week relative to recent turmoil, but investor sentiment remains fragile. The focus on Federal Reserve policy, weakness in China and concerns about economic growth continued to drive sentiment. The S&P 500 Index gained 2.1%, commodities were flat and bond yields rose.1 Technology and health care posted the best results, while energy lagged.1

There's A Fire (Sale) in Bond CEFs
Sep. 10, 2015 - Morningstar, Inc. -  Stock market volatility has sent taxable-bond CEF share prices spiraling downward, but is this the best deal since the financial crisis?

2 Sectors to Explore When Rates Rise
Sep. 10, 2015 - BlackRock Blog -  Though the recent market selloff and declining inflation expectations have lowered the probability of the Federal Reserve (Fed) raising rates right away, the exact timing of the hike isn't as important as the market implications of moderately higher interest rates, which are expected to eventually arrive.

OPEC’s Waning Influence
Sep. 10, 2015 - First Trust -  Since the 1970s nothing has struck fear into the heart of the average American driver like the name OPEC. With every rise in prices at the pump came theories that once again this shadowy cartel might be using its influence to reach deeper into the pockets of the US public. However, the domestic shale revolution seems to have changed all that. The US produced 8.7 million barrels of oil per day in 2014 and that number is expected to grow to 9.2 million for this year, according to the EIA. With this surge of domestically produced oil, OPEC continues to lose leverage as a trading partner. 

A Snapshot of Growth vs.Value Investing
Sep. 10, 2015 - First Trust -  View from the Observation Deck
1. Today's blog post is an update of a previous one. Investors can compare today's snapshot to the one we did on 4/16/15 (click here to view).
2. Growth tends to outpace value investing when the earnings growth rates of said companies accelerate faster than the broader market,such as right after the economy exits a recession.

Chinese Auto Stimulus

Sep. 01, 2015 - First Trust -  A tax cut? In China? We couldn't believe our ears! In the wake of a myriad of other measures to shore up its slowing economy, China announced Tuesday that the auto industry would be the focus of its latest stimulus measures. Starting Oct 1st, and continuing through the end of 2016, China will cut the sales tax on cars with engines of 1.6 liters or less from 10% to 5%. 

2015 & 2016 Earnings Snapshot
Sep. 01, 2015 - First Trust -  View from the Observation Deck
1. Today's blog is an update of a previous post.We refresh the data every couple of months or so. Investors can compare today's snapshot to the one we did at the start of the year on 1/6/15 (click here to view).

Dazed and Confused
Aug. 31, 2015 - Aberdeen Asset Management -  Investors may be confused, and with good reason. On the one hand, reform-minded leaders are at the helm of many of Asia’s biggest economies; government finances are in better shape than they have been for some time; and cheap oil boosts consumer sentiment and delivers an unexpected windfall for many countries.

Markets Volatile, Economy Fine

Aug. 31, 2015 - First Trust -  As you woke up this morning, US stock market futures were down again. They say it’s because the Chinese stock market fell, and in spite of this every summary of Fed intentions that we read suggests a rate hike this year (possibly in September) is still very much on the table

Preferred Securities
Aug. 31, 2015 - Cohen & Steers -  Investment Review
Fixed income markets were generally negative in August, although they fared better than equities in a risk-averse environment. Concerns about slowing growth in China sparked broader market volatility and sent commodities and emerging market stocks sharply lower.

Active Commodities
Aug. 31, 2015 - Cohen & Steers -  Investment Review
Commodities prices declined in August but outperformed broad equity markets. The S&P 500 Index fell sharply in reaction to disappointing economic data and currency devaluation from China.

What The Recovery In REITs Looks Like
Aug. 18, 2015 - First Trust -  View from the Observation Deck
1. The FTSE NAREIT All Equity REITs (Real Estate Investment Trusts) Total Return Index closed 7.48% below its all-time high on
8/14/15, according to Bloomberg.
2. The index’s all-time high was set on 1/26/15, an indication that equity REITs had fully recovered from the previous bear market,
which ended in March 2009.

Financial System Healing 
Aug. 17, 2015 - First Trust -  Every month, the National Association of Realtors reports on existing home sales, which are closings on previouslyowned homes. These sales have been doing very well lately, up in four of the past five months and up almost 10% from a year ago. We expect further gains when the next report comes out Thursday morning

Some CEFs Are Getting a One-Time Boost to NAV
Aug. 13, 2015 - Morningstar, Inc. -  The potential for rising rates casts ARPS in a new light, and falling commodity prices continue to pressure MLP closed-end funds.

When Dumping Munis Is Risky Business

Aug. 11, 2015 - Lipper -  Municipal bonds are a rare asset class with an outsized retail influence. According to the Investment Company Institute, individual investors hold about 35% of muni bonds directly and another 36% indirectly in mutual funds, closed-end funds and exchange-traded funds.

A Good Climate For Equity Covered Call Writing
Aug. 11, 2015 - First Trust -  View from the Observation Deck
1. From 1926-2014,the average annual total return on the S&P 500 Index was 10.12%, according to data from Ibbotson
Associates/Morningstar.
2. Since 1990,there were seven calendar years in which the S&P 500 Index posted a total return that was greater than zero, but less
than 11%.

IMF Can’t End Dollar’s Reign
Aug. 10, 2015 - First Trust -  Ever since Quantitative Easing began, a group of so-called Monetarist/Austrian thinkers have predicted “hyper-inflation” and the demise of the dollar as the world’s “reserve currency.”

The Emerging Markets Best Positioned to Withstand a Fed Hike
Aug. 07, 2015 - BlackRock Blog -  Russ explains why not all emerging markets are created equal when it comes to weathering capital outflows associated with higher U.S. interest rates.

Snapshot of U.S. Equity Styles/Market Caps
Aug. 04, 2015 - First Trust -  View from the Observation Deck
1. Today's blog post is intended to expose potential opportunities within the growth and value styles of investing, as well as by
market capitalization (market cap).
2. At any given time,the equities markets are likely being led up or down by one of the three market cap classifications (large-cap,
mid-cap or small-cap).Often this leadership role can be held for a multi-year period.

Even Garth Can’t Argue About Liftoff
Aug. 03, 2015 - First Trust -  Plow On, Garth! Time for Liftoff, Wayne! The first report on Q2 real GDP showed Plow Horse annualized growth of 2.3%, exactly the same as the average growth rate in the past year. Now that’s the definition of a Plow Horse report.

Five reasons to invest

Jul. 29, 2015 - Aberdeen Asset Management -  Asia’s rising economic importance is nearly impossible to ignore. The region’s vast potential is underpinned by a huge domestic market, young workforce and growing middle class population. Asia Pacific's middle classes will soon be larger than Europe and North America combined. At the corporate level, the wide choice of quality companies makes it a stock-picker's haven.

Rising Interest Rates And Stock Performance
Jul. 28, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post provides some historical perspective on how the S&P 500 Index has performed in calendar years when the yield on the benchmark 10-Year Treasury Note (T-Note) finished the year higher than where it began.
2. From 1975-2014,there were 18 such years (see chart).The S&P 500 Index posted a positive total return in 15 of those 18 years.

GDP Rebounds in Q2 
Jul. 27, 2015 - First Trust -  The US economy rebounded in the second quarter from the supposed decline in real GDP in Q1. We say “supposed decline” in Q1 because the government has had persistent problems seasonally adjusting GDP, tending to underestimate growth in the first quarter each year while overestimating growth in the middle two quarters

Is There Still Opportunity in Japanese Stocks?
Jul. 27, 2015 - BlackRock Blog -  After Japan's strong performance this year, some believe the market will soon run out of steam. Heidi Richardson disagrees.

Closed-End Fund Review: Second Quarter 2015

Jul. 22, 2015 - First Trust -  Second Quarter Overview
The second quarter was a difficult one for diversified closed-end fund (CEF) investors. According to Morningstar, the average CEF was lower by 3.70% on a share price total return basis. Most categories of the CEF marketplace experienced share price total return weakness during the second quarter and that is reflected in the fact that, according to Morningstar, all equity CEFs were lower by an average of 3.44%; all taxable fixed-income CEFs were down by an average of 3.40% and all municipal CEFs were lower by an average of 4.35%.

The Biotechnology Sector Is Clearly Outperforming “Big Pharma”

Jul. 21, 2015 - First Trust -  View from the Observation Deck
1. From 1995-2014, biotechnology stocks outperformed their pharmaceutical counterparts in 13 of the 20 calendar years (see chart).
2. Over that 20-year period,the NYSE Arca Biotechnology Index posted an average annual return of 20.55%, compared to 12.00% for the S&P 500 Pharmaceuticals Index, according to Bloomberg.

Tax Cuts on the Horizon 
Jul. 20, 2015 - First Trust -  The one key reason for being bullish on equities the past several years has been valuation. Stocks are cheap based on profits and interest rates.

Listed Infrastructure in a Rising-Rate Environment

Jul. 19, 2015 - Cohen & Steers -  Rising bond yields have historically presented attractive entry points to the listed infrastructure asset class, while offering active managers an opportunity to add value through subsector selection.

Profit From Market Downturns With Deeply Discounted CEFs
Jul. 16, 2015 - Morningstar, Inc. -  The year 2015 has been unkind to many CEFs, but investors can purchase shares at steep discounts.

Should You Buy Prospect Capital Corporation? COO Grier Eliasek Gives Some Very Interesting Answers
Jul. 15, 2015 - seekingalpha.com -  Summary

Discount to NAV will disappear in the medium term. Historical evidence to support that.
Rising interest rate environment in favor of the company.

Preferred Securities: Offer Better Value Than High-Yield Bonds

Jul. 15, 2015 - Cohen & Steers -  As economic growth trends higher, conventional wisdom suggests that investors reposition portfolios away from interest-rate-sensitive bonds and into those securities that are more credit sensitive. Within credit-sensitive fixed income, we see better value in preferred securities than in high-yield bonds. This view is supported by the yield spreads between high-yield bonds and investment-grade preferred securities being narrow relative to the historical average.

New Horizons: Corporate governance in Japan

Jul. 15, 2015 - Aberdeen Asset Management -  Introduction
Corporate governance in Japan has long been a source of anguish for foreign investors. Companies were run as much to preserve social harmony as to maximize profits, and shareholders were at the bottom of a long list of stakeholders. Accusations from foreign investors of Japanese companies include lacking a focus on shareholder returns, retaining too much cash, holding stakes in suppliers and other friendly companies. They argue these factors contribute to lower performance in terms of return-on-equity (ROE)1 and other metrics (See charts 1, 2).

Growth-Oriented Stocks in the S&P 500 Outperforming Dividend-Payers (2012-Present)

Jul. 14, 2015 - First Trust -  1. One of the ways in which S&P Dow Jones Indices tracks the performance of the constituents in the S&P 500 is by separating those that pay a dividend from those that do not.

Politicians Should Stop Giving Investment Advice

Jul. 13, 2015 - First Trust -  For the past six years, the conventional wisdom has predicted the end of the world. On the left, they say “Tea Party austerity” is a catastrophe and an “income divide” spells doom. On the right, the election of President Obama made collapse inevitable. Anything and everything that could be spun negatively, has been.

2015 & 2016 Earnings Snapshot
Jul. 07, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post is a midyear update. Investors can compare today’s snapshot to the one we did at the start of the year on 1/6/15 (click here to view).

End of an Era
Jul. 06, 2015 - First Trust -  Over this past Fourth of July weekend, in Chicago, the Grateful Dead, or at least what’s left of it, played its last concert. It’s the end of an era, one that epitomized the liberal political earthquake of the 1960s and 70s – VW vans, flower power, tie-dyed tee shirts, drugs, protests, and social justice.

S&P 500 Companies Still Cash Rich Despite Returning More Capital To Shareholders

Jun. 30, 2015 - First Trust -  View from the Observation Deck
1. S&P 500 companies have been rewarding shareholders by increasing stock dividend payouts as well as repurchasing company stock in an effort to boost earnings-per-share growth via the reduction of share count.

Ignore Greece
Jun. 29, 2015 - First Trust -  Don’t let anyone tell you Greece is sticking up for its "dignity" by fighting “austerity.” The current Greek government is sticking up for socialism by fighting reality.

Mid-Year Outlook - Investment Directions

Jun. 29, 2015 - BlackRock -  The year so far has played out largely within our expectations. The divergence in economic growth and central bank policy had some predictable effects, with the most obvious being a stronger U.S. dollar. But there were some surprises. Interest rates unexpectedly plunged early in the year before abruptly rebounding in May. The U.S. economy got off to a rough start, just as Europe notched a surprisingly good first quarter. With six months down, where are the potential opportunities for the rest of 2015?

The Ability Of REITs To Raise Capital Is A Good Sign For Investors

Jun. 23, 2015 - First Trust -  View from the Observation Deck
1. From 12/31/13-3/31/15 (15 months),the FTSE NAREIT All Equity REITs Index posted a cumulative total return of 33.12%, according to Bloomberg.The index, however, was down 5.35% from 3/31/15 through 6/19/15.

Stocks Are Still Cheap
Jun. 22, 2015 - First Trust -  You know those TV shows – the ones about ice trucking, fishing in Alaska, or digging for gold. They’re made to bring out these interesting jobs, but also the danger. They leave you hanging, and break for commercial, just when the truck starts to slide on a bridge, or just when a huge wave is approaching.

The Incredible Shrinking CEF Universe
Jun. 18, 2015 - Morningstar, Inc. -  Closed-end funds are quickly becoming an endangered species.

Greece is Detroit, Not Lehman

Jun. 16, 2015 - First Trust -  Greece is the land of misinformation. We constantly hear that a Greek default will cause a market panic and be as damaging to financial markets as the default of Lehman Brothers back in 2008. While there is no possible way to know for sure, we believe that a Greek default will look and feel more like the Detroit default. In other words, it may make a great deal of noise, but the European economy will not collapse. In fact, we believe any sell-off in the equity markets is a buying opportunity.

The U.S.Dollar Has A Significant Influence On Commodity Prices

Jun. 16, 2015 - First Trust -  View from the Observation Deck 1. For the 12-month period ended 6/12/15,the U.S.Dollar Index (DXY) posted a 17.86% gain, compared to a 27.57% decline for the TR/CC CRB Commodity Index (see chart), according to Bloomberg.

These Three Equity Income Asset Classes Have Sold-Off Following Strong Gains

Jun. 11, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post seeks to briefly address some inquiries we have been getting lately regarding three sectors of the market often pursued by investors seeking relatively high levels of equity income.

Don’t Deny The Jobs Recovery
Jun. 08, 2015 - First Trust -  You would think that after 63 straight months of growth in private sector payrolls, the longest streak since the 1930s, everyone would agree that the job-market recovery is for real. But, that ain’t the case. A quick Google search still uncovers a whole bunch of pessimistic appraisals of jobs and the economy.

Treasury Yields Are Inching Higher…Again
Jun. 04, 2015 - First Trust -  Treasury Yields Are Inching Higher…Again

View from the Observation Deck
1. The yield on the benchmark 10-Year Treasury Note increased from 1.91% on 4/2/15 to 2.26% on 6/2/15 – an increase of 35 basis
points.While higher of late, it remains well below where it stood (3.03%) at the close of 2013.
2. Bond investors appear to be more-and-more sensitive to any economic data that could tip the balance in favor of a Federal
Reserve interest rate hike, in our opinion.Having said that, net inflows to bond funds remain strong.

Limited Duration Closed-End Funds Performing Well in 2015

May. 27, 2015 - First Trust -  At the end of March I wrote about how, after a difficult 2014,senior loan closed-end funds (CEFs) were off to a strong start to the year in 2015. Senior loan CEFs continue to perform well this year and are now up 6.93% (as of 5/21/15 according to Morningstar on a share price total return basis)

Inflation: Dormant, Not Dead 
May. 26, 2015 - First Trust -  Last month we explained why the dreaded threat of hyperinflation hasn’t materialized, and likely wouldn’t materialize, in spite of the huge expansion of the Federal Reserve’s balance sheet the past several years, including QE1, 2, and 3.

Sizing Up The Bull
May. 26, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post is intended to provide investors with a snapshot of how five major stock indices have fared in the current bull market.Three are U.S. based and two track foreign equities.

This 50/50 Sector Combo Has Captured Upside While Mitigating Much Of The Downside

May. 19, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post is an equity investment approach targeting those investors who are concerned about the risks associated with owning common stocks over time.

Taxes Culprit Behind Slow Sales
May. 18, 2015 - First Trust -  Last week’s report on retail sales in April came in weaker than most economists expected, with no change from the pace of sales in March. As a result, the chorus calling for the Federal Reserve to postpone the start of rate hikes beyond June, already loud, grew even louder

PIMCO Prevails in a High-Profile Proxy Battle
May. 14, 2015 - Morningstar, Inc. -  A proxy fight at a PIMCO closed-end fund caught the attention of investors outside of the typically insular CEF world. In early 2015, Ironsides Partners initiated a proxy fight with PIMCO Dynamic Credit Income (PCI). At that point, the firm owned about 1% of the fund's outstanding shares and attempted to add founder Robert Knapp and a lawyer for the firm, Richard Cohen, to the fund's board.

The Big Chill: What’s Wrong with the U.S. Consumer?
May. 14, 2015 - BlackRock Blog -  Most market watchers expect the US economy to bounce back in the second quarter. However, the consumer isn't playing to script. Russ explains.

A Long-Term View on Latin America: Infrastructure Investment and Institutional Reform
May. 08, 2015 - BlackRock Blog -  Armando Senra, BlackRock Head of the Latin America & Iberia Region, discusses the fundamental changes taking place in Latin America and the opportunities for economic growth and investment in the region.

The S&P 500 Beat Rate Hasn’t Skipped A Beat
May. 07, 2015 - First Trust -  View from the Observation Deck
1. From Q1’12 through Q4’14,the average quarterly earnings beat rate for S&P 500 companies was 67.8%.The 67.9% beat rate so far in Q1’15 is on the mark.

A Snapshot of Q1 Flows and Trends
May. 05, 2015 - First Trust -  US-listed exchange-traded fund (ETF) net inflows totaled $59.1 billion during the first quarter of 2015, according to Morningstar.1 International Equity ETFs and Taxable Bond ETFs received the strongest net inflows, totaling $37.7 billion and $20.2 billion, respectively, while US Equity ETFs had the largest net outflows, totaling $12.6 billion. (See Table 1 below) Within the International Equity category, currencyhedged ETFs received $26.5 billion in net inflows, as US investors sought to avoid foreign currency risk. Within the Taxable Bond ETFs category, net inflows were strongest among High Yield Bond ETFs (+$4.8 billion), Corporate Bond ETFs (+$4.8 billion), Intermediate-Term Bond ETFs (+$3.5 billion), and Preferred Stock ETFs (+$1.9 billion). Interestingly, net outflows for the US Equity category may not be as bad as they seem, as outflows from a single ETF totaled nearly $31.3 billion. Apart from this ETF, the US Equity ETFs category received $18.8 billion in net inflows.

Too Late to Invest in EM?
May. 05, 2015 - BlackRock Blog -  While emerging market stocks have had a good 2015 so far, this may still be an attractive time to invest for investors who have been sitting on the EM sidelines.

What Rising Yields Mean for U.S. Stocks
May. 05, 2015 - BlackRock Blog -  Last week’s bond selloff provided a foreshadowing of the U.S. stock segments likely to suffer as the eventual Federal Reserve (Fed) rate liftoff nears.

@WSJopinion vs. @BenBernanke
May. 04, 2015 - First Trust -  The Wall Street Journal’s editorial page and former Fed Chair Ben Bernanke are in a tiff. In a nutshell, the WSJ says growth is slow (which is true) and the Fed has overestimated economic growth (true, too); therefore, monetary policy is not working. Interestingly, after saying this, the WSJ says it does think quantitative easing (QE) has boosted the stock market

Senior Loan & High Yield Review – 1st Quarter 2015
Apr. 30, 2015 - First Trust -  Market Review
Senior loans and high-yield bonds, after a volatile second half in 2014, posted healthy returns in the first quarter of 2015. In fact, first quarter 2015 returns outpaced the full-year 2014 returns for both senior loans and highyield bonds. In contrast to last year,the start of this year has been driven by oil showing signs of stability (at least for now) after a nearly 50% decline in the second half of 2014, a market much more willing to tolerate the current geopolitical climate, and strength in returns across both the high-yield bond and leveraged loan markets.

Would More Government Debt Help the U.S. Economy?
Apr. 30, 2015 - BlackRock Blog -  Russ explains why he's skeptical that massive, debt-fueled government stimulus is what's needed to accelerate the U.S. recovery.

The Price Of Natural Gas Rarely Stays Below $2.50 For Long

Apr. 30, 2015 - First Trust -  View from the Observation Deck 1. The price of natural gas closed yesterday’s trading session (4/29) at $2.61 per million British thermal units (BTUs), up from $2.49 on 4/27.

Where’s the Hyper-Inflation?
Apr. 27, 2015 - First Trust -  If we had a dollar for every time we’ve heard about the threat of hyperinflation, we’d probably have enough money to never worry about it.

A Potential Remedy For A Nagging Problem That Could Get Worse

Apr. 23, 2015 - First Trust -  View from the Observation Deck
1. A study released yesterday (4/22) from TransUnion revealed that out-of-pocket medical costs for U.S. patients rose by 11% in 2014, according to MarketWatch.com

CLOSED-END FUND review - First Quarter 2015
Apr. 21, 2015 - First Trust -  First Quarter Overview
The first quarter of 2015 was a decent one for diversified closed-end fund (CEF) investors with the average fund up 2.03%. The continued decline in global interest rates was particularly beneficial to fixed-income CEFs which were up 3.04% for the quarter. While it was a volatile quarter for equities (particularly U.S. equities), the average equity CEF still managed to achieve a gain of 0.44% for the first three months of the year, although domestic equity CEFs were lower by 0.43%.

Rear-View Mirror Shows Ugly Q1
Apr. 20, 2015 - First Trust -  We know Plow Horses don’t have rearview mirrors, but economists do. So, let’s not beat around the bush: the economy barely grew last quarter. Right now, we’re forecasting that real GDP expanded at a 0.7% annual rate in Q1. That’s a little below the consensus expected 1.0% growth rate, although above the 0.1% estimate by the Atlanta Fed’s GDPNow Model

Japan Equity CEFs Win the First Quarter
Apr. 16, 2015 - Morningstar, Inc. -  These closed-end funds were unstoppable in early 2015; plus, did the first IPO of 2015 usher in a new era for CEF shareholders?

Some Government Bonds Yield Less Than Half Of What They Did In 2010

Apr. 14, 2015 - First Trust -  View from the Observation Deck
1. With the exception of the three BRIC-member countries (Brazil, China and India) featured in the chart, yields on 10-Year government bonds issued by many of the world’s largest nations have declined substantially in the last five years.
2. One of the things that has contributed to the decline in government bond yields is the drop in inflation rates throughout much of the globe, in our opinion

June Rate Hike Still on Tap

Apr. 13, 2015 - First Trust -  According to a recent survey by the Wall Street Journal, most economists think a June rate hike is unlikely. In fact, four times as many think the Federal Reserve won’t start raising rates until September or later as currently think the Fed will start in June.

Will 2015 Be The Year The Fed Tightens?
Apr. 09, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post is an update of one we did on 12/11/14 (click here to view).The yield on the benchmark 10-Year Treasury note fell 80 basis points from 3/31/14-3/31/15. It stood at 1.92% on 3/31/15.
2. While the drop in interest rates helped bolster the 1-year total returns for investment grade bonds,speculative-grade and foreign bond returns came in below their respective yields as of 3/31/14 (see gray shaded columns in chart).

Don’t “Dread” The Plow Horse
Apr. 06, 2015 - First Trust -  “Dread” is the perfect word for what many investors have felt in recent years. Some have experienced it daily since the bottom in March 2009. Some experience it whenever the stock market falls

U.S. Retail Investors Continue To Invest In Foreign Stocks
Mar. 31, 2015 - First Trust -  View from the Observation Deck
1. Over the past five calendar years (2010-2014), retail investors funneled a net $294.39 billion into open-end World Equity mutual funds, according to data from the Investment Company Institute (ICI).
2. As indicated in the chart, all five calendar years registered net inflows, despite a couple of negative total return years for the MSCI World (Ex-U.S.) Index and three down years for the MSCI Emerging Markets Index.

Senior Loan Closed-End Funds off to a Strong Start in 2015
Mar. 30, 2015 - First Trust -  After a challenging 2014 when the average senior loan closed-end fund (CEF) was lower by 1.93%,senior loan CEFs are off to a strong start in
2015. Indeed, the average senior loan CEF is up 5.53% year-to-date (YTD), which makes the senior loan CEF category one of the bestperforming
taxable fixed-income categories within the Morningstar universe so far this year.By comparison,the average taxable fixed-income
CEF is up 2.91% YTD. (All data is from Morningstar on a share price total return basis through 3/25/15.)

Rate Hikes Won’t Kill Housing
Mar. 30, 2015 - First Trust -  Home building plummeted in February, which made perfect sense; this February was the coldest for the most Americans since 1979. What no one expected was that new home sales would soar. Bad winter weather usually doesn’t hurt new home sales as much as it hurts housing starts, but it typically has an impact. This time, though, new homes sales spiked 7.8%, hitting the highest level in seven years.

A Deeper Look at Smart Beta in Fixed Income
Mar. 26, 2015 - BlackRock Blog -  While most tend to think of smart beta as a tool for stock portfolios, there are ways to apply it to bonds. Sara Shores shares a smart beta approach to balancing interest rate and credit risk.

A Divergence of CEF Returns in February
Mar. 19, 2015 - Morningstar, Inc. -  Europe's quantitative easing and a strong U.S. dollar lifted the eurozone and Japan, but negative headline news pushed the municipal market lower.

Good News is Still Good News
Mar. 09, 2015 - First Trust -  The stock market sold off hard last Friday and the reason looks clear: job creation was stronger than the consensus expected in February, the fourth straight month of upside surprises in payrolls.

Don’t Audit It: Rein It In
Mar. 05, 2015 - First Trust -  Some in Congress want to “Audit the Fed.” But an audit, unless the word is used in a very broad sense, would be redundant and basically irrelevant. The Fed is already audited, by Deloitte & Touche LLP and it releases an annual report that includes the auditor’s opinion, each year.

Searching for Yield Down Under
Mar. 03, 2015 - BlackRock Blog -  The persistence of low yields has had investors searching for income high and low for a while now. Recently, investors are expanding their hunt to some less than obvious places.

A Snapshot Of European Equities in 2015
Mar. 03, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post provides some consensus 2015 earnings estimates and price-to-earnings (P/E) estimates from analysts tracked by Bloomberg.
2. Investors funneled a net $6.46 billion into European stock funds and ETFs for the 12-month period ended 1/31/15, according to Morningstar.Nearly $3.5 billion of it came in January 2015.

Fed Has Less Patience For ZIRP
Mar. 02, 2015 - First Trust -  Economic data will have something for everyone this week. The ISM reports (manufacturing and nonmanufacturing) will likely be held down by unusually harsh weather and the Port closures. But, autos sales should remain strong and January jobs data are set for a gain close to 250,000

Technology & Financial Stocks Contribute Most To S&P 500 Dividend Payout

Feb. 24, 2015 - First Trust -  View from the Observation Deck 1. Today’s chart provides a snapshot depicting the level of contribution each of the 10 major sectors currently make to the dividend payout of the S&P 500, relative to the close of 2005. 2. What investors may find interesting is that the dividend yield on the S&P 500 changed very little from 1.80% on 12/31/2005 to 1.99% to 2/17/15.There were a couple of major changes, however, on a sector level.

Strong Dollar: Good, Not Bad
Feb. 23, 2015 - First Trust -  In fifteen short days, the bull market will be six years old. And, we’ve never seen such a steep wall of worry. Nouriel Roubini called it a “dead cat bounce.” Many said the recession wouldn’t end until 2010, maybe 2011. Supply-siders said the “Fiscal Cliff” would do us in. Keynesians said “The Spending Sequester” would end the boom.

The Surge In The U.S.Dollar Is Noteworthy…But Not Rare
Feb. 19, 2015 - First Trust -  View from the Observation Deck 1. From 6/30/14 through 12/31/14,the U.S.Dollar Index rose by 13.15% to an index reading of 90.27, according to Bloomberg. 2. That surge essentially brought the index back in line with its 20-year average (year-end values).

The Indianapolis Colts aren’t alone in their angst over deflation.
Feb. 19, 2015 - Morningstar, Inc. -  The Indianapolis Colts aren’t alone in their angst over deflation.

QE and Currency Wars A Theory With No Evidence 

Feb. 17, 2015 - First Trust -  Some analysts think that central bank policy (specifically, quantitative easing) is the only thing that matters.

Treasury Yields Are Up Sharply In The First Half Of February

Feb. 17, 2015 - First Trust -  View from the Observation Deck
1. The yield on the benchmark 10-Year Treasury Note rose from 1.64% on 1/30/15 to 2.13% on 2/17/15 (midday) – an increase of 49 basis points. Its yield stood at 3.03% on 12/31/13.
2. A strong U.S. nonfarm payroll number in January (257,000/accompanied by substantial upward revisions to December’s and November’s totals), combined with decent corporate earnings (Bloomberg reported that 69.4% of the 395 S&P 500 companies that have reported Q4’14 earnings have topped their estimates) and some hope that Greece’s debt situation can be contained, helped push interest rates higher, in our opinion.

Technology Stocks Have Delivered Strong Returns In The Current Bull Market

Feb. 12, 2015 - First Trust -  View from the Observation Deck
1. From 3/9/09-2/10/15 (current bull), all four of the technology-related indices featured in the chart outperformed the S&P 500.
2. The average annualized total returns for the period were as follows: ISE Cloud Computing (+35.44%); Dow Jones Internet Composite (+31.36%); Philadelphia Semiconductor (+26.23%); S&P 500 Information Technology (+24.95%); and S&P 500 (+23.32%), according to Bloomberg.

Dual Mandate Achieved: Rate Hikes Coming

Feb. 09, 2015 - First Trust -  From 45,000 feet, it certainly looks like the Federal Reserve has achieved, or is very close to achieving, its Dual Mandate of price stability and full employment.

2015 & 2016 Earnings Snapshot
Feb. 03, 2015 - First Trust -  View from the Observation Deck
1. Today’s blog post is an update of one we did on 1/6/15 (click here to view).There was a significant downward adjustment in the energy sector for 2015, as well as other notable changes.

Fooled By Extrapolation 
Feb. 02, 2015 - First Trust -  Pundits have a bottomless reservoir of pessimism and also a magnified ability to extrapolate the most recent trends. So, when Q1-2014 real GDP fell at an annual rate of 2.1%, fear turned rampant.

Finding a Tax Cut at the Pump
Jan. 28, 2015 - BlackRock Blog -  BlackRock Chairman and CEO Larry Fink reacts to the drop in oil prices and explains the concept of “good deflation”.

CLOSED-END FUND review - Fourth Quarter 2014
Jan. 26, 2015 - First Trust -  2014 was a solid year for diversified closed-end fund (CEF) investors. I specifically use the term “diversified” because whether I am writing about CEFs or giving a presentation about the CEF structure, I always encourage investors to diversify across several different categories of the CEF structure in order to attain proper diversification and exposure to many different asset classes. According to Morningstar, the average CEF was up 7.88% last year on a share price total return basis. As always, performance varied significantly depending on the category.

GDP, Strong Again 
Jan. 26, 2015 - First Trust -  With all the focus on Europe in general and Greece in particular, it’s important to keep in mind that the US economy continues to move forward. After real GDP dropped in the first quarter of last year, some analysts were predicting another recession. By contrast, we said the drop was due to unusually harsh winter weather and the economy would rebound quickly.

Higher Inflation Not Only Welcome But Sought In Current Climate

Jan. 22, 2015 - First Trust -  View from the Observation Deck
1. Today,the European Central Bank (ECB) announced that it will soon implement its own version of quantitative easing (QE) in an effort to stimulate growth in the European economy.

Senior Loan & High Yield Review – 4th Quarter 2014
Jan. 21, 2015 - First Trust -  2014 proved to be far more eventful than most predicted. Consider the nearly certain prognostication that rates would increase in 2014, the surprising impact the polar vortex had on economic activity early in the year, geopolitical headlines (Russia/Ukraine, Middle East [Gaza, ISIS], Europe [Greece], etc.), Ebola fears, and last, but most certainly not least, the nearly 50% drop in the price of oil (more on this in a moment). As a result, while sentiment was relatively positive in the early part of the year, investor sentiment for credit risk reversed course and was relatively weak throughout the second half of the year.

Davos – And the Euro 
Jan. 20, 2015 - First Trust -  Perfect! Last week, the Swiss National Bank in reaction to market pressure, ended its crawling peg against the euro. The Swiss Franc surged 40% versus the euro, before settling around 20% higher, and roughly 17% against the already strong dollar. So, guess what? Attendees at The World Economic Forum – an annual gaggle of the global financial elite held in Davos, Switzerland, which starts today – just saw their trip get a lot more expensive.

Oil, Cuba, and Russia, Oh My!
Jan. 15, 2015 - Morningstar, Inc. -  A surprising December capped off a decent year for most CEFs.

Large-Capitalization Stocks Extend Leadership Role To Three Years

Jan. 13, 2015 - First Trust -  View from the Observation Deck
1. Prior to the past three years (2012-2014),the last time the S&P 500 outperformed both mid- and small-capitalization stocks for an extended period of time was in the latter half of the 1990s.Then came a bear market (3/00-10/02).

Bullish, For the Right Reasons

Jan. 12, 2015 - First Trust -  Last week, we forecast the S&P 500 will hit 2,375 at the end of this year (link), so we’re obviously bullish on stocks. Our case is based on fundamentals, specifically, the long-term link between stocks, earnings, interest rates, and the economy as a whole. However, just because we’re bullish, doesn’t mean we agree with every bullish argument that’s out there.

Corporate Cash Holdings Remain High
Jan. 08, 2015 - First Trust -  View from the Observation Deck
1. The S&P 500 Old Industrials companies have more than doubled their cash and equivalent holdings from $606.6 billion in
March 2007 to $1.25 trillion in September 2014.The all-time high is $1.30 trillion (Q4’13).

2015: More Investment and Profits, Higher Rates, Dollar and Stocks

Jan. 05, 2015 - First Trust -  Contrary to popular opinion, business investment is a key factor behind the current recovery. Productive investments have boosted profits to record highs and, in turn, those profits have driven stock prices to record highs. They should continue to do so.

Chicken Little Economics 
Dec. 29, 2014 - First Trust -  It’s now been more than six years since the failure of Lehman Brothers – when the sky fell in and economic panic seized the land. Since then, Chicken Little Economics has inflicted fear and loathing on many investors.

Greedy Innkeeper or Generous Capitalist?

Dec. 22, 2014 - First Trust -  The Bible story of the virgin birth is at the center of much of the holiday cheer at this time of year. The book of Luke tells us that Mary and Joseph traveled to Bethlehem because Caesar Augustus decreed a census should be taken. Mary gave birth after arriving in Bethlehem and placed baby Jesus in a manger because there was “no room for them in the inn.”

Nearing the End of a Decent Year in CEFs
Dec. 18, 2014 - Morningstar, Inc. -  Falling oil prices buffet some CEFs, but many have turned out strong returns so far this year.

A Snapshot Of Major Emerging Market Stock Indices
Dec. 16, 2014 - First Trust -  View from the Observation Deck
1. Emerging markets have been a mixed bag in 2014. As indicated in the chart, economies steeped in natural resources (Russia and
Brazil) have performed quite poorly, particularly in the second half of the year.

Oil Price: Looks Reasonable 
Dec. 15, 2014 - First Trust -  A former economic colleague, and mentor, used to say: “In the Bible, it says an ounce of gold will buy a fine suit of clothing.” We have read the Bible, and we haven’t found this, although there could be some high-powered math, using talents, cubits, frankincense and myrrh that make it true.

Xpert Insights: Market outlook from Dodd Kittsley
Dec. 12, 2014 - Deutsche Asset & Wealth Managment -  The consequences of currency exposure
One of the biggest investment stories of 2014 has been the broad-based strength of the U.S. dollar. Over the past year, the U.S. dollar has risen significantly relative to the euro and yen due to divergence: divergence in economic growth rates, and resultant divergence in monetary policy. Investors should be aware of the magnitude of currency’s negative return on international equities over the past 12 months, as well as the longer three- and five-year periods.

November Retail Sales
Dec. 11, 2014 - First Trust -  Retail sales increased 0.7% in November, and including revisions to prior months were up 1.1%, coming in above the consensus expected gain of 0.4%. Sales are up 5.1% versus a year ago.

Fixed-Rate Bond Total Returns Are Trending Lower
Dec. 11, 2014 - First Trust -  View from the Observation Deck
1. The purpose of today’s blog post is simply to show investors how traditional fixed-rate bonds have performed over the past 1-, 3-
and 5-years.
2. We believe that the information in the chart can help investors establish realistic expectations with respect to fixed-rate bond
yields and performance potential moving forward.

The Myth of QE: Why Rates Are Headed Higher 

Dec. 08, 2014 - First Trust -  It’s a myth; an abused narrative. Those who disagree are called economic heretics. What are we talking about? The idea that Quantitative Easing (QE) drives interest rates down. This myth has a fervent following even though virtually no evidence supports it.

Snapshot of U.S. Equity Styles/Market Caps
Dec. 04, 2014 - First Trust -  View from the Observation Deck
1. Today’s blog post is intended to expose potential opportunities within the growth and value styles of investing, as well as by
market capitalization (market cap). It updates the one we did on 8/7/14.
2. At any given time,the equities markets are likely being led up or down by one of the three market cap classifications.Often this
leadership role can be held for a multi-year period.

Oil – Just Another Price 
Dec. 01, 2014 - First Trust -  Don’t take this the wrong way: energy is important. Oil prices are important. But, we believeth those involved in economic punditry often bloweth them out of proportioneth.

S&P 500 Top-Line Growth Estimates (Updated)
Nov. 25, 2014 - First Trust -  View from the Observation Deck
1. When the stock market is setting new all-time highs, as it did yesterday (S&P 500 at 2069.41), investors are naturally going to
wonder what catalysts are potentially capable of pushing equity prices higher.
2. We believe that corporate earnings determine the direction of the stock market over time.

Let’s Finally Fix The CBO
Nov. 24, 2014 - First Trust -  If they came back today, the Founders of the United States wouldn’t recognize the government they created 225 years ago. They put safeguards in place – separation of powers, a bicameral legislature and reserved powers for the states – to prevent it from growing so large.

No Reprieve for Energy CEFs in October
Nov. 20, 2014 - Morningstar, Inc. -  Oil prices continued their descent in October, leading some to question the future health of the country's largest oil producers. Consumers of oil and gas, however, have benefited from this steady decline in prices. Airlines, for example, have fared extremely well this year, in part because of low fuel costs. Despite the hit that oil and gas firms and energy and related mutual funds took last month, the broader equity market did quite well. The S&P 500 Index gained 2.4% in October and was up nearly 11% for the year to date.

Deflation Fears Are A Distraction
Nov. 17, 2014 - First Trust -  No matter what happens these days, deep fears, driven by breathless newscasters, take things to the extreme. As a result, slight gains in inflation create forecasts of “hyper-inflation,” while slowing or low inflation leads to fears of “deflation.”

Xpert Spotlight: The UK: A Country not to be ignored

Nov. 16, 2014 - Deutsche Asset & Wealth Managment -  Europe’s largest country by market cap, the United Kingdom (UK), has continued its robust economic recovery even as uncertainty and opportunity in the Eurozone grab headlines. We believe the UK equity market offers attractive growth prospects and valuation relative to broader Europe and the U.S.

Bond Investors Still Facing The Prospects For Higher Interest Rates

Nov. 13, 2014 - First Trust -  View from the Observation Deck
1. From 5/27/14-11/12/14 (see chart dates),the yield on the benchmark 10-Year Treasury Note dipped from 2.52% to 2.37%.The yield
rose from 1.76% to 3.03% in 2013.

20 Analyst Rating Downgrades--and 1 Upgrade

Nov. 10, 2014 - Morningstar, Inc. -  The leaves aren't the only things falling this month.


When Oil Prices Dip, Unexpected Winners Emerge
Nov. 10, 2014 - BlackRock Blog -  A stronger dollar is one of the reasons that oil prices are low, which serves many energy-importing economies in Asia while weighing on large oil-producing nations.

Change Is In The Air
Nov. 10, 2014 - First Trust -  While many flail away, trying to figure out the meaning of last week’s GOP wave election, it seems simple. The government has tried for more than five years to turn a Plow Horse economy into a Race Horse, and failed. Yes, the economy is growing and creating jobs, but living standards are growing slowly, or not at all, for many.

PIMCO CEFs Post-Gross
Nov. 04, 2014 - Morningstar, Inc. -  Checking in on PIMCO’s CEFs a month after Gross’ sudden departure.


Fed Ends QE, Rate Hikes Now on Radar
Oct. 29, 2014 - First Trust -  We count five key takeaways from today’s policy statement from the Federal Reserve.

First, the Fed clearly raised its assessment of the economy. Most notably, it deleted its long-standing reference to “significant underutilization” in the labor market, changing it to say that the underutilization in the labor market is “gradually diminishing.”

Equity Investors Still Have The Fundamentals On Their Side

Oct. 28, 2014 - First Trust -  View from the Observation Deck
1. Equity investors endured another pullback in the stock market recently and it was accompanied by the usual dose of scary headlines and dire predictions.

U.S. Equities’ Share Of Total Global Market Capitalization Is Growing

Oct. 21, 2014 - First Trust -  View from the Observation Deck
1. Today’s blog post is an update of one we did on 2/28/13.The chart provides investors with a snapshot of where capital is invested in equities around the globe.

Q3 Real GDP Still Looks Solid 
Oct. 20, 2014 - First Trust -  The current recovery started in mid-2009. Since then, real GDP has grown at a 2.2% annual rate (what we have called a Plow Horse Economy). Now, despite a negative first quarter (caused by weather and inventories), the economy is picking up some speed. It’s not a race horse, yet, but we expect 2.5% to 3% real GDP growth, on average, in the year ahead.

What the 10-Year Treasury’s Dip Means for Bond Portfolios
Oct. 16, 2014 - BlackRock Blog -  It was hard to miss the headlines earlier this week about the 10-year Treasury yield dipping below 2% Wednesday, hitting its lowest level in over a year. Rick Rieder explains what was behind the drop and what it means for bond portfolios going forward.

Commodities CEFs Tank in September
Oct. 16, 2014 - Morningstar, Inc. -  The unexpected departure of PIMCO founder and chief investment officer Bill Gross dominated the headlines at the end of September, but PIMCO investors were far from the most disappointed folks last month. Gold prices dropped 6% in September, continuing a months-long decline from its mid-March high of $1,391.77 per ounce. Since that high, gold prices have fallen more than 13% through the third quarter. The strengthening of the U.S. dollar and improving economy also put pressure on the prices of other precious metals and commodities like oil and gas. 

Senior Loan & High Yield Review – 3rd Quarter 2014
Oct. 14, 2014 - First Trust -  For the first time in quite a while, a healthy dose of volatility wasintroduced into various markets of risk assets, including equities,senior loans and highyield bonds. The volatility was driven largely by geopolitical headlines, including Russia/Ukraine, Gaza, Banco Espirito Santo bailout, Argentine default, etc. As a result, risk sentiment reversed course, and investors became more defensive in the quarter

Senior Loan & High Yield Review – 3rd Quarter 2014

Oct. 13, 2014 - First Trust -  Market Review
For the first time in quite a while, a healthy dose of volatility was introduced into various markets of risk assets, including equities, senior loans and high-yield bonds. The volatility was driven largely by geopolitical headlines, including Russia/Ukraine, Gaza, Banco Espirito Santo bailout, Argentine default, etc. As a result, risk sentiment reversed course, and investors became more defensive in the quarter.

5% Corrections Have Been Normal in this Bull Market
Oct. 10, 2014 - Calamos Investments -  Yesterday’s S&P 500 close of 1928 marked a 4% correction since the index peaked at 2011 on September 18, 2014.

Inflation: What Inflation?
Oct. 06, 2014 - First Trust -  Who hasn’t heard forecasts of “Hyperinflation?” They’ve been all over the web and TV ever since the Federal Reserve started a huge expansion in its balance sheet, called Quantitative Easing, back in 2008. Among other things, these forecasts called for a dollar collapse, dire problems for the banking system and 1970s, or Weimar Republic-like, inflation.

Why We Believe the Market Will Go to New Highs
Oct. 03, 2014 - Calamos Investments -  Today’s +248K jobs growth number and the August revision to +181K suggest recent worries that the U.S. economy was falling backward were misplaced. Over the past two weeks, the 10-year Treasury yield had fallen from 2.6% to 2.4% and the S&P 500 Index lost roughly 3% on fears about slowing global growth. But the combination of today’s strong U.S. employment data, indications of dissipating Hong Kong unrest, and no new Ebola cases put many of those no-growth fears to rest.

September ISM Manufacturing Index
Oct. 01, 2014 - First Trust -  The ISM manufacturing index declined to 56.6 in September from 59.0 in August, coming in below the consensus expected level of 58.5. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)

Should PIMCO CEF Investors Jump Ship?
Oct. 01, 2014 - Morningstar, Inc. -  The sudden departure of PIMCO founder and CIO Bill Gross on Friday, Sept. 26, rocked the investment world. As pundits mulled over who might be crowned the next "Bond King," closed-end fund investors had concerns of their own. Because several PIMCO CEFs have historically traded at relatively high premiums, some CEF watchers predicted extreme share price declines, particularly for the five CEFs that Gross managed. It’s also widely known that Gross owned a significant amount of shares of many PIMCO CEFs. Some wondered whether Gross would dump all of his shares, putting further downward pressure on share prices and premiums.

2014 & 2015 Earnings Snapshot
Sep. 30, 2014 - First Trust -  View from the Observation Deck
1. Today’s blog post is an update of one we did on 7/31/14 (click here to view).We intend to update earnings forecasts every couple of months.

Is Your EM Allocation Vulnerable to Index Vagaries?
Sep. 29, 2014 - First Trust -  Recently, global index provider FTSE announced it has reclassified Morocco from “emerging market” to “frontier market” and Argentina from “frontier market” to “unclassified.”* These changes will impact the composition of FTSE’s emerging market and frontier market indexes in mid-2015.

From the Mailbag: Rising Rates and CEFs
Sep. 26, 2014 - Morningstar, Inc. -  Last week, the Federal Reserve announced that it will continue the unwinding of its bond-buying as planned in October. The Fed also noted that it would stop all of its asset purchases at the next meeting if economic indicators point to continued improvement in unemployment and GDP growth and if inflation remains within an acceptable range. With that in mind, readers may be concerned about the potential effects of rising interest rates on closed-end funds. 

Investors With Exposure To Dividend-Paying Stocks Should Check This Out

Sep. 25, 2014 - First Trust -  View from the Observation Deck
1. Today’s blog post is an update of one we did on 3/27/14.We intend to continue monitoring the direction of S&P 500 stock dividend distributions over the coming quarters.

Early Thoughts on Tax-Loss Selling Season
Sep. 24, 2014 - First Trust -  With the fourth quarter about a week and a half away, the topic of tax-loss selling and closed-end funds (CEFs) is one that is often on the forefront of CEF investors’ minds.Tax-loss selling is when investors sell securities to realize losses in order to offset gains within their portfolios. Tax-loss selling in the CEF structure often is most pronounced from roughly mid-November to the third week of December

CEF Update: News You Can Use
Sep. 23, 2014 - Morningstar, Inc. -  Leverage Changes
Gabelli Health & Wellness (GRX) announced that it recently completed the offering of 1.4 million 5.875% Series B Cumulative Preferred shares, raising a total of $35 million.

Tender Offers
The Central Europe, Russia, and Turkey (CEE) fund announced the final results of its tender offer that expired Sept. 9, 2014. Under the final calculations, 7.33% of the fund’s shares were repurchased at a price of $29.88. Given that the shares currently trade for $25.81 as of Sept. 19, 2014, this was a good deal for shareholders.


Two Sides to Every Coin
Sep. 22, 2014 - First Trust -  Every coin, like every historical (or even not so historical) event, has two sides. You can choose which side to focus on – the positive or the negative. For example, some choose to view the Initial Public Offering (IPO) of Alibaba – a Chinese company described as eBay, Amazon and PayPal, combined, which serves more than a quarter billion customers – as a negative.

S&P 500 Top-Line Growth Estimates
Sep. 18, 2014 - First Trust -  View from the Observation Deck
1. When the stock market is setting new all-time highs, as it did on 9/5/14 (S&P 500 at 2007.71), investors are naturally going to
wonder what catalysts are potentially capable of pushing equity prices higher.

August Housing Starts
Sep. 18, 2014 - First Trust -  Housing starts declined 14.4% in August to a 0.956 million annual rate, coming in below the consensus expected 1.037 million annual rate. Starts are up 8.0% versus a year ago.

Sector Equity CEFs Excelled in August

Sep. 12, 2014 - Morningstar, Inc. -  Despite continued turmoil overseas, the U.S. economy chugged along in August. In its July meeting minutes, released in late August, the Federal Reserve commented that inflation and labor market conditions had moved closer to its longer-run objectives and that it anticipated continued progress toward those goals. In that vein, the Fed kept rates unchanged and took another $10 billion out of its monthly asset purchases. But, the minutes also contained language that caused some hubbub among investors.

A Global Growth Slowdown?
Sep. 10, 2014 - BlackRock Blog -  As 2014 is shaping up to be another year of below-trend economic growth, many investors are wondering: Is economic growth once again slowing? Russ explains why his answer is no.

Does the August Jobs Report Mean U.S. Growth is Softening?
Sep. 09, 2014 - BlackRock Blog -  After last week’s weaker-than-expected August jobs report, many investors are wondering whether the U.S. economy is softening. Russ explains why he still expects a strong U.S. economy in 2014, noting three takeaways for investors.

Why Growth Stocks Now?
Sep. 09, 2014 - Calamos Investments -  After five years of a strong bull market, I believe there’s still room for stocks to advance. Growth stocks look especially attractive. At 1.23, the premium for growth over value remains lower than the historical average of 1.44. Even when we omit the tech bubble from the long-term average, the 1.23 premium for growth is lower than that 1.37 average.

Are Discounts and Premiums Important When Selecting CEFs?
Sep. 05, 2014 - Morningstar, Inc. -  Early September is a great time of year. Kids are back in school, the football season is getting under way, and the weather is still great here in Chicago--at least for now. But September is not always very kind to investors' portfolios. In fact, The Wall Street Journal recently reported that September is the only month that has experienced an average decline in the market during the past 20, 50, and 100 years.

Return-of-Capital Special Cases
Sep. 03, 2014 - Morningstar, Inc. -  Last week, we tackled the issue of return of capital in closed-end funds. The ideas and calculations presented were appropriate for evaluating most CEFs but, importantly, not master limited partnerships.

September Swoon Ahead?
Sep. 02, 2014 - BlackRock Blog -  Despite stocks’ strong recent performance, investors may want to exercise a bit of caution going into the fall. Russ gives two reasons why.

A Rundown on Return of Capital
Aug. 27, 2014 - Morningstar, Inc. -  Return of capital in closed-end funds is a hot-button issue for investors. On one side of this often-polarizing argument are investors who believe all return of capital is bad and who avoid any fund that has ever distributed return of capital. On the other side are investors who believe return of capital isn't that bad in light of a fund’s discount. The truth lies somewhere in the middle.

How to Position Your Portfolio as Rates Start to Rise

Aug. 26, 2014 - BlackRock Blog -  With the Fed likely to begin raising rates in the first half of 2015, you may be wondering how to position your portfolio for the coming period of rate normalization. Russ shares his take.

The Consumer Price Index Increased 0.1% in July
Aug. 20, 2014 - First Trust -  The Consumer Price Index (CPI) increased 0.1% in July, matching consensus expectations. The CPI is up 2.0% versus a year ago.

“Cash” inflation (which excludes the government’s estimate of what homeowners would charge themselves for rent) was unchanged in July and is up 1.8% in the past year.

Europe…A Distinction With A Bit Of A Difference

Aug. 20, 2014 - First Trust -  View from the Observation Deck

European equities have experienced a pullback of late. The sell-off has been more pronounced in the European Union (EU or Eurozone), which is comprised of 18 countries. Broader Europe spans 28 countries.

Why Do You Own High-Yield Bonds?
Aug. 20, 2014 - Morningstar, Inc. -  The high-yield market was rattled last week causing a $6.5 billion outflow out of high-yield funds and exchange-traded funds for the week ended Aug. 6. This brought a four-week streak of net redemptions totaling $12.5 billion. The massive outflows followed months of commentary suggesting the high-yield market was showing signs of froth and highlighting the risks to this sector after a multiyear bull run. It'll be interesting to see whether these outflows continue or whether investors waiting on the sidelines will now jump back into the fray given slightly higher yields following the sell-off. 

“Bad News is Good” – A Hard Habit for Investors to Kick
Aug. 18, 2014 - BlackRock Blog -  Last week’s market performance proved that investors are having a hard time kicking a certain habit: treating “bad news as good.” Russ explains, suggesting that investors continue to focus on relative value.

What Middle East Tensions Mean for Oil Prices & Equity Portfolios
Aug. 15, 2014 - BlackRock Blog -  With turmoil in the Middle East dominating headlines, many investors are wondering what the recent and growing unrest in the region means for oil prices and for equity portfolios. Russ explains why oil prices are likely to remain elevated for the foreseeable future and why there’s a strong case for sticking with energy stocks even if oil prices don’t spike.

July Was a Mixed Bag for CEFs
Aug. 14, 2014 - Morningstar, Inc. -  At the start of July, the markets were relatively calm despite escalating crises in Russia and the Middle East, though as the month wore on news from abroad began to weigh on the market. Despite largely positive economic news out of the United States near month-end, Argentina's pending default cast a shadow on the market. The S&P 500 Index plunged 2.4% in the last five trading days of July, closing the month down 1.4%.

Tight Money, Still A Long Way Off
Aug. 12, 2014 - First Trust -  Going into last month’s Fed meeting, most analysts thought that if anyone dissented it would be Dallas Fed President Richard Fisher, the Federal Reserve’s most outspoken hawk. After all, Fisher had publicly called out the dovish Fed majority only days before the meeting (in an unusually aggressive Wall Street Journal Op-ed), pointing to the risk of “staying too loose, too long” given a “rapidly improving employment picture.”

Why Relative Value is Trumping Risk Aversion
Aug. 12, 2014 - BlackRock Blog -  Despite recent rising geopolitical tensions, stocks haven’t completely followed the typical “risk-off” script and a number of high-risk segments have performed relatively well. The simple reason: Investors have found a newfound interest in relative value. Russ explains and shares which market segments potentially offer this value.

What Investors Need to Know about Money Market Fund Reform
Aug. 11, 2014 - BlackRock Blog -  The SEC’s new rules on money market funds carry specific implications for some investors, and for the broader financial system as a whole. Matt Tucker explains.

The “Great Deleveraging” that Never Happened: Why the US Still Has a Debt Problem
Aug. 08, 2014 - BlackRock Blog -  For several years, media headlines have been filled with references to a mythical “deleveraging,” or a reduction in the level of U.S. debt. In reality, U.S. non-financial debt has increased, and this has real long-term consequences for the economy. Russ explains.

Events vs. Data
Aug. 04, 2014 - First Trust -  
If you’re an investor looking for a reason to be worried, there are plenty of headlines to light the fuse. Widening war in the Middle East, turmoil in eastern Ukraine (or is that western Russia?), a debt default by Argentina…problems with some Portuguese bank…Ebola…tapering. 


The Z-Statistic Is No Silver Bullet
Aug. 01, 2014 - Morningstar, Inc. -  Investing in a closed-end fund is more complicated than investing in a mutual fund that's run by an experienced manager with a consistent and repeatable process and that charges low fees. Investors must also carefully evaluate a CEF's distribution policy and consider its sustainability, as well as the amount and type of leverage, to understand the potential volatility of returns. The final piece is valuation.

Where to Seek Equity Income
Jul. 31, 2014 - BlackRock Blog -  While Russ would be wary of seeking income at all costs and ignoring valuations, there’s one “bond-like” equity market segment that he believes is worth pursuing: International and global dividend stocks.

Investor Fatigue Setting In?
Jul. 29, 2014 - BlackRock Blog -  Despite a generally positive tone to earnings season, investors may be finally showing signs of fatigue, as seen by aggressive selling of risky assets, namely high yield and U.S. equities. Russ K explains the implications.

How Safe Is Your CEF's Distribution?
Jul. 25, 2014 - Morningstar, Inc. -  It’s no secret that income-oriented investing has been all the rage for several years now. This makes a lot of sense, after investors were burned during the 2008 financial crisis. Many now view a bird in hand (income today) as worth more than two in the bush (capital gains at some point in the future).

The Energy Trade Is Still Working For Investors

Jul. 24, 2014 - First Trust -  

View from the Observation Deck 

  1. Today's blog post is an update of one we did last December. The areas shaded in orange represent activity since 9/30/13. The price of a barrel of crude oil stood at $103.12, as of 7/23.


It Looks Like Gold & Silver Miners May Finally Be Joining The Bull
Jul. 22, 2014 - First Trust -  

View from the Observation Deck 

  1. Precious metals miners have not participated in the bull market that began on 3/9/09 (see chart). The Philadelphia Gold & Silver Index was actually down 4.78% (cumulative total return) from 3/9/09 through 7/18/14. 
  2. The miners, however, are off to a great start so far in 2014, with a total return of 22.04%, as of 7/18 (see chart). Gold bullion and silver were up 8.91% and 7.30%, respectively, over that period.


CEF Update (7/23/14): News You Can Use
Jul. 22, 2014 - Morningstar, Inc. -  It was a quiet week in closed-end fund news.
 
Rights Offerings and Tender Offers 
Nuveen announced tender offers for four of its muni funds.  Nuveen Dividend Advantage Municipal 3 (NZF), Nuveen Dividend Advantage Municipal Income (NVG),  Nuveen Municipal Advantage (NMA), and  Nuveen Quality Income Municipal(NQU) will purchase up to 10% of outstanding common shares for 98% of net asset value on the purchase date. The offer will commence after the funds' 2014 annual shareholder meetings. In conjunction with the tender offer, activist investor Karpus Management agreed to vote their shares in accordance with the recommendations of the board and has agreed to be bound by "standstill" covenants until Sept. 30, 2017.

Plow Horse GDP Rebound in Q2
Jul. 21, 2014 - First Trust -  The 2.9% drop in real GDP during the first quarter was a fluke caused by a brutal winter and some one-off events. With much of the monthly data in for Q2, it looks like the US will see that drop almost completely reversed. 

Searching for Bargains in Closed-End Funds
Jul. 19, 2014 - Barron's -  Closed-end bond funds have been on a tear this year, returning an average of 11% during the first half, including dividends, according to Closed-End Fund Advisors, a research group. The average yield at the end of June was 6.4%. Compare that with a first-half total return of just 5.4% for SPDR Barclays High Yield Bond (ticker: JNK), an exchange-traded fund that tracks junk bonds.

In 2014's First Half, MLPs Reign King
Jul. 18, 2014 - Morningstar, Inc. -  While bond investors spent much of 2014 fretting over what the improving economic outlook means for interest rates, U.S. equity investors earned decent returns in the first half of the year. Investors expecting a repeat of 2013's surging equity markets in 2014, though, were disappointed. The S&P 500 Index, for example, dropped sharply in January and put up gains of less than 100 basis points during March and April, netting a respectable, but not amazing, 7% return for the first six months of the year.

CEF Update (7/15/14): News You Can Use
Jul. 15, 2014 - Morningstar, Inc. -  
Manager Change
Waddell & Reed announced that the lead portfolio manager of several of its high-yield bond funds, William  Nelson, was terminated from the firm for causes unrelated to his portfolio-management responsibilities. Nelson was appointed manager of the fund following the departure of previous lead manager Bryan Krug, who left the firm in November 2013 to join Artisan Partners. Chad Gunther, an 11-year veteran at Waddell & Reed, will replace Nelson as lead manager on several funds, including Ivy High Income Opportunities (IVHand its open-end counterpart,  Ivy High Income (IVHIX).


Comeback Kids: Municipal Funds Made a Strong Showing This Year
Jul. 11, 2014 - Morningstar, Inc. -  Not generally known as an exciting asset class, municipal funds are what investors typically turn to for tax-advantaged income. But the municipal market made headlines last year with Detroit’s bankruptcy and Puerto Rico’s perilous financial situation. Those events, combined with the bond market’s so-called "taper tantrum," caused many investors to flee municipal open-end funds in droves. The open-end category experienced 10 consecutive months of outflows between March 2013 and December 2013. Although pension deficits in cities and states across the country and the potential for rising bond yields remain a concern for investors, tax-advantaged income lured some back to the asset class in 2014. 

Trying to “Fed Proof” Your Portfolio? Beware of the Risks
Jul. 10, 2014 - BlackRock -  We’ve come a long way since the Fed first hinted at tapering its easy money program a year ago. But, as Del Stafford explains, investors are still a bit unsure of how to position their fixed income portfolios. Here are a few risks to consider before reworking your strategy.

The Philippine Growth Story Looks Set to Continue
Jul. 09, 2014 - Calamos Investments -  As the Philippine equity market has appreciated more than 20% in the first half of 2014, our team has continually analyzed valuations and the degree to which we include Philippine equities within our portfolios. While the recent appreciation in equity prices makes valuations less compelling than last year, we are still finding attractive opportunities.

Time to Jump on the Silver Bandwagon? Not so Fast
Jul. 07, 2014 - BlackRock Blog -  After rising nearly 12% from its June lows, silver has been garnering some attention lately, leaving many investors wondering whether they should raise their allocations to the precious metal. Russ explains why now probably isn’t the best time to allocate more to either silver or gold.

US Stocks Week Ended July 3, 2014
Jul. 07, 2014 - First Trust -  In last week’s holiday-shortened trading session, the Dow Jones Industrial Average skyrocketed to close at an all-time high of 17,068.26. In addition, the S&P 500 also celebrated the holiday by completing Thursday at a record high of 1,985.44. Through last week, the S&P 500 trades at a multiple of 18 times trailing earnings with a dividend yield of 1.89%. Since the March 9th, 2009 low of 676.53, the S&P 500 has returned more than 200% including dividends reinvested.

CEF Update: News You Can Use
Jul. 01, 2014 - Morningstar, Inc. -  Share Offerings
H&Q Healthcare Investors (HQHand H&Q Life Sciences Investors (HQLboth completed rights offerings, which gave existing shareholders the option to purchase additional shares at a ratio of three-to-one. The Healthcare Investors fund raised $189 million, while the Life Sciences fund raised $70 million. We’re surprised to see these funds raise additional capital while the shares of both currently trade at discounts to net asset value. In general, we think it makes more sense for funds trading at a discount to take active measures to buy back shares rather than issue new ones. 

Muni Takeaways From the Morningstar Conference
Jun. 27, 2014 - Morningstar, Inc. -  Last week, Morningstar hosted the 26th annual Morningstar Investment Conference. During the conference, attendees heard keynotes from some of the industry's highest-profile fund managers, including Franklin Templeton's Michael Hasenstab, PIMCO's Bill Gross, and AQR's Cliff Asness. While these speakers didn't disappoint, several of the most interesting and engaging conversations happened between keynotes in more intimate panel discussions.

Personal Income Increased 0.4% in May

Jun. 26, 2014 - First Trust -  Implications: Don’t let anyone tell you that workers aren’t earning enough to keep increasing their spending. Private-sector wages & salaries increased 0.5% in May and are up 4.3% from a year ago. Total income – which also includes rents, small business income, dividends, interest, and government transfer payments – increased 0.4% in May and is up 3.5% from a year ago. Yes, government transfer payments – like Medicare, Medicaid, Social Security, disability, unemployment compensation – are still an unusually large share of income. 

Feeling Anxious about your Golden Years? “The Truth About Retirement Plans and IRAs” May Help
Jun. 24, 2014 - BlackRock Blog -  Like many Americans, Sue feels anxious about her retirement. Whenever she feels uncertain about a topic, her first instinct is to read about it, so she recently turned to Ric Edelman’s new book, “The Truth About Retirement Plans and IRAs.” Here’s her review of the book.

CEF Update: News You Can Use
Jun. 24, 2014 - Morningstar, Inc. -  Merger Completion
Cohen & Steers Total Return Realty (RFI) completed its merger with Cohen & Steers Dividend Majors. The board also declared an increase to the third-quarter distribution by 10% to $0.24 per share from $0.22 per share.

Existing Home Sales Increased 4.9% in May
Jun. 23, 2014 - First Trust -  Implications: Existing home sales increased 4.9% in May to a 4.89 million annual rate, well above consensus expectations. Sales are still hovering just below the average level of the past two years, but we think the gains of the past couple of months are the start of a new upward trend. The best news in today's report is that a lack of inventory, which has been a major culprit behind slow sales, seems to be changing.

3 Reasons Closed-End Funds Are Unpopular
Jun. 20, 2014 - Morningstar, Inc. -  During the past decade, U.S. open-end fund assets under management have grown by 160%. Meanwhile, exchange-traded fund net assets grew more than 900%. Closed-end funds, on the other hand, grew a paltry 54%. Even with historically low interest rates and a tremendous marketwide thirst for income, CEFs still make up less than 3% of market share in U.S. fund assets.

Why Millennials Should Try Their Luck in Mexico

Jun. 18, 2014 - BlackRock Blog -  BlackRock Chairman and CEO Larry Fink explains why, if he were starting his career today, he would try his luck in Mexico.

A couple of weeks ago, I visited Mexico City—one of my favorite cities in the world. It’s a remarkable place, not least because of the food, the museums, and the culture, but also because of the incredible economic changes taking place in Mexico right now—both in the capital and all around the country.


CEF Weekly Update - June 17, 2014
Jun. 17, 2014 - Morningstar, Inc. -  Merge, Merge, Merge
BlackRock announced board approval of the merger of three taxable fixed-income funds. BlackRock Income Opportunity (BNA) and BlackRock Income (BKT) will merge with BlackRock Core Bond (BHK). The merger is subject to shareholder approval and expected to complete in late 2014.

Supply, Demand and Interest Rates: Why One thing Leads to Another
Jun. 16, 2014 - BlackRock Blog -  As we approach the mid-point of the year many casual investors are surprised to look in on the market and find that bond yields remain stubbornly low. In fact, aswe have discussed in this space before, they have actually fallen during the year with the 10 year US Treasury declining from 3.03% at the end of December to 2.63% as of June 9th. And it turns out that this overall decline in yields has occurred across global bond markets. There are a lot of drivers of lower yields, including the continued accommodative policies of central banks and the continued slow growth in GDP and inflation in most developed economies.

10 Inexpensive Medalist Closed-End Funds
Jun. 13, 2014 - Morningstar, Inc. -  Morningstar’s methodology for investing in individual stocks is based on buying high-quality firms trading at a discount to intrinsic value. This is easier said than done--intrinsic value is determined by forecasting a company’s future cash flows and discounting those cash flows back to today, a task that is extremely difficult to do with much accuracy. As such, intrinsic value for a stock could be viewed as a range of values that incorporate different best- and worst-case scenarios for the company’s future prospects. 

A Snapshot From The Best Bull Market Ever
Jun. 12, 2014 - First Trust -  View from the Observation Deck  
  1. The current bull market in stocks has lasted 1,920 days. It now ranks as the fifth longest in U.S. history, according to data from Bespoke Investment Group.
  2. Since 1928, the longest U.S. bull market lasted 4,494 days (12/4/87-3/24/00). On a price-only basis, the S&P 500 posted a cumulative return of 582.15% over that period - the highest ever for a U.S. bull market, according to Bespoke.


The Great Rotation Out Of Bond Funds On Hold
Jun. 10, 2014 - First Trust -  View from the Observation Deck  
  1. From 2008 (financial crisis) through 2012, investors liquidated a net $537.33 billion from equity mutual funds, compared to net cash inflows totaling $1.05 trillion for bond mutual funds, according to the ICI.
  2. In 2013, the yield on the benchmark 10-Year Treasury note rose from a calendar year low of 1.63% on 5/2 to 3.03% on 12/31, or a gain of 140 basis points.


A Number of CEFs Tweak Distributions
Jun. 10, 2014 - Morningstar, Inc. -  Capital Transactions 
Gabelli Dividend & Income (GDV) announced shareholder approval for the spin-off of a new fund, Gabelli Global Small and Mid Cap Value Trust. GDV will contribute $100 million to the new fund, which anticipates a NAV of about $12 per share. The shares will trade on the New York Stock Exchange under the symbol GGZ on June 24.

The ECB Wants a Free Toaster
Jun. 09, 2014 - First Trust -  Banks used to give toasters away to customers who opened checking or savings accounts, but the world is changing. Soon, customers may need to give toasters to the bank.

Last week, the European Central Bank (ECB) created a “negative” interest rate of 0.1% annually on bank reserves. In other words, banks must pay the ECB to hold excess reserves.

US Stocks Week Ended June 6, 2014
Jun. 09, 2014 - First Trust -  Equities gained to yet another record high as the S&P 500 reached new heights in four out of five trading days for the week. The continued momentum was led by ECB’s further stimulus measures to fight disinflation and weak projected growth. The ECB’s moves included a negative rate for deposits, the first ever negative rate for a major central bank, a decrease in the benchmark rate to 0.15 percent from 0.25 percent, a 400-billion-euro liquidity channel to spur bank lending and a pledge to do more if needed.

Should Your Fund Manage Its Distribution?
Jun. 06, 2014 - Morningstar, Inc. -  Many closed-end funds live and die by their distributions. A high distribution rate can woo investors, pushing share prices up, but a below-average distribution rate can create a persistently wide discount. Even during times of poor performance, funds are reluctant to lower distribution rates for fear of driving investors away.

CEF Weekly Update - June 3, 2014
Jun. 03, 2014 - Morningstar, Inc. -  As summer temperatures rise, closed-end fund news cools off.  

Fund Mergers

Tortoise announced the approval by its shareholders to merge Tortoise Energy Capital (TYY) and Tortoise North America Energy (TYN) into  Tortoise Energy Infrastructure (TYG). The merger is expected to close June 20, 2014.

Housing Recovery Still on Track
Jun. 02, 2014 - First Trust -  Just a couple of months ago the pessimists were saying the housing recovery was on the ropes. Home sales were down and housing starts had dropped. 

But barely more than a month later this looks like just another head-fake. Existing home sales grew 1.3% in April and, given data on pending home sales, look like they rose another 2% in May. (Existing home sales are counted at closing; pending sales are contracts on existing homes.) Meanwhile, new home sales bounced back in April as well.

Personal Income Increased 0.3% in April
May. 30, 2014 - First Trust -  Implications: After March, when consumers increased spending at the fastest pace in almost five years, consumers took a breather in April, with spending slipping 0.1%. This is not a big deal. Despite the slight decline in April, spending is up at a 6.1% annual rate in the past three months and a 4.7% rate in the past six months. These are faster than the 4.3% gain in the past year, so the underlying trend appears to be accelerating. Personal income matched expectations, rising 0.3% in April and is up 3.6% from a year ago. 

Where to Look for Cheap Muni Funds
May. 30, 2014 - Morningstar, Inc. -  As a whole, municipal-bond closed-end funds are not screaming bargains at current valuations, but they look fairly cheap on a relative basis. As of May 27, the average muni CEF traded at a 5.6% discount, which was wider than the 3.4% average discount for the sector over the past 16.5 years (as far back as Morningstar data goes). Even after omitting the hot muni market of January 2010 onward, muni CEFs look slightly cheaper than average: These funds traded at an average discount of 3.9% for the 13-year period ended December 2009. That market environment was also less favorable for leveraged muni funds, as higher short-term interest rates made leverage financing more expensive.

CEF Update: A Gabelli Fund Approves a Transferable Rights Offering
May. 27, 2014 - Morningstar, Inc. -  The start of summer didn't keep funds from announcing rights and tender offers, changing distribution payments, and updating leverage.

In a recent article, we highlighted different ways shareholders can take full advantage of a fund's rights offerings. This week, three funds announced rights offerings



Smarter CEF Investing Starts With a DRIP
May. 23, 2014 - Morningstar, Inc. -  A version of this article was published on Feb. 3, 2012.

A Dividend Reinvestment Plan, or DRIP, allows current investors to reinvest their fund's distributions at an advantageous price instead of receiving cash. Such programs are offered by most closed-end funds, or CEFs, though we've been told by many fund firm insiders that very few shareholder take advantage of this option. Reinvesting distributions can, over time, significantly benefit long-term investors' returns.



The Other Discount Advantage
May. 21, 2014 - First Trust -  
When an investor considers investing in a closed-end fund (CEF) that is trading on the secondary market, one of the attributes of the CEF structure that is often appealing isthe ability to purchase shares of a fund at a discount to its net asset value (NAV). Due to the fact that CEFs are equity instruments with shares traded publicly throughout the trading day on an exchange such as the New York Stock Exchange (NYSE), and an investor purchases shares of a CEF at a share price which is independent from the fund’s underlying NAV, its share price can trade at a discount or premium to its NAV. Whereas a CEF’s share price is traded throughout the day on an exchange, a CEF’s NAV is only priced once a day after the market closes


CEF Weekly Update - May 20, 2014
May. 20, 2014 - Morningstar, Inc. -  Merger News
Nuveen Investments announced that the proposed merger of three of its municipal closed-end funds, Nuveen New York Dividend Advantage Municipal Fund(NAN)Nuveen New York Performance Plus Municipal Fund (NNP), and Nuveen New York Dividend Advantage Municipal Fund 2 (NXK) failed to receive approval due to lack of shareholder participation. The majority of shareholders that cast a vote did so in favor of the merger, but total participation was not enough for the vote to pass. Nuveen did not indicate whether it will make another attempt to merge these funds. In general, though, we would expect that the merger of similar funds should lead to more efficiencies and lower costs for shareholders.

The Fed Provides The Real Juice For Utilities
May. 20, 2014 - First Trust -  View from the Observation Deck  
  1. The S&P 500 Utilities Index is the top performing major sector so far in 2014. Year-to-date through 5/19, the index posted a total return of 10.21%, compared to 2.80% for the S&P 500.
  2. We believe that some investors have shifted capital to utilities in an effort to get a bit more defensive in the current climate, due in large part to the 0.1% GDP growth rate posted in the U.S. in Q1’14. 


Can a "Perma-Bull" Turn Bearish?
May. 19, 2014 - First Trust -  During the past five years, stock market forecasts have fallen into three different camps.
  • It’s a Dead Cat Bounce, Sugar High, Artificial, QE-Induced Bubble Stock Market. It will crash any day.
  • It’s a Real Bounce, from Artificial Undervalued Lows, With Technology and Productivity Driving Real Profits. The market is still cheap and will go higher.
  • It was too low in 2009, but, as it moved higher, it became fairly, or over-valued. The risks of the world have risen and a correction or sideways market is due.


Municipal Closed-End Funds: MNCEFT Closes Above 1600; Silent Rally Continues
May. 16, 2014 - First Trust -  The First Trust Municipal Closed-End Fund Total Return Price Index (MNCEFT) closed above 1600 (1604.99 to be precise) on 5/15/14 for the first time since 5/24/13 when it closed at 1608.11. National municipal closed-end funds (CEFs) as measured by this index are now up 13.71% YTD and up 17.64% since 12/5/13, according to Bloomberg. As recently as 12/5/13 this index was at 1364.22. It closed above 1400 on 12/18/13, above 1500 on 2/10/14 and above 1600 on 5/15/14. 

America The Youthful? Yes, On a Relative Basis
May. 16, 2014 - BlackRock Blog -  While the United States is aging at a much slower pace than much of the rest of the world, the U.S. population will almost certainly continue to age. As Russ explains, this has three implications for the U.S. economy.

Where Do Bank-Loan CEFs Go From Here?
May. 16, 2014 - Morningstar, Inc. -  We've written about the pros and cons of bank loans before, but the space is worth revisiting given the uncertainty facing floating-rate investors.

Bank loans (also known as floating-rate loans or senior loans) feature rates that regularly reset to a spread over Libor and are relatively immune to price changes driven by changes in broad-market interest rates. While interest-rate risk is minimal, borrowers (or issuers) in this market tend to have highly leveraged balance sheets. 


CEF Update - May 13, 2014
May. 13, 2014 - Morningstar, Inc. -  Muni Fund Mergers
Nuveen continued to clean up their fund lineup last week, announcing that shareholders of several state-oriented municipal closed-end funds approved a series of mergers.  Nuveen California AMT-Free Municipal Income (NKX) plans to acquire Nuveen California Premium Income Municipal (NCU), which would increase its net assets to $714 million from $625 million.

Closed-End Fund Discounts: A Master-Class in Nuance
May. 13, 2014 - Closed-End Fund Advisors -  We are often asked, “So, your firm buys closed-end funds, do you just buy at a discount and sell at a premium?” After thirteen years in the industry the answer is, “Yes, but all discounts are not created equal”. In this article we hope to address three areas that we believe investors should better understand before venturing into the closed-end fund (CEF) structure. First let’s look at Absolute Discounts vs. Relative Discounts charted over the past two years. An Absolute Discount is the fund’s current Market Price vs. Current Net Asset Value (NAV). 

Federal Reserve Gone Wild
May. 12, 2014 - First Trust -  The Fed has massively increased the size of its balance sheet, from roughly $850 billion in 2008 to its current $3.96 trillion. Quantitative Easing was accomplished by having the Fed buy bonds and pay for them by “creating” excess bank reserves – reserves above and beyond those that are required.

US Economy and Credit Markets Week Ended May 9, 2014

May. 12, 2014 - First Trust -  Treasury movements were mixed this week as the yield curve steepened the most since September amid mixed economic data and a speech by Janet Yellen affirming a commitment to gradual increases in interest rates. On Monday, yields spiked when reports showed that service industries expanded at their fastest pace in eight months.

This Portfolio Beat Its Category by a Comfortable Margin
May. 09, 2014 - Morningstar, Inc. -  Since its October launch, the Strategic Income Portfolio--our model portfolio of best ideas for taxable fixed-income closed-end funds--has seen fairly high levels of volatility. Nevertheless, its 5.3% share price total return for the six-month period beat its Morningstar Category, multisector bond, average of 3.6% by a comfortable margin. Despite the volatility, the SIP accomplished this with similar levels of credit risk and a lower level of interest-rate risk compared with the category average. 

2014 Earnings Snapshot

May. 08, 2014 - First Trust -  

View from the Observation Deck

  1. Today’s blog post is an updated version of one we did on 2/11/14. Earnings estimates are monitored and adjusted often throughout the calendar year.
  2. The biggest difference between today’s earnings growth rate estimates for 2014 and this past February’s is that there are currently 8 equity indices (see chart) with double-digit projections, compared to 11 on 2/11/14.


Nonfarm Productivity Declined at a 1.7% Annual Rate in the First Quarter
May. 07, 2014 - First Trust -  Implications: After three consecutive quarterly increases, nonfarm productivity fell at a 1.7% annual rate in Q1. This was not due to falling production; output increased at a 0.3% rate. Instead, productivity declined because the number of hours worked increased much faster than output, which means output per hour declined. In spite of the decline in Q1, productivity is still up 1.4% from a year ago. More importantly, we think government statistics underestimate actual productivity growth. There are many examples, in every area of the economy, but the service sector is particularly hard to measure. 

CEF Weekly Update - May 6, 2014
May. 06, 2014 - Morningstar, Inc. -  Fund Mergers
Nuveen announced the restructuring and combination of several of its equity-option closed-end funds in order to streamline its offerings. The funds affected includeNuveen Equity Premium Income (JPZ)Nuveen Equity Premium & Growth(JPG),  Nuveen Equity Premium Opportunity (JSN)Nuveen Equity Premium Advantage (JLA)Dow 30 Premium & Dividend Income (DPD)Dow 30 Enhanced Premium & Income (DPO), and NASDAQ Premium Income & Growth(QQQX).

Field Notes: India
May. 06, 2014 - Calamos Investments -  I recently spent a week in Delhi and Mumbai meeting with corporate management teams and local investors to gain insights into the Indian economy and the outlook for upcoming elections. Meetings like these enhance our team’s understanding of how company management teams are thinking about their businesses and the potential impact they believe future macro events (e.g., elections) may have on how they deploy capital and pursue growth initiatives.

US Economy and Credit Markets Week Ended May 2, 2014

May. 05, 2014 - First Trust -  Yields fell this week as the geo-political situation in Ukraine continues to benefit safe assets. President Obama and Chancellor Merkel of Germany met on Friday to weigh additional economic sanctions on Russia, which cloud global growth prospects. In this uncertain environment, gold rose along with bond prices. Positive economic reports were released this week but failed to overcome the concerns surrounding Russia and Ukraine.

April Employment Report
May. 02, 2014 - First Trust -  Implications: Great headlines about the direction of the labor market, but the details of today’s employment report were not as strong. Nonfarm payrolls increased 288,000 in April, the largest gain in more than two years. However, we think some of the gain is payback for harsh winter weather and unusually slow job gains back in December/January. Nonfarm payrolls are up 197,000 per month in the past year and we think the underlying trend is a little faster than that pace. The other piece of good news was that the unemployment rate dropped to 6.3%, well below where even the most optimistic forecasters were predicting. The jobless rate among college grads is only 3.3%. But the drop in the jobless rate was mostly due to an 806,000 drop in the labor force, which pushed the participation rate down to 62.8%, tying the lowest level since 1978.

Thoughts From Capital Link 2014
May. 02, 2014 - Morningstar, Inc. -  Last Thursday, several members of Morningstar attended the 13th annual Capital Link conference for closed-end funds and exchange-traded funds. The conference was widely attended by analysts, portfolio managers, and product specialists. Some key topics included sector-specific trends in areas like energy investing and emerging markets, as well as product-level issues such as how to raise capital for CEFs and master limited partnerships. Morningstar's Steve Pikelny moderated the CEF industry round table panel discussion.

April ISM Manufacturing Index
May. 01, 2014 - First Trust -  Implications: Following temperatures, the ISM index, a measure of manufacturing sentiment around the country, continued to move higher in April. The index now shows manufacturing activity expanding at the fastest pace since the end of 2013, with seventeen of the eighteen manufacturing industries surveyed reporting growth in April. While not quite back to the levels we saw in mid-to-late 2013, the index has stood in expansion territory for eleven consecutive months, and we expect the index to continue to show strength as companies ramp up production and make up for time lost to bad weather. 

Commodities Off To A Good Start Relative To Stocks In 2014

Apr. 29, 2014 - First Trust -  

View from the Observation Deck 

  1. For the three-year period ended December 2013, the S&P 500 posted a cumulative total return of 56.82%, compared to a cumulative loss of 22.40% for the Dow Jones-UBS Commodity Index.
  2. Phil Flynn, senior market analyst at the Price Futures Group, noted in a MarketWatch.com article in December 2013 that the “biggest story” in 2014 would be the direction of commodity prices relative to stock prices.


CEF Update: A Merger and an Unusual Rights Offering
Apr. 29, 2014 - Morningstar, Inc. -  Merger
Cohen & Steers announced last week that shareholders of Cohen & Steers Dividend Majors (DVM) and Cohen & Steers Total Return Realty (RFI) approved a consolidation of the two funds. The firm expects the reorganization to take place by June 2014, with RFI as the surviving fund. Both funds are relatively small, with RFI containing $128 million in net assets and DVM containing $215 million in net assets. Considering that neither fund uses leverage nor has a substantial balance of undistributed net investment income, the merger should be relatively straightforward.

Rights Offerings: Have Your Cake and Eat It, Too
Apr. 25, 2014 - Morningstar, Inc. -  Most closed-end fund, or CEF, investors are familiar with the mechanics behind a fund's IPO but know decidedly less about rights offerings. To be sure, IPOs are more prominent and typically outnumber rights offerings in terms of both frequency and size, but when your fund announces a rights offering, what is it doing? And what should you, as a shareholder, do? 

The Price Of Crude Oil Doubled Over The Past Five Years
Apr. 24, 2014 - First Trust -  

View from the Observation Deck 

  1. For the five-year period ended March 2014, which captures all of the economic recovery that began in July 2009, the price of a barrel of crude oil increased by 104.6% to $101.58.
  2. The cumulative total return on the S&P 500 Energy Index was 114.1% over that same five-year period. At first glance, energy stocks essentially kept pace with the rise in the price of crude oil.


Avoid These Incredibly Overvalued Closed-End Funds
Apr. 18, 2014 - Morningstar, Inc. -  Many closed-end fund investors are quite well-informed. They understand the intricacies of relatively complex investment vehicles, diligently read the footnotes of their funds' annual and semiannual reports, and are disciplined enough to know when to buy and sell their holdings. However, it appears some investors less familiar with CEFs are willing to venture far outside their circle of competence for the sake of picking up some extra income. As a result, some CEFs that pay high distributions are occasionally driven up to exorbitant premiums. Experienced CEF investors generally steer clear of these funds, but this may not be as obvious a move for CEF newbies. 

CEF Update: TIAA-CREF Acquires Nuveen Investments
Apr. 15, 2014 - Morningstar, Inc. -  Acquisition
The biggest news of the past week was the announcement that TIAA-CREF would acquire Nuveen Investments for total consideration of $6.25 billion, including $4.6 billion in outstanding debt. Nuveen is one of the world's largest closed-end fund managers, with $57 billion in total CEF assets under management, including leverage. TIAA-CREF has no immediate changes planned for Nuveen or its CEF platform, but we will watch closely for any updates.

This Bank-Loan Fund Is a Standout
Apr. 11, 2014 - Morningstar, Inc. -  Few asset classes have received as much attention lately as bank loans (also known as senior loans or floating-rate loans). In the past 12 months, $54 billion has flown into the open-end bank-loan category as income-seeking investors look for protection against a potential rise in interest rates. As we've discussed before, senior loans pay interest to investors based on a floating rate that is generally reset quarterly. That rate is based on a reference index or rate (usually Libor) plus a spread, which is generally determined based on the credit risk of the portfolio's underlying assets. So, in a rising-rate environment, floating-rate loans should pay investors more income. 

CEF Update: 10 Large Distribution Changes
Apr. 08, 2014 - Morningstar, Inc. -  Leverage Refinancing
Nuveen continued to refinance the fixed-rate munifund term preferred shares (MTPs) issued by its muni funds. Last week,  Nuveen Dividend Advantage Municipal 3(NZF) and Nuveen NY AMT-Free Municipal Income (NRK) both announced that they issued institutional munifund term preferred shares (iMTPs) and variable-rate munifund term preferred shares (VMTPs) to refinance the rest of their outstanding MTPs. This will likely reduce leverage costs for both funds as long as short-term rates remain low.

Plow Horse Gets De-Iced
Apr. 07, 2014 - First Trust -  For the last couple of months it’s been an open question whether US economic growth was slower because of brutal winter weather or if something more serious and worrisome was going on. 

We have consistently sided with the “weather theory.” The winter of 2014 was one of the coldest and snowiest in the past 30 years, at least in the population centers in the East and Midwest. It was likely enough to slow real GDP growth from the 2.6% pace of the past year to under 1% annualized growth in the first quarter.

March Employment Report 

Apr. 04, 2014 - First Trust -  Implications:  The March employment report was more Plow Horse, with some signs of underlying improvement as weather-related problems eased. The unemployment rate held at 6.7% instead of ticking back down to 6.6%, as we expected, but the details of the report were much better than the headlines. Payrolls increased 192,000 in March, or a total of 229,000 after including upward revisions for prior months.  Including revisions, private payrolls gained 239,000.  What kept the unemployment rate from falling was a 503,000 gain in the labor force, which counteracted the robust 476,000 gain in civilian employment in March– an alternative measure of jobs that includes small business start-ups.  

Are Some Investors in for a Tax Surprise?
Apr. 04, 2014 - Morningstar, Inc. -  As investors finish their taxes for 2013, many will reflect on their decisions for the year and vow to make more tax-efficient choices in 2014. For closed-end fund investors, this is rarely straightforward. CEFs are more complicated than many other investment vehicles, and their taxable implications aren't always clear. Their distributions often contain several components such as net investment income, realized short-term capital gains, realized long-term capital gains, return of capital, and pass-through return of capital. Keeping all this straight might be difficult but is instrumental in making tax-efficient investment decisions. 

Job & Economic Growth Could Drive Auto Sales Higher
Apr. 03, 2014 - First Trust -  View from the Observation Deck  
  1. March’s U.S. nonfarm payroll number will be released tomorrow. Bloomberg’s survey of top economists produced a consensus estimate of 200,000 new hires. 
  2. That target is slightly above the 187,540 monthly average posted over the past 12 months, but still below the 250,000-plus economists believe is needed to make a serious dent in unemployment.


Biotechnology Ranked 2nd In Funding From Venture Capitalists For 3rd Year In A Row in 2013
Apr. 01, 2014 - First Trust -  View from the Observation Deck  
  1. From 2011-2013, of the 16 major categories tracked, the only one that raised more money from the venture capital (VC) industry than Biotechnology was Software.


CEF Weekly Update: 2 New MLP Funds
Apr. 01, 2014 - Morningstar, Inc. -  Two MLP Funds Launch
After nearly three months of no closed-end fund IPOs in 2014, we saw two new master limited partnership CEFs launch last week: First Trust New Opportunities MLP & Energy (FPL) raised $440 million, and Nuveen All Cap Energy MLP Opportunities(JMLP) raised $255 million. Assuming the full exercise of underwriters' overallotment options, the proceeds could raise to $530 million and $293 million, respectively. Despite the roughly four-month dry spell in CEF launches, MLP funds are still fairly hot. Five of the last 10 CEFs launched focus on MLP investing.

Year-To-Date Performance of Municipal Closed-End Funds Shows the Importance of Balance
Mar. 31, 2014 - First Trust -  2013 was a remarkable year for domestic equities. Not only was the Standard & Poor’s 500 Index up 32.37% according to Bloomberg, but it achieved these results with very little downside volatility. Indeed, August was the only negative month for the S&P 500 in 2013. With such robust returns for equities coupled with a rise in long-term interest rates last year, it is to be expected that investors could lose sight of the importance of building balanced, diversified closed-end fund (CEF) portfolios and instead be mostly focused on equities and equity CEFs. 

Repudiating Milton Friedman
Mar. 31, 2014 - First Trust -  Milton Friedman taught the world that the “transmission mechanism” for central bank policy worked through the quantity of money – the amount of money injected into, or subtracted from, the economy.

Shining the CEF Spotlight on DNP Select Income
Mar. 28, 2014 - Morningstar, Inc. -  A couple weeks ago, Steve Pikelny highlighted Bronze-rated  Aberdeen Asia-Pacific Income (FAX) as a closed-end fund worth taking a closer look at for investors looking to diversify their regional and currency exposure. This week, we bring the CEF spotlight back to the United States to highlight Silver-rated  DNP Select Income (DNP), a fund managed by the team at Duff and Phelps.

The V-Shaped Recovery In Stock Dividends Is Now A Check Mark
Mar. 27, 2014 - First Trust -  View from the Observation Deck  
  1. Today’s blog post is an update of one we did on 1/7/14. We intend to continue monitoring the direction of stock dividend distributions over the coming quarters.  
  2. S&P 500 companies paid out $84.98 billion in dividends in Q4’13, up 6.5% from the $79.83 billion distributed in Q4’12.


4th Quarter GDP (Final)
Mar. 27, 2014 - First Trust -  Implications: The biggest news this morning was that initial claims for unemployment insurance declined 10,000 last week to 311,000 and continuing claims dropped 53,000 to 2.82 million. Plugging these figures into our payroll models suggests a solid March gain of 203,000 nonfarm and 205,000 for the private sector. We will be adjusting this forecast to reflect incoming data over the next week, but it looks like the pace of job growth is bouncing back from weather-related problems this winter. 

If Henry Ford Could See Us Now
Mar. 27, 2014 - Calamos Investments -  A car, SUV, or pickup truck is still, at its core, a method of conveyance. Its utility to a driver hasn't changed since the first of the mass-produced cars rolled off the assembly line in 1908 (the Model T, for you trivia buffs).

February Durable Goods  
Mar. 26, 2014 - First Trust -  Implications: A pleasant upside surprise in the headline for new durable goods orders in February after declines in December and January. But don’t get too excited that durables goods avoided a weather impact. The strength in orders was mostly due to the volatile transportation sector (aircraft and autos); orders excluding transportation increased only 0.2% in February. 

It’s Back To The Future With Dividend-Paying Stocks

Mar. 25, 2014 - First Trust -  View from the Observation Deck  
  1. Dividend-paying stocks have held their own against the broader market over the past decade.  
  2. From 2/04-2/14, the Dow Jones U.S. Select Dividend Index (DJDVY), a commonly used benchmark for dividend-paying stocks, posted a cumulative total return of 94.9%, compared to 99.8% for the S&P 500.
  3. The strong showing has prompted some in the financial media to argue that valuations on dividend-paying stocks have reached levels too rich to justify the potential risks to investors’ capital.


February New Home Sales  
Mar. 25, 2014 - First Trust -  Implications: On February 2nd, Punxsutawney Phil woke up and predicted six more weeks of winter. Boy was he right! Terrible weather has been suppressing both home construction and sales, and today's report appears to be another victim as new home sales fell 3.3% in February to a five month low. Some people may blame the recent slowdown in new home sales on higher interest rates but the US had a bubble in housing during 2003-05, when 30-year mortgage rates averaged 5.8%. Today the rate is 4.3%. The months’ supply of new homes – how long it would take to sell all the new homes in inventory – rose to 5.2 in February, but is still below the average of 5.7 over the past twenty years.

2 BlackRock Funds File for At-the-Market Offerings
Mar. 25, 2014 - Morningstar, Inc. -  Last week, BlackRock filed to implement an at-the-market (ATM) shelf offering program for two of their funds:  BlackRock Limited Duration Income (BLW) and BlackRock Floating Rate Strategies (FRA). Considering that both funds are currently trading at substantial discounts, this is a strange move.

Good Corporate Governance Benefits Shareholders
Mar. 21, 2014 - Morningstar, Inc. -  Many citizens take the election of government officials quite seriously, as they should. These elected officials will go to Washington, D.C., or to our state capitals in an effort to represent us and our political beliefs. They are tasked with making hundreds, if not thousands, of decisions that will affect our everyday lives. In making these decisions, they should embody the interests of the citizens that elected them. At least, that's the ideal on which our electoral system is based. This is also the ideal for the board of directors of a closed-end fund, but shareholders take these elections far less seriously.

S&P 500 Top-Line Growth Estimates
Mar. 18, 2014 - First Trust -  View from the Observation Deck  
  1. Today’s blog post is intended to supplement our post from 2/20/14 (“S&P 500 Earnings Beat Rate On The Mark For Q4’13”).
  2. In that post we noted that 66.5% of S&P 500 companies, on average, had beaten their quarterly earnings estimates since Q3’11.
  3. Nearly two out of every three S&P 500 companies has managed to top analysts’ quarterly forecasts, in part, by cutting costs, such as labor, and boosting productivity via the implementation of cutting-edge technology. 


S&P 500 Top-Line Growth Estimates
Mar. 18, 2014 - First Trust -  View from the Observation Deck  
  1. Today’s blog post is intended to supplement our post from 2/20/14 (“S&P 500 Earnings Beat Rate On The Mark For Q4’13”).
  2. In that post we noted that 66.5% of S&P 500 companies, on average, had beaten their quarterly earnings estimates since Q3’11.
  3. Nearly two out of every three S&P 500 companies has managed to top analysts’ quarterly forecasts, in part, by cutting costs, such as labor, and boosting productivity via the implementation of cutting-edge technology. 


CEF Weekly Update - March 18, 2014
Mar. 18, 2014 - Morningstar, Inc. -  The past week saw significant activity in the closed-end fund world. Many funds remain busy on the issuing and repurchasing front, while Templeton is looking to expand its investment options in China. 

Leverage Changes
Nuveen Dividend Advantage (NZF) and Nuveen NY AMT-Free Muni (NRK) both announced the filing of notice for the redemption of all their outstanding Variable Rate MuniFund Term Preferred and MuniFund Term Preferred shares. The funds expect to finance the redemptions with proceeds of newly issued preferred shares. The anticipated redemption date is April 11, 2014.

The Consumer Price Index Increased 0.1% in February
Mar. 18, 2014 - First Trust -  Implications: Consumer prices continued to move higher in February, though at the same tepid 0.1% pace we saw in January. In the past year, consumer prices are up 1.1%. “Core” prices, which exclude food and energy, also rose 0.1% in February and are up 1.6% in the past year. So, for the time being, neither overall inflation nor core inflation is setting off alarm bells. Instead, they suggest the Fed’s preferred measure of inflation, the PCE deflator (which usually runs a ¼ point below the overall CPI) will remain well below the Fed’s target of 2%. 

No Extension Needed

Mar. 17, 2014 - First Trust -  No one can know with absolute certainty exactly how much the brutal winter weather affected jobs. But, the 162,000 increase in February private sector payrolls was a positive shock to the consensus. January, at 145,000, was surprising, too. 

CEF Spotlight: Muni CEFs That Could Be Worth the Risk

Mar. 14, 2014 - Morningstar, Inc. -  With tax season upon us, many investors will soon assess their tax burdens for 2013 and promptly vow to increase the tax-efficiency of their portfolio. For taxable accounts, some will find themselves underwhelmed by the many low-yielding municipal-bond funds available to them. With this in mind, we're highlighting five Bronze-rated muni closed-end funds that are run by BlackRock and conduct identical strategies:  BlackRock MuniVest (MVF),  BlackRock MuniVest II (MVT),  BlackRock MuniYield (MYD),  BlackRock Municipal Income (BFK), and  BlackRock Municipal Income II (BLE). To be sure, these are high-octane muni funds, and are certainly not for every investor. But for the most aggressive, they are definitely worth a look.

CEF Weekly Update - May 11, 2014
Mar. 11, 2014 - Morningstar, Inc. -  It's been another busy week for closed-end funds. Following is a summary of recent CEF news over the past week.

Oxford Lane Capital
 (OXLC)announced that its rights offering will result in the issuance of more than 4 million additional shares. The subscription price for the oversubscribed offering was $17 per share. Shareholders on record as of Feb. 4, 2014, will receive one nontransferable right for each share held.


Taking a Closer Look at Aberdeen Asia-Pacific Income
Mar. 07, 2014 - Morningstar, Inc. -  Between a recent management shuffle, the rapid depreciation of the Australian dollar, and refinancing its leverage structure, it has been an eventful 10 months  Aberdeen Asia-Pacific Income (FAX). But with this Bronze-rated fund trading at a 7.8% discount, now might be a good time for contrarian investors to take a look. To be sure, Aberdeen Asia-Pacific Income is not for everyone. As evidenced by its nearly 21% loss on a share price total return basis for 2013, the portfolio entails a large amount of currency risk.

CEF Weekly Update: An Overvalued Fund Now Slightly Less Overvalued
Mar. 04, 2014 - Morningstar, Inc. -  A Collapsing Premium
After reaching an inexplicably high premium in late January, shares of Chile Fund(CH) are finally coming back to earth. Partially because of its persistently high levels of return of capital, and partially because of the poor performance of Chilean equity markets, the fund's net asset value has depreciated close to 33% during the past year. Meanwhile, share prices have seen some odd behavior during that period, reaching a 30% premium last August before falling down to NAV by December.

Ukraine Fears Temporary
Mar. 03, 2014 - First Trust -  It’s a huge week for economic data, and US stock indices just made new highs, but who cares – Vladimir Putin sent troops into the Ukraine and this was blessed by a vote in the Duma. Previously, Ukraine’s elected president, an ally of Russia, was forced from office for ordering troops to fire on protestors. That departure was ratified by Ukraine’s parliament.

A Tough Spring Ahead for Stocks?
Mar. 03, 2014 - BlackRock Blog -  Despite last week’s disappointing economic data, stocks rallied to record highs. Russ explains what’s behind this disconnect and why stocks may be vulnerable come the spring.

Will Gold Add Some Shine to Your Portfolio?
Feb. 28, 2014 - Morningstar, Inc. -  The roller-coaster ride experienced by gold investors during the past year shows no signs of stopping. Still, many investors consider gold a safe haven from inflation or a hedge against financial calamity, and consider a small allocation to gold as a prudent diversification tool. This article will explore a few different vehicles that investors can use to gain exposure to gold.

CEF Weekly Update
Feb. 25, 2014 - Morningstar, Inc. -  Capital Structure Changes
DNP Select Income (DNP) announced the successful placement of $267 million of floating-rate mandatory redeemable preferred shares, or MRPS. The fund will use the proceeds to redeem all outstanding shares of Series D and Series E remarketed preferred stock. The preferred shares will be redeemed for 100% of their liquidation preference plus accrued and unpaid dividends. The Series D shares will be redeemed March 12, 2014, and the Series E shares will be redeemed March 19, 2014. The fund will use the remaining proceeds from the MRPS placement to repay $128.8 million of the $861.8 million principal outstanding under its credit facility.

Treading Water: Four Economic & Market Trends Likely to Continue in 2014
Feb. 25, 2014 - BlackRock Blog -  Like stocks last week, economic fundamentals are treading water. Russ explains the economic and market trends that are likely to continue in coming months.

The Importance of Limit Orders When Investing in CEFs
Feb. 21, 2014 - Morningstar, Inc. -  Closed-end funds are often touted as vehicles for investors to access illiquid securities such as stock of emerging markets companies and certain fixed-income investments. Frequently ignored, however, is the illiquidity of CEFs themselves. Due to limited investor audiences, some of the most thinly traded CEFs are municipal funds and, more specifically, those concentrated in issuers from a single state. 

Three Reasons Frontier & EM Equities Are Not Created Equal
Feb. 21, 2014 - BlackRock Blog -  With all the turmoil in emerging markets recently, some investors may be especially wary of investing in so-called frontier markets. Russ explains why frontier and emerging markets are separate asset classes, each deserving of a strategic allocation.

CEF Weekly Update
Feb. 18, 2014 - Morningstar, Inc. -  Leverage Refinancing
Pioneer High Income (PHT) announced last Tuesday that it plans to redeem all of its outstanding auction-rate preferred shares at par, totaling about $150 million. The board of directors plans to finance the redemption with the authorization of a third-party debt facility. The refinancing will be completed March 18, 2014. Considering that alternative forms of leverage financing are typically more expensive than ARPS, investors should expect an increase in the fund's total expense ratio.

Mid-Quarter Update: Good Start to 2014 for Many Categories of CEF Marketplace; Still Compelling Values Available
Feb. 18, 2014 - First Trust -  
Many categories of closed-end funds (CEFs) are offto a good start to the year. Investors took advantage ofthe big discounts to net asset value
(NAV) and attractive yields available in the secondary market which helped push the average CEF up 2.57% the first 6 weeks of the year as
measured by the First Trust Closed-End Fund Composite Total Return Price Index (UPCEFT) as of 2/14/14. 


Should You Become a Convert to Convertibles Funds?
Feb. 14, 2014 - Morningstar, Inc. -  As a steady economic recovery pushed equity securities higher in 2013, convertible securities also benefited. A convertible security is a bond that also carries the right to buy the stock of the issuing firm once it hits a certain (conversion) price. As a result, convertibles funds tend to provide much, but not all, of equities' upside with less of their downside risk. For example, last year,  SPDR S&P 500 (SPY) gained 32%, the typical open-end convertible fund gained nearly 22%, and the typical convertibles closed-end fund gained nearly 20%. In an equity bear market, convertible securities should provide some downside protection--in 2008, SPY dropped nearly 37%, but the typical open-end convertibles fund lost 26% and the typical CEF lost 34%. 

CEF Weekly Update
Feb. 11, 2014 - Morningstar, Inc. -  AllianceBernstein Income Fund (ACG) announced that its board of directors approved a proposal to eliminate the fund's fundamental and nonfundamental investment policies, which will be submitted to shareholders at the annual meeting on March 27. The fund's primary fundamental policy requires it to invest at least 65% of total assets in obligations issued or guaranteed by the U.S. government, including agency securities and repurchase agreements pertaining to U.S. government securities.

The Recovery Is Not A Sugar High
Feb. 10, 2014 - First Trust -  What happened to stocks in January and early February is nothing new. It’s happened quite a few times in the past four years and eleven months. Ever since mark-to-market accounting was fixed in March/April 2009, these corrections have been short-lived and relatively mild. And once they were over the market went higher. It’s been a very strong bull market.

A Closer Look at Preferred-Stock Funds
Feb. 07, 2014 - Morningstar, Inc. -  On Nov. 4, 2013, Morningstar launched the preferred-stock category. This Morningstar Category includes funds with a majority of assets invested in preferred stock over a three-year period. For an overview of preferred stock and the new category, refer to this article.

Preferred stocks were off to a decent start at the beginning of 2013, but took a hit after the Federal Reserve's taper talk in May. Because most preferred securities are long term (often perpetual in nature), prices dropped dramatically as long-term interest rates jumped. Adding fuel to the fire, soon after its taper talk the Fed released finalized rules on bank capital requirements relating to the treatment of certain preferred shares, which took a toll on preferred-share prices.

What Puerto Rico’s Downgrade Means for Investors
Feb. 05, 2014 - BlackRock Blog -  After much speculation and anticipation, the island of Puerto Rico has been downgraded to junk. Peter Hayes discusses the implications (or lack thereof) for the municipal market.

Puerto Rico has been making headlines for months. Yesterday, the clincher finally appeared: 
What Looks Good in Muni Land?
Jan. 31, 2014 - Morningstar, Inc. -  Last year was not pretty for municipal funds. Across the spectrum, rates rose from historic lows, making it difficult for many funds to break even for the year. With rates slightly higher, investors seeking tax-exempt income now have some breathing room, but they are not out of the woods yet.

CEF Weekly Update
Jan. 28, 2014 - Morningstar, Inc. -  It's cold in Chicago, but the closed-end fund world is always hot. Below is a summary of news across the (CEF) universe from the past week. 

Manager Change
Aberdeen announced on Jan. 21, 2014, that Victor Rodriguez will take over head management responsibilities for  Aberdeen Asia-Pacific Income (FAX), replacing previous head manager Anthony Michael. Because of the manager change, we placed our Morningstar Analyst Rating for the fund under review. 


After Last Week’s Sell-off: More Volatility Ahead
Jan. 27, 2014 - BlackRock Blog -  Russ explains the two major factors behind last week’s U.S. equity market sell-off as well as why investors should expect more volatility ahead and consider international stocks.

After a rocky first few weeks of the year, U.S. equity markets fell sharply last week. The media blamed much of the decline on market turmoil in emerging markets.  China reported some surprisingly weak economic data, and financial turmoil in Argentina and Turkey led to a sell-off in EM currencies.



How the Safe Havens Stack Up
Jan. 24, 2014 - BlackRock Blog -  For investors who are worried about a correction, Russ provides a look at which traditional safe-haven assets tend to perform best during times of uncertainty.

Given stocks’ stellar rise over the last year, investors worried about a correction are asking me where they can park their money.


Strategic Income Portfolio Quarterly Update
Jan. 24, 2014 - Morningstar, Inc. -  In October, we launched the Strategic Income Portfolio, our model portfolio of taxable fixed-income closed-end funds. For the three months ended Jan. 21, 2014, the portfolio logged a total return of 2.71% on a share price basis. Meanwhile, the Morningstar Category of multisector-bond funds returned an average 1.21%, and the Barclays Capital Aggregate Bond Index gained 0.26%. The short time frame makes it difficult to draw meaningful insight about risk-adjusted returns, but let's take a closer look at the key drivers of the SIP's performance. Then we will discuss some adjustments to the portfolio.

The Power of Closed-End Fund Distributions
Jan. 21, 2014 - First Trust -  
Albert Einstein once said, “Compound interest isthe eighth wonder of the world. He who understands it, earns it ...he who doesn't ...paysit.” Long-term investors in closed-end funds (CEFs) are keenly aware of this principle. The majority of CEFs have the goal of distributing current income astheir primary investment objective and historically the majority of a CEF’s total return has come from the distributions it makes. This doesn’t mean an individual CEF or category of CEFs cannot earn capital appreciation along with distributions, rather as the data below indicates it simply means over long periods of time the majority of the total return CEFs historically provide comes from the distributions.


Q4 GDP - Stronger than Keynes Predicted

Jan. 21, 2014 - First Trust -  
Please don’t accuse us of ignoring “everything” John Maynard Keynes said. The truth is we ignore just 99%. What most people are taught about Keynes is that government spending is the equivalent of, or through the spending multiplier, more powerful than, private spending. 

Very few ever try to argue with this idea, especially after teachers pull out the officious, yet full of hocus-pocus, IS-LM curves. Politicians want to believe the idea of the Keynesian multiplier because they really actually do believe they themselves are bigger than real life. As a result, politicians around the world have elevated Keynes to legendary status even though big government spending has left economic mayhem and poverty strewn everywhere.


US Economy and Credit Markets Week Ended Jan. 17, 2014
Jan. 21, 2014 - First Trust -  Treasuries gained this week as housing starts declined in December, industrial production came in as expected and consumer confidence unexpectedly fell. This is the third consecutive week of gains for Treasuries following the 10 year yield peaking at 3.05% on January 2nd. On Tuesday, the December Retail Sales Report showed a 0.2% increase in December and sales up 4.1% versus a year ago.

Year in Review: Taxable-Bond Closed-End Funds
Jan. 17, 2014 - Morningstar, Inc. -  The last two CEF Weekly articles provided an overview of the equity and municipalclosed-end fund groups and their performances during 2013. It was a good year for equity-focused CEFs, as the S&P 500 returned 32% and the average equity-focused CEF posted a net asset value gain of 17% (including distributions) and a share price gain of 18%. Morningstar fund analyst Steven Pikelny discussed the usually steady municipal-bond space, which was hit with the double whammy of rising rates and credit concerns over cash-strapped municipal issuers like Detroit and Puerto Rico. Exchange-traded fund  iShares National AMT-Free Municipal Bond (MUB), for example, dropped 3.0% in 2013 following impressive gains in 2011 and 2012. Municipal CEFs fared even worse, as the average fund's NAV declined 6.8% and fell 13.0% on a share price basis.

Semiconductor Sales Were A Good Barometer For The Technology Sector In 2013
Jan. 16, 2014 - First Trust -  

View from the Observation Deck 

Today’s blog post is an update of a post we did on 2/2/12 where we encouraged investors to monitor the recovery in semiconductor sales and use it as a barometer for the overall health of the technology sector.



Recently Updated CEF Ratings
Jan. 14, 2014 - Morningstar, Inc. -  Recently, we have updated coverage on a number of closed-end funds, upgrading or downgrading some Morningstar Analyst Ratings. We regularly check in with fund managers while evaluating a fund's rating, a process which may lead to a ratings confirmation or change.

Year in Review: Equity Closed-End Funds
Jan. 10, 2014 - Morningstar, Inc. -  As we turn the page on a new calendar year, resolutions and fresh starts are on everyone's minds. But it's also a great time to look back at the year that was. Last week, analyst Steve Pikelny provided a detailed look at the year in municipal closed-end funds, or CEFs. (Spoiler alert: The muni market was volatile and ended the year on a much lower note than it started.) This week, we tackle the equity universe, which we've broadened to include not just equities, but allocation funds, convertibles, alternatives, and commodities. Next week, we will delve into taxable fixed-income funds.

Following Solid December, Municipal CEFs off to Good Start in 2014
Jan. 09, 2014 - First Trust -  While the average municipal closed-end fund (CEF) was lower by 13.42% on a share price total return basis in 2013 (NAVs were lower by 6.88% on a total return basis) according to Morningstar, performance has improved recently. On September 3, 2013 I wrote a blog piece entitled “Still out of Favor but with Compelling Yields and Valuations” which discussed that municipal CEFs were still out of favor with investors despite the value in municipal bonds, attractive discounts to NAV and very compelling tax-free yields municipal CEFs offered. The September to November period was a fairly stable one for most municipal CEFs, however by December investors had finally begun to take advantage of the very compelling yields and discounts to NAV. In fact, the First Trust Municipal CEF Index (MNCEFT) was up 2.26% during the month of December. The positive momentum and bargain hunting has continued into 2014 with MNCEFT up 2.24% through 1/8/14 according to Bloomberg. The index closed at 1443 on 1/8/14 which represents its highest closing price since 7/12/13 according to Bloomberg.

CEF Weekly Update
Jan. 07, 2014 - Morningstar, Inc. -  The end of the year usually brings around a few traditions. In Chicago, cold weather is expected, but the recent arctic plunge has already hit all-time records, leaving the entire city in a deep freeze. In warmer news, the end of year also usually brings about special distribution announcements at several closed-end funds, and 2013 was no different. Some noteworthy one-time distributions announced in the past few weeks include a $1.60 per share distribution from Aberdeen Latin American Equity (LAQ), $1.71 per share from the Central Europe, Russia and Turkey Fund(CEE), $2.13 per share from the Mexico Equity & Income Fund (MXE), and $3.35 from the New Germany Fund (GF).

Year in Review: Municipal CEFs
Jan. 03, 2014 - Morningstar, Inc. -  Normally regarded as a sleepy--and "safe"--asset class, municipal bonds were hammered in 2013. In fact, munis were hit twofold: first by rising interest rates, and then by credit concerns. After a spectacular run in 2012, many muni investors were likely disappointed. For example, the largest muni exchange-traded fund,  iShares National AMT-Free Municipal Bond (MUB), which tracks the S&P National AMT-Free Municipal Bond Index, lost 3.0% for the year after returning 5.2% in 2012 and 13.0% in 2011. But this was still relatively tame compared with the carnage among muni closed-end funds. These CEFs typically use leverage, focus on the longer end of the yield curve, and go after securities with greater credit risk--all of which amplified the volatile movements in the broad muni market. 

10 Inexpensive CEFs to Put on Your Radar
Dec. 31, 2013 - Morningstar, Inc. -  With many closed-end funds ending the year trading at substantial discounts, it's natural for value-conscious investors to scour the CEF market for bargains. If discounts contract, they can provide a margin of safety to investors: If the net asset value stays constant, investors benefit as the share price converges toward its underlying NAV. Similarly, contracting discounts can ease the pain of a declining NAV. All that said, there's no guarantee that purchasing discounted CEFs will lead to positive returns. After all, discounts can widen and management teams can underperform. Investors should dig deeper by looking at valuation on a relative basis and by focusing on high-quality funds run by experienced managers with sound processes and low fees. Combining Morningstar Analyst Ratings with z-statistics can be a powerful way to uncover great funds at attractive valuations.

A Checklist for Fixed-Income Fund Investors
Dec. 27, 2013 - Morningstar, Inc. -  After a volatile year for fixed income, many closed-end fund investors are understandably skittish as they make year-end portfolio adjustments. Some will adjust their portfolios toward comparatively less-volatile ETFs and open-end funds, but others will find the current environment ripe with opportunities for investing in discounted funds. But with roughly 400 fixed-income CEFs in existence, sifting through the universe can be daunting. Even after drilling down into a specific sector, it can be hard to tell the difference between two funds. Especially within a single fund family, it is not uncommon to come across several funds with nearly identical investment mandates and strategies. (Are the differences between  Nuveen Premium Income Muni 2 (NPM) and  Nuveen Premium Income Muni 4 (NPT) truly significant?) With this in mind, a systematic approach to picking CEFs might be helpful for investors worried about covering all their bases. While the following checklist is by no means fully inclusive of all CEF-related concerns, it is a good starting point.

Deck the Halls With Higher Tax Bills
Dec. 23, 2013 - Morningstar, Inc. -  
While the holiday season is generally filled with cheer, some closed-end fund investors may say "Bah, humbug!" thanks to higher tax bills this year. Investors in traditional open-end funds are quite familiar with the year-end tradition of special distributions. And although CEFs are required to distribute nearly all of their realized gains and income earned during the year to maintain their status as a registered investment company, CEF investors are often removed from this ritual. That's partly because managed and level distribution policies allow CEFs to pay capital gains throughout the year. In fact, as of mid-December, 13% of all CEFs had managed distribution policies (a stated, predetermined percentage of net asset value is paid out each year, with payments spread evenly throughout the year) and more than three fourths had level distribution policies (the same dollar amount is paid each period, usually monthly or quarterly).


A Recap of 2013's CEF IPO Market
Dec. 20, 2013 - Morningstar, Inc. -  The first half of 2013 was a promising start to the year for closed-end fund initial public offerings. There were 13 launches, two of which each raised more than $2 billion in proceeds, topping the $1 billion raised for 2012's most talked about new fund, PIMCO Dynamic Income (PDI). Although "taper talk" in May brought the IPO market to a halt for a few months, fund launches picked back up in the fall, closing the year (as of Dec. 13) with 23 new funds launched. Net proceeds for the year were a healthy $14 billion, though much of this is attributed to a handful of $1 billion-plus funds launched in the first half of the year.

Top Picks for Emerging-Markets Bond CEFs
Dec. 13, 2013 - Morningstar, Inc. -  Emerging-markets funds have historically played a small (or even nonexistent) role in most investors' portfolios, but as the developed world remains in a no- to low-growth holding pattern, investors have increasingly turned to riskier assets in an effort to meet their investment goals. Despite a recent slowdown in some previously faster-growing emerging economies, Gross domestic product growth relative to the United States and much of Europe remains strong. China, for example, logged 9%-10% growth from 2009 to 2011 and, though 2012 GDP grew at a slower 7.8%, that's 3.5 times the 2.2% GDP growth rate in the U.S.

Senior Loan CEFs: Big Disparity Between Share Price and NAV Performance in 2013
Dec. 10, 2013 - First Trust -  
Following 2012, a year in which the average senior loan closed-end fund (CEF) was up 22.63% on a share price total return basis according to Morningstar, the average senior loan CEF is up a miniscule 0.03% year-to-date (YTD) also on a share price total return basis according to Morningstar as of 12/9/13. However, the slightly positive share price total return earned thus far in 2013 only tells part of the story. While share price total returns are barely positive YTD, underlying net asset value (NAV) performance has been much better. In fact, according to Morningstar, as of 12/9/2013, the average senior loan CEF has a NAV total return of 8.43%. This high single digit NAV total return reflects the positive fundamentals which continue to exist in the senior loan asset class, including a default rate of only 1.48% as of the end of November according to S&P. It also reflects the continued demand investors have for the senior loan asset class given their limited duration risk and compelling income.


Alternatives Strategies in a CEF Wrapper
Dec. 10, 2013 - Morningstar, Inc. -  Closed-end funds are commonly--and incorrectly--perceived as old, stodgy investment vehicles that primarily buy and hold municipal bonds. Yes, CEFs are old (the first was launched in the United Kingdom in the late 1800s), and yes, almost half of the CEFs in existence invest in municipal bonds. But investors in the know realize that CEFs are far from boring; many employ a wide array of investment tactics, even alternative and hedge fund-like strategies. While the definition of what is "alternative" is open to interpretation, Morningstar defines alternatives using three buckets:

Pessimists Get Desperate

Dec. 09, 2013 - First Trust -  Payrolls keep growing. Economic data stays positive. The stock market makes new highs. It’s been consistent for nearly five years. And so has the pessimism. In fact, the pouting pundits of pessimism get more determined each month, trying to prove that things are really bad out there.

We really do tip our hats to those who dive deeply into the details of job reports – even though they don’t really understand the data – to find that one nugget of negative information that will boost hits on their webpages and get them retweeted. 

October Personal Income and Consumption 
Dec. 06, 2013 - First Trust -  Implications: Another Plow Horse report on income and spending in October shows the consumer is doing just fine. This report is one more nail in the coffin for the supposed concerns about the partial government shutdown in October affecting consumer spending for the month. Spending rose 0.3% overall, absolutely unaffected from the drama out of Washington. Although income fell 0.1% in October, this comes after eight consecutive months of gains, and most of the decline was due to farm income which has been very volatile. Wages and salaries continued to grow and are up 3.2% from a year ago. Income growth has accelerated over the past three months, growing at a 3.7% annual rate versus a 3.4% gain the past year. 

CEF Weekly: Medalist Edition
Dec. 06, 2013 - Morningstar, Inc. -  During the last month, we added coverage of two new closed-end funds, or CEFs, bringing the total number of funds rated to 125, accounting for 45% of the net assets in the CEF universe. (For those closely following our ratings count, that number was 126 at the start of November, but it dropped because of a merger of four rated BlackRock High Yield funds.  BlackRock Corp High Yield VI Common (HYT), the surviving fund, earned a Bronze rating.) For a detailed discussion of the Morningstar Analyst Rating for CEFs, you can find the methodology document here.

CEF Mergers Abound in 2013, but Boulder's Potential Deal Sticks Out
Dec. 03, 2013 - Morningstar, Inc. -  Despite a healthy year for closed-end fund initial public offerings, a rash of fund mergers shrank the overall CEF universe from 616 at the start of 2013 to 600 as of mid-November. Although merger transactions slowed this year compared with those in 2012, the trend hasn't ended: Eight mergers have been proposed or approved this year to be completed in 2014.

Generally speaking, firms with numerous municipal offerings, especially Invesco and Nuveen, focused on merging smaller, often single-state, funds in years past. In 2013, however, there was an uptick in non-muni-fund combinations, including the recently proposed merger of four equity funds from Boulder Investment Advisors. If approved by shareholders through a proxy vote in the first quarter of next year, this will be the first equity fund merger since early 2012.
 


The ISM Manufacturing Index Increased to 57.3 in November
Dec. 02, 2013 - First Trust -  Implications: The ISM index, a measure of manufacturing sentiment around the country boomed in November coming in at the highest level since April 2011, easily beating consensus expectations, and rising for the sixth consecutive month. According to the Institute for Supply Management, an overall index level of 57.3 is consistent with real GDP growth of 4.7% annually. We don’t expect real GDP to grow anywhere near that pace in Q4, but we do expect much faster growth in 2014. 

Consumers Doing Fine
Dec. 02, 2013 - First Trust -  According to the National Retail Federation, Thursday to Sunday holiday sales dropped 3% versus last year. No doubt, this will wake up some dozing bears. And, we are sure that when we say it’s not as bad as you think, many will argue we are perma-bulls, naïve, or downright stubborn. You can think what you want, but we don’t believe sales are falling.

First, other reports conflict with the NRF data. ShopperTrak, a Chicago-based firm that monitors sales traffic at 40,000 retail outlets and malls around the country, reported a 2.3% gain in sales for Thanksgiving and Black Friday.



US Economy and Credit Markets Week Ended Nov. 29, 2013
Dec. 02, 2013 - First Trust -  Treasuries ended the holiday-shorted week flat with a slight yield curve twist as the Federal Reserve tried to shift attention away from the bond buying program and toward keeping short-term policy rates low. This is because long-term yields rose much faster short-term yields in November. Monday and Tuesday saw very good demand for Treasury auctions on poor economic data. On Monday, sales of previously sold homes were lower than expected, while Tuesday showed the Confidence Board consumer confidence index fell again to its lowest point since April. 

How Much Does Your CEF Cost?
Nov. 29, 2013 - Morningstar, Inc. -  Many investors avoid buying closed-end funds because of their reputation for charging high fees. After all, Morningstar regularly notes that fees are often the best predictor of performance, so why consider an "expensive" CEF? Intuitively, the mechanics behind low fees and strong returns makes sense: The risk-adjusted benefits of active management are often unclear and inconsistent, but fees are always a sure thing. In more technical terms, fees represent negative alpha. Superior management teams occasionally overcome the high-fee hurdle through superior security selection and portfolio construction, but this is the exception rather than the norm.

New Orders for Durable Goods Declined 2.0% in October

Nov. 27, 2013 - First Trust -  Implications: New orders for durables declined 2.0% in October. However, almost all the decline was in the transportation sector – particularly civilian aircraft – which is extremely volatile month to month. Orders were down 0.1% excluding transportation. The best news in today’s report was that unfilled orders for core capital goods rose 0.3% in October, hitting a new record high. The news on unfilled orders supports our optimism about business investment. In addition, the recovery in home building should generate more demand for big-ticket consumer items, such as appliances. Expect more plow horse growth in the months ahead. In other manufacturing news, the Richmond Fed index, which measures mid-Atlantic factory sentiment, increased to +13 in November from +1 in October. The Chicago PMI, which measures factory sentiment in that region, declined to 63.0 in November from 65.9 in October.

Are Some Investors In for a Tax Surprise?
Nov. 26, 2013 - Morningstar, Inc. -  As 2013 comes to a close, many investors will soon look to make their annual, semiannual, quarterly, monthly, weekly, daily, or hourly portfolio adjustments. For closed-end fund investors, this process might include a thorough analysis of year-end distributions and capital loss carryforward harvesting prospects. But CEFs are more complicated than other investment vehicles, and their taxable implications aren't always straightforward. With this in mind, now is a good time to dig into some of the tax considerations relevant to CEF investing. Note that this article is meant as a general overview of CEF taxes. For more-specific guidance, please consult a tax professional.

December Taper or Not: 2 Reasons Easy Money Will Likely Continue
Nov. 25, 2013 - BlackRock Blog -  Many market watchers are obsessed with when the Fed will begin tapering. However, those who expect the start of tapering to mean the end of easy money, and possibly of related market gains, are missing an important nuance. Russ explains.

As the Federal Reserve (Fed)’s December policy meeting approaches, many market watchers are obsessed with when the Fed will announce that it’s starting to scale back, or “taper,” its asset purchase program.

QE: Not That Big of a Deal
Nov. 25, 2013 - First Trust -  The most frequent question we get lately is “what happens to long-term interest rates when quantitative easing ends?” Many analysts argue that the Federal Reserve is buying and holding a huge share of Treasury debt and once QE ends other buyers will suddenly have to absorb more. This will cause interest rates to soar, bust the housing market, undermine stocks, and possibly cause a recession.

US Economy and Credit Markets Week Ended Nov. 22, 2013

Nov. 25, 2013 - First Trust -  Near-term Treasury yields declined slightly amid mixed economic data and the Federal Reserve’s continued commitment to very low short-term interest rates. Longer-term bond yields continued increasing during the week and the yield curve continues steepening as investors prefer shorter duration bonds in anticipation of an eventual roll-back of Fed asset purchases. Higher interest rates may encourage banks to extend more loans, as they will collect more on higher yielding loans. On Wednesday, there were major reports offering the latest information on the health of the consumer. MBA Mortgage applications disappointed for the third straight week as refinancing activity stretched to a two week low.

2 Ways to Invest in High-Yield Bonds
Nov. 22, 2013 - Morningstar, Inc. -  The corporate high-yield bond market is uniquely positioned at the crossroads of equity and fixed income. High-yield bonds are generally corporate bonds rated below BBB by S&P or Baa by Moody’s. A range of companies issues high-yield bonds, including casino operators, chemical companies, and financial-services firms. Companies may wind up with a high-leverage profile either intentionally (because of a leveraged buyout, leveraged acquisition, or recapitalization) or unintentionally (because of a deterioration of the underlying business of an erstwhile investment-grade firm).

Morningstar's New Preferred Stock Category
Nov. 15, 2013 - Morningstar, Inc. -  On Nov. 4, Morningstar launched new categories for open-end and closed-end mutual funds and exchange-traded funds. The preferred stock category includes funds with a majority of assets invested in preferred stock over a three-year period. Previously, most preferred share funds were lumped in with long-term bond funds because of their historically high sensitivity to long-term yields. Preferred shares have exhibited much more equitylike behavior in recent years, though, especially in periods of market distress. In fact, the historical correlation between the new preferred stock category and the now preferred-share-absent long-term bond category has come down (just 0.63 over the trailing three years ended October 2013 and 0.57 over the trailing five years). 

Is Europe Making a Comeback?
Nov. 14, 2013 - BlackRock Blog -  

A move by the European Central Bank to cut interest rates to a record low of 0.25% has specific implications for improving investor confidence. Dodd Kittsley explains.

A battered Eurozone seems to be on a slow road to recovery. Spain finally emerged from its two-year recession in the third quarter, and this summer marked the first time in three years that the Eurozone didn’t suffer from a financial crisis. Last week, the European Central Bank lowered interest rates to 0.25%. These signs of life highlight improving economic signals and investor confidence in the region – a sentiment echoed by our own Russ K – and are sparking a surge in select European ETF flows.

 



My CEF Final Four
Nov. 12, 2013 - First Trust -  There are many different ways to approach investing in closed-end funds (CEFs) in the secondary market. One question I often get is “What factors do you think an investor should consider before investing in a CEF?” While there is no right or wrong answer to this question, from my standpoint the four most important criteria an investor should consider are discussed below.

  • Attractiveness of the underlying asset class: Just like an open-end fund (commonly known as a mutual fund) a closed-end fund can provide investors with professional management, diversification and exposure to many different asset classes depending on the objective of the fund. However, unlike an open-end fund where an investor buys and sells shares in the fund at net asset value (NAV) once a day after the market closes, closed-end fund investors purchase common shares of a fund on an exchange such as the NYSE throughout the trading day. 


Taper Talk
Nov. 11, 2013 - First Trust -  Tapering…please bring it on. We wanted it yesterday, or last month, or even years ago. We never thought QE helped the economy and certainly don’t think keeping it around is a good idea. It’s created uncertainty at an unprecedented level. 

But, we aren’t holding our breath waiting for the Fed to change course. Despite better data on the economy, the Fed will take its sweet time, possibly waiting until March before slowing the pace of “quantitative easing,” the monthly purchase of $85 billion in long-term securities. With Vice-Chair Janet Yellen on tap for the top spot at the Fed and more potential budget fights looming in January/February, it’s hard to imagine the Fed rushing to do something that might spook the markets.  

Thoughts on Closed-End Funds From Industry Insiders
Nov. 08, 2013 - Morningstar, Inc. -  Depending on an investor's level of interest in closed-end funds, this week's Investment Company Institute's conference on CEFs can be pinned anywhere along the spectrum from boring to wonky. The conference isn't geared toward individual investors and advisors as much as it is toward CEF industry personnel. This means that speakers generally focus less on market updates and selling their specific funds, and more on discussing CEF mechanics, new regulatory concerns, and challenges of sponsorship. The agenda certainly had its less exciting parts--the new, expanded definition of commodity pools under Dodd-Frank, for example, wasn't as enthralling a discussion as one might expect--but still offered some information that investors may find useful. In particular, discussions on the new-issue market and secondary market support offer insight into the direction the industry is heading.

Medalist Movers--CEF Edition
Nov. 05, 2013 - Morningstar, Inc. -  On Friday, we provided a broad overview of where the Morningstar Analyst Ratings for closed-end funds stand as of late October. This week, we highlight two funds whose ratings have changed and two funds that are newly rated. 

Ratings Changes

MFS Intermediate Income(MIN) was upgraded to Bronze from Neutral because of its low volatility, strong management team, and reasonable expenses.

In 2008, the fund tweaked its strategy from a global government-bond focus to include emerging-markets corporate bonds (its holdings are mostly intermediate-term and investment-grade at the time of purchase). The move had the potential to add volatility to a historically low-volatility fund, but overall volatility was kept at bay during the five years since the change. While its performance has not been exciting--this unleveraged fund has trailed its mostly leveraged world-bond CEF peers over the trailing five-year period--it has offered investors a smoother ride on a net asset value basis. Compared with its unleveraged world-bond open-end peers, the fund has done well, outpacing 60% of peers over the trailing five-year period and 75% of peers over the trailing three years.


More #PlowHorse in Q3 

Nov. 04, 2013 - First Trust -  Despite the shutdown, the sequester, talk of tapering, and meteors in the night sky, the US economy just keeps plowing along. Reported later this week, we expect Q3 real GDP grew right on trend at a 1.9% rate – another, #PlowHorse report. 

It’s somewhat slower than we expected at the start of the year, but we still expect an acceleration in 2014-15 given loose monetary policy, a downward trend in government spending (relative to GDP), explosive new technology, record high corporate profits, and a forceful housing recovery. 

Here’s our “add-em-up” calculation of real GDP growth in Q3, component by component.

US Economy and Credit Markets Week Ended Nov. 1, 2013

Nov. 04, 2013 - First Trust -  Treasury debt fell this week as manufacturing and consumer spending grew faster than expected. Spending and inflation reports are carefully reviewed for any potential impact they may possibly have on the Federal Reserve’s decision to taper or not and strong spending and production growth are seen as increasing the probability of asset purchase tapering by the Fed. On Monday, MoM Industrial Production increased at .6% vs an expected .4%. Tuesday revealed wholesale prices fell in October with an unexpected decrease in the producer price index mostly due to decreased food costs.

US Stocks Week Ended Nov. 1, 2013

Nov. 04, 2013 - First Trust -  Last week, stocks were mixed with large cap stocks outperforming small caps. The Dow Jones rose for the fourth consecutive week. This performance comes amid signs the Chinese economy has been strengthening. China’s official Purchasing Manager’s Index rose more than expected last month and is now at an 18 month high. The Wall Street Journal reported that Barclays and Royal Bank of Scotland have suspended traders in possible connection to rigging interbank lending rates. 

Morningstar Analyst Rating Medal Count--CEF Edition
Nov. 01, 2013 - Morningstar, Inc. -  We last checked in on the medal count for closed-end funds in August of 2012. Since that review, we've increased coverage to 126 funds from 106 with more in the pipeline. Of the 604 funds in the CEF universe, ratings on 126 (just shy of 21% of the entire universe) doesn't seem too impressive at first glance. However, many CEFs are small and illiquid and aren't worth a deep-dive Morningstar Analyst Rating. For example, 104 are single-state municipal funds that have limited appeal outside the state of investment. Note that we do cover seven of the largest California municipal funds offered by PIMCO, BlackRock, and Nuveen due to the extensive size of the municipal bond market in that state. On a net asset basis, the rated funds account for 45% of the net assets of the entire CEF universe. This week, we'll take a look at an overall medal count as well as a breakdown of medals by fund firm and Morningstar Category. In Tuesday's article, we'll highlight recent ratings changes and two newly rated funds.

September CPI  
Oct. 30, 2013 - First Trust -  Implications: The Federal Reserve is comfortable with today’s inflation report. Consumer prices rose a consensus expected 0.2% overall and only 0.1% excluding food and energy. Energy and rent led the gains. Compared to a year ago, overall consumer prices are up 1.2% while core prices are up 1.7%. Neither of these figures sets off alarm bells. Instead, they suggest the Fed’s preferred measure of inflation, the PCE deflator (which usually runs a ¼ point below the overall CPI) will remain below the Fed’s target of 2%. We don’t expect this to last. Inflation bottomed in April when it was up only 1.1% from the prior year, and we expect it will be noticeably higher a year from now. Recent figures underscore a slight acceleration in inflation, with the overall CPI up at a 1.7% annual rate in the past three months. However, for the Fed, the key measure of inflation is its own forecast of future inflation. So, even if inflation moves higher, as long as the Fed projects the rise to be temporary it will not react to that inflation alone by raising short-term interest rates.

September PPI
Oct. 29, 2013 - First Trust -  Implications: We’ve been waiting a while for an acceleration in inflation and now it looks like we’re going to have to wait at least a bit longer. Overall producer prices declined a slight 0.1% in September, led by a 1% drop in food costs more than offsetting a 0.5% rise in energy and slight increases elsewhere. Producer prices are up only 0.3% in the past year, but up at a 1.6% annual rate in the past six months, which we think is closer to the underlying trend. “Core” producer prices, which exclude food and energy, are up 1.2% from a year ago. As a result, some analysts still say the Federal Reserve has room to continue quantitative easing at a pace of $85 billion per month. We think this would be a mistake but the Fed is likely to continue QE full throttle anyhow until about March, when we expect it to finally start tapering its purchases.

September Retail Sales
Oct. 29, 2013 - First Trust -  Implications: A lackluster headline on retail sales today, but the underlying details of the report were quite positive. Retail sales declined 0.1% in September but the drop was all due to auto sales, which are volatile from month to month and which appear set for a rebound in October despite the partial government shutdown. Ex-autos, retail sales were up 0.4% in September, led by groceries and restaurants & bars. “Core” sales, which exclude autos, building materials, and gas, rose 0.5% in September, are up fifteen straight months, and 3.6% above sales a year ago…which probably explains why we don’t hear any more about the federal spending sequester or fiscal cliff deal killing the consumer. Overall retail sales are up 3.2% in the past year. Assuming consumer prices rose 0.2% in September, “real” (inflation-adjusted) sales are up about 2%.

8 Undervalued Positively Rated Funds
Oct. 29, 2013 - Morningstar, Inc. -  In November 2011, Morningstar launched a qualitative rating for mutual funds and closed-end funds called the Analyst Rating. The rating focuses on five pillars, which are discussed in detail as they relate to CEFs here. While the Analyst Ratings are a helpful starting point for CEF investors to gauge the prowess of the management team and delve into a fund's underlying process, they should not be used in isolation. Part of what makes CEFs unique is the valuation component of share (or market) price versus underlying net asset value. A good fund may be a bad value at the current market price.

Why Stocks Advance Despite Mediocre Economic Data
Oct. 28, 2013 - BlackRock Blog -  The basic takeaway from last week’s economic data seems to be that we’re still in a world of 2% US economic growth with little evidence of a pickup. Yet stock markets have advanced and can move higher over the next six to 12 months? Russ explains why.

With the shutdown finally a thing of the past, the bottleneck on economic data was lifted last week and investors started to receive some important clues on where the U.S. economy is heading as the year ends.


Diving Deeper Into the Strategic Income Portfolio
Oct. 25, 2013 - Morningstar, Inc. -  On Tuesday we outlined a model portfolio of fixed-income closed-end funds, which includes seven of our best ideas. The funds were chosen because we like them on a stand-alone basis, but their respective valuations make them even more attractive. Today, we take a closer look at each of the funds and discuss the rationale behind the positions. From a top-down perspective, we constructed the portfolio based on three buckets: core, high yield, and long duration. Funds in the core bucket take on a moderate level of risk but are generally poised to do well in most market environments.

A Strategic Income Portfolio for Fund Investors
Oct. 22, 2013 - Morningstar, Inc. -  During the last few months, there's been no shortage of closed-end funds for us to highlight. The exodus of investors from fixed-income CEFs this year quickly turned many premiums into discounts, and many discounts into wider discounts. The average fixed-income fund is now down 8.9% for the year to date on a share price basis, even after taking into account their distributions. It doesn't take Benjamin Graham to figure out that many of these funds are now cheaper than they were in March. Excellent deals aside, investing in CEFs requires more than a quick look at valuations. Long-duration funds might be incredibly cheap, for example, but tremendous interest-rate risk still can be a concern. With this in mind, now is a good time to step back and examine how all the pieces fit together.

6 Things Every Investor Must Know About Closed-End Funds
Oct. 18, 2013 - Morningstar, Inc. -  Closed-end funds are complicated investments, at least relative to most exchange-traded funds and especially relative to mutual funds. Investors need to know how to navigate leverage, parse the details of distribution rates, and discern whether a discount represents actual potential value. Have no fear--Morningstar has a collection of educational slides on CEFs here. There are two collections of articles on CEFs and CEF investing here and here.

Two More Reasons to Like Equities: Growth & Inflation
Oct. 15, 2013 - BlackRock Blog -  I’ve long been advocating that investors should overweight equities relative to bonds, and while equity valuations are no longer at their cheapest and there are risks inherent in stocks, I still hold this view. In fact, all the factors I look at, including the economic backdrop, inflation trends, monetary policy and corporate fundamentals, suggest that investors should still consider overweighting equities.

Closed-End Funds with Morningstar Analyst Ratings
Oct. 15, 2013 - Morningstar, Inc. -  Morningstar has been providing Analyst Ratings on closed-end funds for nearly three years now. Currently, 127 CEFs carry Analyst Ratings. This represents about 45% of both the net and total assets of all 603 CEFs traded in the United States. Three CEFs have Negative Analyst Ratings, 57 Neutral , 47 Bronze, 18 Silver, and only two carry a Gold rating.

3 Investing Implications of Washington Drama
Oct. 14, 2013 - BlackRock Blog -  

While a potential debt ceiling deal failed to gain much traction over the weekend, I’m still reasonably optimistic that some sort of patchwork and limited deal to, at least temporarily, extend the debt ceiling will be reached around this Thursday’s deadline.

But while I believe a US default will be avoided, the continuing political drama does have implications for investors. As I write in my latest weekly commentary, there are three:

1.    Economic growth will be slower than it otherwise would be.Were it not for all of the political turmoil and uncertainty, I would expect fourth-quarter US economic growth somewhere between 2.5% and 3%. Given the drama in Washington, 2% gross domestic product (GDP) growth is a more likely number.



Central Securities Presents Rare Investment Opportunity
Oct. 11, 2013 - Morningstar, Inc. -  A version of this article originally ran as a CEF Specialist on July 30, 2013.

Central Securities (CET) is one of the quaintest closed-end funds that you'll ever come across. This wasn't always the case. On Oct. 1, 1929, the firm began operating as a closed-end investment company with maybe the most inauspicious launch of a fund in history: Black Thursday, Black Monday, and Black Tuesday all occurred within a month. Somehow the firm persevered, and perhaps the experiences of its early days still influence the culture.

Global Economic Review & Outlook, October 9th 2013
Oct. 09, 2013 - Calamos Investments -  
The saying “If you don’t like the weather, wait five minutes and it will change” is quite popular in Chicago. While market sentiment hasn’t shifted quite that fast, the sunny outlook that followed the Fed’s taper delay has been replaced by storm clouds centered in Washington. As the government shutdown enters its second week, the optimism of the summer has been replaced by nasty rhetoric from both parties, reminiscent of August 2011. In the third quarter, market participants largely ignored the political brinkmanship that hit with full force in October, as a largely irrelevant government shutdown fueled worries that the U.S. would default on its debt. Markets have been increasingly roiled by the stalemate in Washington, and although we continue to believe that a debt default is highly unlikely, we’re prepared for a nail-biter.


An Undervalued Bank-Loan Fund
Oct. 08, 2013 - Morningstar, Inc. -  Over the last few weeks, we've highlighted some nuances in the bank-loan market that affect funds during a period of rising long-term rates, specifically as they relate to leveraged closed-end funds. While issues like Libor floors and short-term versus long-term interest-rate trajectories might worry some potential investors, we believe bank-loan funds can still play a valuable role in a diversified portfolio, as long as investors have reasonable total-return expectations for these funds (that is, don't expect bank-loan funds to increase distributions as the Federal Reserve tapers--and then ends--quantitative easing). What's more, the recent hoopla in Washington over the government shutdown and the debt ceiling have seemingly spooked the Fed enough to push any tapering further into the future. Some portfolio managers and market pundits believe Ben Bernanke may not make any taper moves during the rest of his tenure as chairman, which ends Jan. 31, 2014.

The Only Story In Town 

Oct. 07, 2013 - First Trust -  It’s strange times in the United States. The government is partially shut down and isn’t releasing any statistics. Even John Muir wouldn’t be allowed to hike in a national park. All the while, the President and the Treasury Secretary are predicting an economic calamity for the US (and maybe the globe) if the debt ceiling isn’t raised. Yet, they refuse to negotiate to prevent that from happening.

Understanding Distributions From MLP-Focused CEFs
Oct. 04, 2013 - Morningstar, Inc. -  A version of this article was first published on July 2, 2010.

When it comes to investing, I believe that complexity often leads to opportunity. If a security is complex or a company's story is complex, many investors simply avoid the hassle of figuring it out, creating a market inefficiency. Small-cap stocks face this all the time: often, the companies behind these stocks have no analyst coverage, have no means to get their stories heard, and have attractive valuations. For investors who seek such stocks and are willing to do the legwork, the financial rewards can be considerable.



Energy Distribution Tops Energy Production Over Past 5 Years
Oct. 01, 2013 - First Trust -  

View from the Observation Deck

  1. As high as crude oil prices are today, they were nearly as high five years ago. The price of a barrel of oil stood at $102.33 on 9/30/13, up 1.68% from $100.64 on 9/30/08, according to Bloomberg.
  2. The price of natural gas, however, was cut in half over the past five years. It stood at $3.56 per million British thermal units on 9/30/13, down 52.15% from $7.44 on 9/30/08, according to Bloomberg.
  3. Even with the absence of any significant supply constraints for oil or gas in the past five years, investors favored energy master limited partnerships (MLPs/pipelines and storage) over energy production.


SeptemberISM Manufacturing Index
Oct. 01, 2013 - First Trust -  Implications: While Washington offers us more drama, the private sector keeps moving forward. Despite supposed fears about a government shutdown, a very strong report today for the ISM index, a measure of manufacturing sentiment around the country. The ISM came in at the highest level since April 2011, easily beating consensus expectations. According to the Institute for Supply Management, an overall index level of 56.2 is consistent with real GDP growth of 4.4% annually.

A Relatively Undervalued Silver-Rated CEF
Oct. 01, 2013 - Morningstar, Inc. -  Everyone who watches closed-end funds knows that discounts have widened and premiums have collapsed for most funds over the past four months or so. In such environments, value-oriented investors like to start sniffing around to see whether any CEFs have discounts attractive enough to warrant a purchase. One potential stumbling block is that at such times there seem to be a plethora of CEFs to choose from. After all, this turbulence affects the entire market--not just a few CEFs.

Shutdown: A Good Thing?
Sep. 30, 2013 - First Trust -  It looks like House and Senate won’t come to a budget agreement by midnight and, as a result, the federal government is going to partially shut down starting Tuesday morning.

Run for the hills? Armageddon: right? Nope!

As we said a few weeks ago, a shutdown is not as scary as it seems. Money still flows into the Treasury Department and money still flows out, for Social Security or to make interest payments on the debt, for example.

Modest Improvement in Many CEF Categories; Potential for Tax-loss Selling
Sep. 27, 2013 - First Trust -  The wider than average discounts to net asset value (NAV), compelling yields and the recent announcement from the Federal Reserve that it is not going to begin reducing its bond purchasing program known as Quantitative Easing just yet as many market participants had expected as well as their firm commitment to keep short-term interest rates very low at 0-0.25% for a considerable time (likely to 2015) has helped to lead to modest improvement in the share price performance of many fixed-income closed-end funds recently. For example, according to Morningstar, high yield CEFs are up 2.84% in the past month, limited duration CEFs are up 3.46% over the past month and national leveraged municipal CEFs are up 3.77% over the past month (all data is on a share price total return basis).

3 Income Ideas for the Current Market Environment
Sep. 27, 2013 - Morningstar, Inc. -  Fund firm MFS doesn't stand out much in the closed-end fund universe. The firm has run the same 12 CEFs since 1999, nine of which have less than $300 million in total assets (including leverage). None of the funds are particularly special in terms of performance, each with an overall Morningstar Rating of 2 or 3 stars. A glance at the family of funds earlier this year wouldn't have raised many eyebrows in terms of valuation either: As of the end of March, six of its 12 funds traded at fairly narrow discounts, while five traded at premiums. Nevertheless, things have changed: Even though these funds follow fairly vanilla investment strategies, the CEF market sell-off during the second quarter of this year left eight of the funds trading at (or close to) double-digit discounts. And, in our opinion, several of these funds are now trading at attractive valuations on a relative basis. Let's take a look at the three largest (and most liquid) CEFs in the MFS lineup.

Shop Now: Nearly 10% Off on Precious Metals
Sep. 24, 2013 - Morningstar, Inc. -  Usually, we don't get too excited about absolute (i.e. published) discounts or premiums. They are, after all, simply a measure of the relationship between a closed-end fund's share price and its net asset value.

A typical sign that someone is spouting myths about CEFs is when you are told that a discount amounts to "good value." In fact, in a recentBloomberg article, Stewart Horejsi, the comanager of four equity-focused CEFs at Boulder Investment Advisers, errantly made a claim regarding his funds' large  Berkshire Hathaway (BRK.A) stakes and their large discounts: "If you can buy Berkshire at 80% of where it's trading, that's a better value."


Loose and Looser

Sep. 23, 2013 - First Trust -  Larry Summers took his name out of the hat and won’t be considered for the top spot at the Federal Reserve. And while nothing is a slam dunk, it looks very much like current Vice Chair Janet Yellen is going to get the call from President Obama to step up and replace Bernanke.

US Economy and Credit Markets Week Ended September 20, 2013
Sep. 23, 2013 - First Trust -  Treasuries prices rallied as the Federal Reserve decided against tapering its 85 billion monthly bond buying program. Yields fell sharply as they move inversely to prices. The continued weakness in treasury yields is seen as a boon for REIT, Utility and other high yielding sectors. Friday, however, yields on the 10-year fell slightly as concern over the federal budget debate began weighing on gains from the Federal Reserve’s tapering decision.

4 Reasons To Have EM Exposure Now
Sep. 20, 2013 - BlackRock Blog -  Russ explains the four reasons why investors underweight or not exposed to emerging markets (EM) should consider gaining some exposure to this asset class despite EM stocks’ underperformance year-to-date.

Why Your Bank-Loan Fund's Distribution Might Be Cut
Sep. 20, 2013 - Morningstar, Inc. -  During the month of August, bank-loan (also called senior-loan and floating-rate-loan) open-end and exchange-traded funds took in $7.6 billion of inflows. Over the last year, investors have poured nearly $54 billion into these funds. Looking at bank-loan closed-end funds, 19 of the 25 funds are currently fairly valued on a one-year basis. It's clear that with the prospect of rising rates many retail investors have flocked to these funds in the hope of catching some extra income as rates rise. Unfortunately, this line of thinking is flawed. (For a primer on bank-loan funds, readthis article.)

Don't "Tin Cup" It 
Sep. 19, 2013 - Calamos Investments -  Eventually, many investors face their own “Tin Cup” moments, when they think they are smarter than the market or the management team running a business. Some—the activist investors that make the news—may be so blinded by their egos that they believe they can turn around a poor-performing business, if only they owned a large stake, threw out the current management and ran it themselves. With few exceptions, we think scenarios like this are recipes for disasters. In Tin Cup moments, investors ignore what made them good in the first place, which was hitting the ball down the middle of the fairway and then chipping onto the green for a par. Boring? Maybe. Effective? Absolutely.

August Existing Home Sales
Sep. 19, 2013 - First Trust -  Implications: Despite all the fear-mongers saying higher mortgage rates would kill the housing recovery, today we got our second look at sales that would be affected by higher rates, and boy were they wrong, again! Existing home sales were up 1.7% in August, up a very strong 13.2% versus a year ago, and hit the highest level since February 2007. It sure doesn’t look like higher rates are having any negative effects and there are a few reasons for this. First, higher rates reflect expectations of faster economic growth. 

5 Years Later: The Crisis We Haven’t Tackled Yet
Sep. 19, 2013 - BlackRock Blog -  Five years after the Lehman bankruptcy, the proximate causes of the 2008 crash are no longer threats. But while the risk of another imminent financial system crisis has abated, there are two major issues that foretell a coming retirement funding crisis.

Domestic Equity CEFs Still a Favored Category
Sep. 16, 2013 - First Trust -  
With all of the volatility in fixed-income closed-end funds (CEFs) the last four months, it may have been overlooked that one category of the CEF marketplace which continues to perform well and remains one of two categories I have had the highest conviction level in since January 2012, is domestic equity CEFs. (Senior loan CEFs is the other category I have had the highest conviction level in since January 2012.) Indeed, year-to-date (YTD) through 9/13/13, the Morningstar universe of 119 domestic equity CEFs is up 9.44% on a share price total return basis. The same universe is up 12.71% on a net asset value (NAV) total return basis. 


Consider Adding Closed-End Funds to Your Investment Arsenal
Sep. 13, 2013 - Morningstar, Inc. -  Having more options is usually a good thing. In May 2011, while on my honeymoon, my wife and I were in Boppard, Germany, a small town where the Rhine River bends itself into a "U" shape. The best view of the topography is from a spot on a mountain known as Gedeonseck. Getting up there, though, took some doing. The local restaurateur, whom we befriended, suggested we spend the day taking the scenic hiking path, but we didn't want to spend the entire day getting to the destination. An athletic-looking gent at the next table suggested a bike path, but we had no bikes, and I'm not in that kind of shape.

20 Large CEF Discount and Premium Changes
Sep. 10, 2013 - Morningstar, Inc. -  No investor has to be reminded about the tumultuous market environment we've been living through since mid-May, when Mr. Market came to the realization that the Federal Reserve's quantitative-easing program would not go on forever. Throughout the summer, Mr. Market's moodiness has been on full display, perhaps nowhere better reflected than in closed-end funds, or CEFs. Because most CEFs are relatively thinly traded and moderately leveraged, their share prices tend to amplify the market's emotions.

Are Real Estate CEFs Worthy of Consideration?
Sep. 06, 2013 - Morningstar, Inc. -  With interest-rate concerns taking center stage for many investors, several closed-end fund categories have sold off in recent months. Among them, interest-rate-sensitive municipal funds, high-yield funds, and emerging-markets debt funds have gotten the most attention. Real estate CEFs have also seen their discounts widen substantially. Investors who view the sector itself as oversold, or are looking to rebalance the real estate allocation of their portfolios, might consider discounted CEFs as good instruments. But as we frequently point out, a large absolute discount does not necessarily mean that a CEF is attractively valued. Many investors will find that ETFs are the best way to gain cheap exposure to the sector. Nevertheless, some CEFs satisfy more specific investment needs, so they might still be worth considering.

Still out of Favor but with Compelling Yields and Valuations
Sep. 03, 2013 - First Trust -  It’s not earth shattering news to state that over the past three months investors have lost interest in having exposure to higher quality, yield-oriented municipal bonds and preferred securities. This is clearly epitomized by the significant outflows in these two asset classes from both open-end funds and exchange-traded funds (ETFs) that have occurred over the past three months as well as the significant discount widening both of these closed-end fund (CEF) categories have experienced. The shift out of these two asset classes was primarily due to the significant move higher in long term interest rates (which put pressure on both of these asset classes) as well as investors becoming more enamored with equities.

Emerging Market Equities Fit The GARP (Growth At A Reasonable Price) Profile
Sep. 03, 2013 - First Trust -  

View from the Observation Deck

While U.S. stocks have set multiple all-time highs in 2013, emerging market equities stood 30.6% below their all-time high (10/29/07) at the close of August, as measured by the MSCI Emerging Markets Index.

After having posted a cumulative total return of 392.12% (USD) from 12/01-10/07 (all-time high on 10/29/07), the MSCI Emerging Markets Index declined 18.25%, on a cumulative basis, from 10/07-8/13.

The combination of commodity-fueled inflationary pressures in 2010 and 2011, tempering of growth in China, the world’s biggest consumer of raw materials, and Europe’s recession induced profit taking, in our opinion.



4 Signposts To Watch for an Emerging Markets Turnaround
Sep. 03, 2013 - BlackRock Blog -  

Since the Federal Reserve (Fed) first hinted at the possibility of a taper in May, anxiety has roiled emerging markets (EM).

Over the last three months, EM stocks have fallen 12% in dollar terms, underperforming developed markets by 10%, and EM currencies on average have tumbled by 7% versus the dollar[1]. And as numerous market watchers have pointed out, the EM rout has only intensified this week amid concerns about an escalating conflict in Syria and rising oil prices.



The Bond Bear is Waking Up

Sep. 03, 2013 - First Trust -  We’ve been bond bears for quite some time, and we still are. The good news is that the violent part of the bear market has passed. We expect a slower, but still painful and consistent, move higher in interest rates during the quarters ahead. The 30-year bull market in bonds is over.

AugustISM Manufacturing Index
Sep. 03, 2013 - First Trust -  Implications: A surprisingly strong report today for the ISM index, a measure of manufacturing sentiment around the country. The ISM came in at the highest level since June 2011, easily beating consensus expectations. In particular, the new orders index boomed in August, coming in at 63.2, the highest since April 2011. According to the Institute for Supply Management, an overall index level of 55.7 is consistent with real GDP growth of 4.2% annually. We don’t expect real GDP will grow anywhere near that pace in Q3, probably more like a 1% to 1.5% rate instead, but we do expect that by late this year growth will pick up noticeably from the roughly 2% trend over the past few years. 

US Economy and Credit Markets Week Ended August 30, 2013
Sep. 03, 2013 - First Trust -  Selling of Treasuries cooled during the week as tensions surrounding potential conflict in the Syria increased demand for safe assets. However, for August, U.S. Treasury bonds slid for a fourth consecutive month and since the start of May the 10-Year Treasury is up over a full point from continued concerns over the Federal Reserve potentially unwinding its bond buying program. Oil rose during the week as Middle East turmoil gives rise to supply concerns. 

Re-Evaluating PIMCO's Income Funds
Sep. 03, 2013 - Morningstar, Inc. -  Around this time last year we wrote an article looking at the prospect of PIMCO Dynamic Income (PDI), comparing it with sister fund PIMCO Income Opportunity(PKO). At the time, both funds were hot: PDI had just launched, raising close to $1 billion, and PKO was flirting with a double-digit premium. One year later, the funds have fallen out of favor along with a broader sell-off in fixed-income closed-end funds. PDI and PKO now sport 7.5% and 5.9% discounts, respectively. But while both funds certainly have their pros and cons, the discount pricing certainly makes each of them more attractive. With many investors newly interested in the funds, now is a good time to revisit the pair.

July Personal Income and Consumption
Aug. 30, 2013 - First Trust -  Implications: Another month, another Plow Horse report on income and spending. Income grew a tepid 0.1% in July, with dividends, rents, and farm income offsetting a drop in wages & salaries. At this point we don’t read much into a one-month drop in wages & salaries. We notice the same thing happened last July, so it could be difficulties making seasonal adjustments. Or it could just be normal statistical noise that might later be revised away. However, we will be following the data closely to see if any weakness becomes persistent, which might be attributable to the roll-out of Obamcare. In the meantime, overall personal income is up 3.3% from a year ago while wages & salaries are up 3.4% and private-sector wages & salaries are up 4.2%. Adjusting for inflation, real income is up 1.9% from a year ago, private wages & salaries are up 2.8%. Despite what some pundits are saying, there is still no evidence that the end of the payroll tax cut or federal spending sequester is hurting consumers. 

From the Mailbag: Rising Rates and CEFs
Aug. 30, 2013 - Morningstar, Inc. -  While we make a concerted effort to respond to comments posted about our articles and to user feedback emails dropped into our inboxes, time often constrains our ability to do so. We thank you for reading and writing in, and, as always, we welcome your feedback. We've received numerous queries from readers about the effects of rising rates on closed-end funds. This week, we'll address some of the most frequently asked questions.

For Those Who May Not Subscribe To A Buy And Hold Investment Strategy
Aug. 29, 2013 - First Trust -  

View from the Observation Deck

While we subscribe to a buy and hold investment strategy, we do acknowledge that many investors may seek to potentially exploit opportunities within days, weeks or months. 

Seasonal investing is one such approach and it has been documented through the years in the Stock Trader’s Almanac. The chart features five areas that have demonstrated a seasonality effect beginning in October.



RiverNorth to Reopen DoubleLine-Subadvised Fund
Aug. 29, 2013 - Morningstar, Inc. -  On Monday, Aug. 26, RiverNorth Funds announced plans to reopen to new investors a fund that is subadvised by DoubleLine Capital Management and DoubleLine's founder, noted bond manager Jeffrey Gundlach.

Launched at the end of 2010,River North/DoubleLine Strategy Income (RNSIX) employs three strategies: a closed-end fund income strategy, a core fixed-income strategy, and an opportunistic income strategy. RiverNorth manages the tactical closed-end fund income strategy, while DoubleLine oversees the core bond and opportunistic income strategies.


Share Prices Historically Track NAVs
Aug. 28, 2013 - First Trust -  
One of the unique characteristics of a closed-end fund (CEF) is that an investor buys and sells a fund on a stock exchange such as the NYSE or NASDAQat a share price just asthey would for any other publically traded company.  Open-end funds(commonly referred to as Mutual Funds) are bought and sold at the net asset value (NAV) of the fund and transactions are executed only once per day after the NAV is calculated.


Middle East Tensions, Oil Prices and the US Economy
Aug. 28, 2013 - BlackRock Blog -  A further escalation of violence in the Middle East will not only have a terrible human toll, it could also lead to rising oil prices, which in turn could hurt consumers and the global recovery. Russ explains the situation and shares how investors can prepare.

Retail Investors Still Somewhat Leery Of Stocks
Aug. 27, 2013 - First Trust -  
View from the Observation Deck
1.  The S&P 500 posted a total return of 17.79% from 12/31/12 through 8/26/13. It posted a cumulative total return of 43.31% (7.46% annualized) in the 5-year span depicted in the chart.
 
2.  Despite these positive returns, there remains a huge distinction in the sentiments towards equities between institutional investors (top chart/block trades) and retail investors (bottom chart/non-block trades).


This Fund Has Performed Well and Poorly, Simultaneously
Aug. 27, 2013 - Morningstar, Inc. -  In 2007, I traveled for a few weeks to Morningstar's offices in Shenzhen, China. This was during the boom in Chinese equities. The markets there were becoming frothy, as it was increasingly evident that everyone who could was investing in stocks. There was a story--and I forget if this was on the news or if it was a colleague's family member--that recounted how a woman, when asked why she had purchased shares in a publicly trading meat processing company, replied that the shares were a real value because they were priced less than a pound of pork.

Why Rising Mortgage Rates Matter for the US Recovery
Aug. 27, 2013 - BlackRock Blog -  As long-term Treasury rates have increased in recent months, mortgage rates have followed suit. Russ K explains why investors should pay close attention, since rising rates could hurt the US recovery through their impact on the housing market.

July Durable Goods
Aug. 26, 2013 - First Trust -  

New orders for durable goods dropped 7.3% in July (-7.2% including revisions to June), coming in well below the consensus expected decline of 4.0%. Orders excluding transportation slipped 0.6% (-0.4% including revisions to June). The consensus expected a gain of 0.5%. Overall new orders are down 0.3% from a year ago, while orders excluding transportation are up 5.9%. 



US Economy and Credit Markets Week Ended August 23, 2013
Aug. 26, 2013 - First Trust -  Amid mixed economic reports and debate over the status of the Federal Reserve’s Quantitative Easing program longer dated Treasuries rose this week while those with duration between 1 and 7 years fell. On Monday, in the absence of major economic data, Treasury yields approached their highest levels since 2011 as speculation grew that the Fed would trim bond purchases as early as next month. On Tuesday, Treasuries rallied as value oriented investors scooped up the securities. 

US Economy and Credit Markets Week Ended August 23, 2013
Aug. 26, 2013 - First Trust -  Amid mixed economic reports and debate over the status of the Federal Reserve’s Quantitative Easing program longer dated Treasuries rose this week while those with duration between 1 and 7 years fell. On Monday, in the absence of major economic data, Treasury yields approached their highest levels since 2011 as speculation grew that the Fed would trim bond purchases as early as next month. On Tuesday, Treasuries rallied as value oriented investors scooped up the securities. 

Time to Dump Munis or Give Them a Look?
Aug. 25, 2013 - Morningstar, Inc. -  Investors have been shedding municipal bonds right and left so far in recent months, with $19 billion flowing out of open-end muni-bond funds so far in the third quarter alone. Many investors are no doubt concerned about troubled municipal finances, including Detroit's recent bankruptcy filing, as well as the effects that rising interest rates could have on the bonds, which are often long-duration [a measure of interest-rate sensitivity]. Munis have struggled on the performance front, too, generally underperforming taxable bonds of the same duration and credit quality so far this year.

Are Rising Rates a Reason to Shun All Bond Funds?
Aug. 23, 2013 - Morningstar, Inc. -  With all the talk of rising interest rates, bond bubbles, and a great rotation into stocks, investors may think it's time to jump ship on all bond funds. However, various sectors of the bond market react differently during periods of rising rates. What's more, while history can be a guide, the economic environment as rates rise is always unique. There have been three distinct periods of rising 10-year Treasury rates in the past 20 years (1994 to 1995, mid-1999 to mid-2000, and mid-2004 to mid-2006), and the macroeconomic environment was not the same during each of the periods. What's more, none of those periods is highly representative of the current economic environment. An important consideration is the historically low level of rates from which the Fed will begin its tightening this time. Even as rates begin to rise, they will remain at low absolute levels for some time. And, investors' hunger for income isn't going away.

Cohen & Steers Closed-End Fund Strategy - July 2013
Aug. 22, 2013 - Cohen & Steers -  
We would like to share with you our review and outlook for the closed-end fund market as of July 31, 2013. For the month, the market price total return of the Morningstar U.S. All Taxable ex-Foreign Equity Closed-End Fund Index was 0.4%, while its return on net asset value (NAV) was 2.5%. Year to date, the index had a total return of 3.2% based on market price and 5.2% based on NAV. By comparison, the S&P 500 Index and the Barclays Capital U.S. Aggregate Bond Index had total returns of 5.1% and 0.1% for the month, and 19.6% and -2.3% for the year to date, respectively.


Should You Bet on Japan With These Funds?
Aug. 20, 2013 - Morningstar, Inc. -  At the end of 2012, many investors and market commentators declared Japan's stock market as the one to watch. After years of devastating deflation, the country's prime minister was prepared to initiate an aggressive monetary stimulus program to create jobs, pull the country out of its deflationary trap, and devalue the yen in an effort to revive the long-stagnant economy. The news sent stocks soaring, with the Nikkei 225 Index up 19% in the first quarter of 2013 (by comparison, the S&P 500 Index gained about 11% in this year's first quarter). But the Japanese stock market took a dive in late May, dropping from a high of 15,381 on May 21 to 12,686 on June 14, a loss of 17.5% in less than a month. 

The Key Economic Report to Watch Now
Aug. 20, 2013 - BlackRock Blog -  Stocks and bonds came under pressure last week as investors reacted to a stronger-than-expected initial jobless claims report. Russ explains why the selloff was unnecessarily extreme – and reveals the number investors should be paying attention to instead.

Part-Timers and the Labor Market

Aug. 19, 2013 - First Trust -  

Over the past few weeks we keep getting the same two questions about the labor market.  Basically, investors want to know whether the labor market is really improving if so many of the jobs are going to part-timers and if the more expansive definition of the unemployment rate (the one that includes discouraged workers and part-timers who want to work full-time) is about double the regular unemployment rate.

The simple answer is yes, the labor market is still getting better.  It should be getting better much faster, but don’t be thrown off track by analysts who cherry-pick and highlight supposedly bad data or don’t provide a historical context for the numbers they use.   



A Bear Market Is Here: In Bonds!
Aug. 19, 2013 - First Trust -  While it certainly hasn’t made the headlines that it should have, the bond market has been kicked in the teeth. After bottoming at 1.61% on May 1, the yield on the 10-year Treasury Note hit 2.84% on Friday, its highest level in two years – the worst bear market move in bonds since the end of the 2008-09 financial panic.

Someone who bought a newly-minted (“on the run”) 10-year Note at almost any time in the past year has suffered a capital loss of about 10% - or approximately five years of interest payments. If investors hold these bonds to maturity, they would get back their investment and would continue to earn the coupon. But anyone who needs to sell now would face a serious loss, while the interest earned by holding would be well below current market rates. In other words, every investment, even the US Treasury Note, is risky. 

US Economy and Credit Markets Week Ended August 16, 2013
Aug. 19, 2013 - First Trust -  Treasuries rose during the week on continued discussion regarding the Federal Reserve’s debt-purchase program. Investors are weighing the possibility of the central bank reducing its asset purchases starting at the September policy meeting and this pushed the yield on the 10-year to its largest weekly increase in nearly two months and its highest level in over two years. The Federal Reserve possibly winding down the debt purchase program has given rise to higher bond yields and also put pressure on gold. 

US Stocks Week Ended August 16, 2013

Aug. 19, 2013 - First Trust -  Last week the S&P 500 Index closed down with a -2.04% return. This was the second straight week of negative performance following the previous week’s -0.98% return and the third time in 2013 with negative performance for two consecutive weeks. The index is currently down -1.61% for the month of August. Monday opened lower, but quickly rebounded and closed slightly down with a -0.11% return. The index slid early on Tuesday on Fed tapering concerns, but began a steady climb after the first hour of trading to close up 0.30% for the day. Apple Inc. increased 4.75% for the day with Carl Icahn saying it is extremely undervalued and revealing his large position in the stock.

Senior Loan, Limited-Duration and High Yield CEFs
Aug. 16, 2013 - First Trust -  As you might know, I have been an advocate, and continue to be, for closed-end fund (CEF) investors to have exposure to credit sensitive funds and shorter duration funds based on the compelling yields they provide, defaults which remain below historical averages and based on the shorter duration/interest rate risk these funds generally have.

When Are Discounted CEFs Bargains?
Aug. 16, 2013 - Morningstar, Inc. -  In the active versus passive fund management debate, it's always important to keep one thing in mind: The reason passive funds are so popular has little to do with passive management. Instead, their popularity likely has more to do with cost. For investors skeptical of the value added by portfolio managers, choosing the fund with the lowest expense ratio is as good as any other option--it just costs less.  For this reason, some investors shun the high fees of many closed-end funds. But while fees are certainly an important consideration, the relationship between performance and fees is less clear when evaluating CEFs.

Nonfarm Productivity Increased at a 0.9% Annual Rate in the Second Quarter
Aug. 16, 2013 - First Trust -  Implications: Nonfarm productivity increased at a Plow Horse-like 0.9% annual rate in Q2, as hours increased at a healthy clip, but output climbed even faster. After surging rapidly in 2009, productivity grew at a moderate pace in 2010 and has since slowed down even further. In fact, productivity is now unchanged from a year ago. One possibility is that the government is having a hard time measuring production in the increasingly important service sector, which means both output growth and productivity growth are higher than the official data show. 

Housing Starts Increased 5.9% in July to 896,000 Units at an Annual Rate
Aug. 16, 2013 - First Trust -  Implications: The good news is that housing starts rebounded sharply in July after being depressed by unusually wet weather in many states in June. Like blizzards in the winter, heavy rains in the summer sometimes make it tough to break ground for foundations, adding volatility to the starts data. The so-so news is that the rebound in July was all due to multi-family homes, which are always volatile; single-family starts declined 2.2% in July. 

The Clock Is Ticking And Returns Are Diminishing
Aug. 15, 2013 - First Trust -  

View from the Observation Deck

  1. While today’s message is intended for those investors who still own packaged products with a high exposure to Treasuries, it may also be applicable to some degree to other investment-grade debt securities. 
  2. We believe that many investors felt compelled to seek refuge in Treasuries during the financial crisis in 2008. Trading up in credit quality while in the midst of an economic contraction is understandable, in our opinion


2 Ideas for High-Yield Investors
Aug. 15, 2013 - Morningstar, Inc. -  There are several differences between open-end and closed-end funds, but an important one is how each is affected by negative investor sentiment. Open-end funds may be harmed when investors redeem their shares, with the resulting outflows potentially affecting the funds' portfolio construction or performance to the detriment of remaining shareholders. Conversely, as investors sell their shares of CEFs, the funds start to trade at a cheaper valuation, presenting an opportunity for remaining investors (along with new investors) to pick up shares on the cheap.

Pairs of A Kind
Aug. 13, 2013 - First Trust -  

View from the Observation Deck

  1. On page two of our Quarterly Newsletter from July 2012 (click here to view), we featured four 50/50 split-ticket investment ideas for investors to ponder. They are featured in the chart.
  2. Our goal was to show how investors can combine two investment vehicles targeting the same theme or sector in an effort to diversify risk, increase the potential for capturing appreciation, or both. 


An Undervalued High-Yield Fund
Aug. 13, 2013 - Morningstar, Inc. -  With the tremendous sell-off of fixed-income closed-end funds since the end of May, there has been no shortage of interesting and attractively valued funds to highlight. While it is not particularly difficult to argue that some CEFs might be oversold, the fears that induced the overselling might not be entirely unfounded. Many funds that saw their discounts widen are incredibly interest-rate-sensitive, with long-duration portfolios amplified by leverage. Funds with large foreign currency exposure also took a hit, as rising rates implied a strengthening of the U.S. dollar.

“Shiller P-E” No Reason to Sell
Aug. 12, 2013 - First Trust -  In terms of market calls, few academics or economists can match Yale University economics professor Robert Shiller. In his 2000 book, “Irrational Exuberance,” he argued that 10-year averages of corporate earnings smoothed out the ups and downs of the business cycle. Then, using this “cyclically-adjusted” level of earnings and comparing it to current stock prices he claimed to generate a better version of the P-E ratio. 

Should You Allocate to Allocation Funds?
Aug. 09, 2013 - Morningstar, Inc. -  As investors grow weary of managing not only individual fund selection but also allocation decisions, some have turned to allocation funds to ease the burden. In the mutual fund space, some of the most popular and well-known allocation funds are target-date mutual funds. These days, many 401(k) plans include target-date funds, allowing investors to simply choose their expected retirement date and let the funds' managers do the rest (this usually means following a preset "glide path" that places more emphasis on bonds as the retirement date approaches). If you're interested in target-date mutual funds, you can read the latest Morningstar research on them here.

Discounts to NAV Indicate Real Value

Aug. 08, 2013 - First Trust -  One important indicator closed-end fund (CEF) investors should use to see if there is value in an individual CEF or value in a specific category of the CEF marketplace is to examine a fund or category's current discount to NAV relative to its historical average. CEFs historically revert back to their mean average discount to NAV so if a fund or category of funds is trading at a wider discount to its historical average discount to NAV it often signals there is value to be had.

4 Contrarian Income Funds
Aug. 06, 2013 - Morningstar, Inc. -  As interest rates spiked over the past few months, many fixed-income sectors were hit hard. Investors poured out of mutual funds and exchange-traded funds; even Vanguard saw its first net outflows in 20 years. With fixed income leaning out of favor (or, at least less in-favor than it was earlier this year), many investors argue that certain sectors of the bond market are now oversold. Municipal bonds, in particular, look increasingly attractive with their spread over longer-term U.S. Treasuries increasing drastically in the wake of Detroit's publicized insolvency.

July ISM Non‐Manufacturing Index
Aug. 05, 2013 - First Trust -  Implications: Just like its manufacturing sister report, the ISM service report boomed in July easily beating not only consensus expectations but the predictions from all of the 84 economics groups that made a forecast. Both reports signal a pickup in economic growth in Q3. The ISM service report expanded at the fastest pace in five months. The business activity index, – which has a stronger correlation with economic growth than the overall index – boomed to 60.4, while the new orders index also showed notable growth to 57.7.

Politicizing the Economy
Aug. 05, 2013 - First Trust -  If we were put in charge of the world, if we had complete control of fiscal and monetary policy, we would change things.

But we aren’t in control. And complaining gets us nowhere. Our job is to keep investors informed and to share our best thinking about where the economy and financial markets are headed.

We won’t always be perfect. We have made mistakes in the past and we will make them in the future. When we are wrong, we will say so, and when we are right, we will try to remember when we were wrong.

US Economy and Credit Markets Week Ended August 2, 2013
Aug. 05, 2013 - First Trust -  Treasuries had a mixed week as yields on 1, 2, 3, and 5 year Treasuries dropped while yields on 10 and 30 year Treasuries rose. This yield curve twist occurred as comments from the Federal Reserve on Wednesday suggested that the bond purchase program would continue as it has for the foreseeable future. The Federal Reserve downgraded the outlook for U.S. economic growth from “moderate” to “modest,” which led to speculation that tapering of bond purchases will not occur as soon as expected.

Stick to Your Investment Plan
Aug. 02, 2013 - Morningstar, Inc. -  To state the obvious to anyone who has been paying attention: The markets for leveraged fixed-income closed-end funds have seen their share of volatility in recent months. For some, if not most, investors, such an environment is full of stress. After all, none of us like watching as our investment gains--if only on paper--begin to decline. If only markets only went up--the faster the better. But we all know better than that, even if most individual investors don't.

July Employment Report
Aug. 02, 2013 - First Trust -  Implications: A Plow Horse report on improvement in the labor market in July, with some good data, some soft data, and some numbers right in the middle. The best news was that the unemployment rate dropped to 7.4%, the lowest since December 2008. Civilian employment, an alternative measure of jobs that includes small business start-ups, rose 227,000, helping push the jobless rate down. However, the jobless rate also dropped because of a 37,000 decline in the labor force. We don’t think the decline in the labor force is going to continue and expect the jobless rate to decline in the year ahead even as the labor force starts growing again. That’s been the trend over the past year, as the unemployment rate has dropped 0.8 points while the labor force has increased 686,000. 

What A Difference A Year Can Make
Aug. 01, 2013 - First Trust -  

View from the Observation Deck

  1. When we did the comparison in the chart a year ago we found that the S&P 500 Growth Index outperformed the S&P 500 Value Index for the 5-, 10-, 15-, 20-, 25- and 30-year periods ended 7/31/12.
  2. This year we added the past 1- and 3-year periods to the mix. The period that really pops in the chart is the one reflecting the past 12 months. The value style of investing is getting a boost from Financials.


July ISM Manufacturing Index
Aug. 01, 2013 - First Trust -  Implications: A blowout positive number today for the ISM index, a measure of manufacturing sentiment around the country. The ISM came in at the highest level since June 2011, easily beating not only consensus expectations but the predictions from all of the 84 economics groups that made a forecast. In particular, the production index boomed in July, coming in at 65.0, the highest since May 2004. According to the Institute for Supply Management, an overall index level of 55.4 is consistent with real GDP growth of 4.1% annually.

3 Reasons Silver Is Not the Same As Gold
Aug. 01, 2013 - BlackRock Blog -  

In recent weeks, many investors reluctant to add to their gold positions are asking me if they would be better off getting their exposure to precious metals through silver instead.

While I don’t have strong views on the direction of silver prices, I think it’s important to distinguish between silver and gold rather than assume that the two metals are interchangeable.



The First Estimate for Q2 Real GDP Growth is 1.7% at an Annual Rate
Jul. 31, 2013 - First Trust -  Implications: Real GDP grew at a 1.7% annual rate in Q2, beating consensus expectations, but staying at a Plow Horse pace. We like to focus on real GDP growth outside of government, trade, and inventories and that measure grew at a moderate 2.6% pace in Q2. The more interesting news came from “benchmark revisions” some of which went back to 1929. Those revisions show the Great Recession was still big, but not quite as steep. 

Implications of China’s cash crunch
Jul. 31, 2013 - Aberdeen Asset Management -  
The recent fall of the Shanghai stock market to its lowest level since 2008, coupled with reports of spiking interbank rates, have sparked fears that China is slowing abruptly and that financial meltdown might follow. How serious is this?
 
The slowing economy is nothing new. Years of over-investment, rising wages and weak export markets have made it inevitable that China would soon have to accept Gross Domestic Product (GDP) growth lower than the 8-9% per annum it has managed for the past two decades.
 
China’s new leadership has telegraphed as much. It has talked about quality of growth and the need to shift emphasis to domestic demand while at the same time boosting productivity. Behind this is a desire to avoid a ‘middle income trap’ – declining competitiveness abroad coupled with stagnant wage growth.


We Are Not In Unchartered Waters

Jul. 30, 2013 - First Trust -  

View from the Observation Deck

  1. The longest U.S. bull market in stocks spanned 4,494 days from 12/4/87-3/24/00, according to Bespoke Investment Group. The S&P 500 returned 582.1% (price-only), the best gain of any bull to date.
  2. The current bull market has lasted 1,603 days (3/9/09-7/29/13), and ranks as the fifth longest in history. That puts it at 52 months and counting. The S&P 500 was up 149.1% (price-only) during that period.


Central Securities Presents Rare Investment Opportunity
Jul. 30, 2013 - Morningstar, Inc. -  Central Securities (CET) is, perhaps, one of the quaintest closed-end funds, or CEFs, that you'll ever come across. This wasn't always the case. On Oct. 1, 1929, the firm began operating as a closed-end investment company in what was perhaps the most inauspicious launch of a fund in history: Black Thursday, Black Monday, and Black Tuesday all occurred within a month. Somehow the firm persevered. And, perhaps, the experiences of its early days still, somehow, influence the culture.

Get Ready for a Wild Week
Jul. 29, 2013 - First Trust -  Weeks with lots of data are always interesting; but this one will be more wild than most. 

Wednesday is the initial report on Q2 GDP and we expect a pretty tepid growth rate of 1.2%, which is down slightly from last week when we thought 1.5%. But this quarter government statisticians will do benchmark GDP revisions. Data will change, in some cases all the way back to 1929. So, we wouldn’t be surprised by any number between 0% and 2.5%

US Economy and Credit Markets Week Ended July 26, 2013

Jul. 29, 2013 - First Trust -  Treasuries little changed during the week on mixed economic reports. On Monday, existing domestic home sales unexpectedly recorded a decline but Wednesday domestic new home sales rose to the highest they have been since May 2008. This was offset by weekly jobless claims increasing more than anticipated. Following this, the US Durable Good New Orders came in better than expected (4.2% vs 1.4% expected) from rising demand in automobiles and equipment/machinery orders. This is the fourth consecutive increase for capital goods orders which signals increased business investment. 

Behavioral Finance and Closed-End Fund Investing
Jul. 26, 2013 - Morningstar, Inc. -  If Morningstar's special report on behavioral finance earlier this week highlighted anything, it's that there is more to investing than simply crunching numbers. Emotions and cognitive biases persistently cloud judgment, and successful investors are ones who supplement their analysis with a psychologically disciplined approach. Academia looks to help in this endeavor by observing the many ways in which investors deviate from "rational decision-making." Unfortunately, this does not always translate to practical advice. The literature on closed-end funds, in particular, is often lacking. Researchers occasionally offer sweeping theories on the persistence of discounts (typically relating to accrued tax liabilities and investor sentiment) and conclude that investors are simply irrational, but researchers tend to stay away from how individual decision-making pertains to CEF investing.

New Single-Family Home Sales Rose 8.3% in June to a 497,000 Annual Rate
Jul. 24, 2013 - First Trust -  
  • New single-family home sales rose 8.3% in June to a 497,000 annual rate, beating the consensus expected pace of 484,000. Sales are up 38.1% from a year ago.


Looking A Bit Like 2003

Jul. 23, 2013 - First Trust -  
View from the Observation Deck
 
1. High yield corporate bonds and seniorloans(leveraged loans) are both classified asspeculative-grade debtsecurities,which
meansthey are inherently more risky than investment-grade debt.
 
2. Both are cyclical in nature.High yield corporate bonds and seniorloanstend to perform best during economic expansions,when
corporate earnings are generally stronger.


Buying Currency at $0.84 on the Dollar
Jul. 23, 2013 - Morningstar, Inc. -  With recent interest-rate concerns spooking fixed-income markets, closed-end fund valuations have generally come back down to earth. In some cases, valuations have crashed straight into earth, leaving a sizable crater. Most notably, share prices of leveraged long-duration funds have fallen well below their net asset values. While these funds don't exactly stand to benefit from a rising rate environment, one has to wonder if this is an overreaction. After all, many will argue that sell-offs in the bond market already take into account concerns related to the underlying securities, and widening CEF discounts just represent a shift in investor sentiment. For those that subscribe to this line of reasoning, now is a good time to use CEFs to make contrarian bets.

June Existing Home Sales
Jul. 22, 2013 - First Trust -  Implications: Despite the decline in June, existing home sales are up 15.2% from a year ago and remain near the highest levels since November 2009, when they were artificially boosted by an $8,000 homebuyer tax credit. As the chart to the right shows, existing home sales have been volatile from month to month, but the trend is clearly upward. The months’ supply of existing homes (how long it would take to sell the entire inventory at the current selling rate) rose to 5.2 in June, due to both the slower selling pace and an increase in single family inventories. Inventories have grown over the past five months, but we don’t see this as a problem.

A Rocky Ride for CEF Investors in the First Half of 2013
Jul. 19, 2013 - Morningstar, Inc. -  While the first quarter of 2013 was relatively calm and, overall, pretty good for closed-end fund investors, the second quarter ended with an explosion that few expected. Fund managers were surprised by the fervor with which investors fled bond funds, dumping shares with little regard to long-term investment strategies and overall portfolio allocations. After the dust settled, CEF investors saw many high-premium bond funds trading at historically narrow premiums or even discounts. Technical investors, specifically hedge funds and mutual funds investing in CEFs, have had a field day with the carnage left by tapering fears.

June Housing Starts
Jul. 17, 2013 - First Trust -  
  • Housing starts declined 9.9% in June to 836,000 units at an annual rate, coming in well below the consensus expected 960,000 pace. Starts are still up 10.4% versus a year ago.
  • The decline in starts in June was mostly due to multi-family units, which fell 26.2%. Single-family starts declined 0.8%. Single-family starts are up 11.5% from a year ago while multifamily starts are up 7.9%.
  • Starts in June were down in all major areas of the country.


Fitch: Global Credit Outlook - Tapering Plans Reveal Suppressed Risks 
Jul. 17, 2013 - Fitch Ratings -  Fitch Ratings-London-17 July 2013: In its six-monthly The Credit Outlook report, Fitch Ratings says that increased market volatility due to speculation about the timing of monetary stimulus exit will drive sentiment in global credit markets during H213 and beyond, as evidence of firm economic growth remains elusive and suppressed risks

PIMCO's Income Funds at Bargain-Basement Prices
Jul. 16, 2013 - Morningstar, Inc. -  Investors take note of fund offerings from bond giant PIMCO. However, savvy closed-end fund, or CEF, investors have been (rightly) wary of jumping into PIMCO's typical CEF offerings because of staggeringly high premiums, despite generally good returns and high distribution payments. Interestingly, two of PIMCO's multistrategy income funds have not garnered the lavish attention paid to other PIMCO funds and they usually sell at just modest premiums. With the recent falloff in the market, both income funds are selling at discounts nearing three-year lows. 

3 Professional CEF Investors Divulge Some of Their Secrets
Jul. 12, 2013 - Morningstar, Inc. -  T.S. Eliot wrote that "April is the cruellest (sic) month." While that may be true for poets and academics, for closed-end fund investors this year, late May and early June were the cruelest. Indeed, the fright that overtook some investors in fixed-income CEFs is quite apparent by looking at average discounts. Taxable fixed-income CEFs averaged a 0.12% discount at the end of April, a 3.55% discount at the end of May, and an average 3.63% discount at the end of June. Investors in national municipal bond CEFs saw the average discount widen from 0.87% at the end of April to 5.03% at May's finish, before settling back to 2.73% at the end of June.

Can Fund Investors Find Refuge in Covered Calls?
Jul. 11, 2013 - Morningstar, Inc. -  In the never-ending search for income, equity closed-end fund managers often boost income generation potential by way of derivatives. A popular strategy is selling call options on the underlying portfolio. This strategy goes by many names (covered call, buy-write, and option overlay, to name a few) and is wide-ranging in its implementation. While there are a handful of mutual funds that implement buy-write strategies (the best-known being  Gateway (GATEX)), it's more prevalent in the CEF world, likely because of their closed capital structure and general income focus.

A Tale Of Two Energy Markets
Jul. 09, 2013 - First Trust -  

View from the Observation Deck

  1. We now know that the U.S. and Canada have extensive reserves of both crude oil and natural gas. Supply is no longer the concern it once was, in our opinion. 
  2. We also know that environmental concerns over hydraulic fracturing and deep sea drilling, to name two, provide a formidable hurdle with respect to boosting the production capacities of both. 


Lower Interest-Rate Risk Among High-Quality Junk Bonds
Jul. 06, 2013 - Morningstar, Inc. -  It's tempting to write off short-duration, high-yield funds as a recent example of fund family marketing. Knowing that there is investor demand for both higher income and less interest-rate risk, fund sponsors wheel out the latest investment idea du jour, sit back, and rake in the fees. Scouring the Morningstar database for funds in the high-yield category with either "short duration," "limited duration," or actual reported average effective durations of less than three years, I came across 28 such funds (mutual funds, closed-end funds, and exchange-traded funds); 16 of these were launched since Jan. 1, 2011; as of June 30, there was $10.3 billion invested in all 28 funds. It seems to be a rather perfect story, akin to the bank-loan fund phenomenon: invest in a diversified portfolio of junk-rated bonds and avoid most of the interest-rate risk so prevalent in the typical high-yield fund.

Should More CEFs Use Discount-Control Mechanisms?
Jul. 05, 2013 - Morningstar, Inc. -  Closed-end funds are often closed for good reason. Many CEFs invest in illiquid assets, utilize leverage, and engage in other investment strategies that are negatively impacted by inflows and outflows. But despite these advantages, the resulting premiums and discounts can often harm shareholders. The most obvious detriment is the added volatility of share price movements on top of changes in net asset value. But even long-term, buy-and-hold income investors who don't place much emphasis on day-to-day volatility can be negatively affected should they want to reinvest part of their distribution while the fund is trading at a premium.

Update on Municipal Closed-End Funds
Jul. 05, 2013 - First Trust -  Despite a wider than historical current average discount to NAV of 4.91% (as of June 24, 2013 according to Morningstar); attractive average yields of 6.63% (Morningstar) for national leveraged funds; and the fact that within the past couple of weeks the Fed clearly stated it is not raising short-term interest rates anytime soon, the market has yet to see meaningful buying in the municipal CEF category. One of the main reasons we continue to see volatility among municipal CEFs, in my opinion, is related to the factors currently negatively impacting the underlying municipal bond market.

Is It a Good Time to Buy American?
Jul. 02, 2013 - Morningstar, Inc. -  We've spent a lot of time during the last few weeks talking about relative deals, as market volatility opened up closed-end fund discounts to historically wide levels. But as the CEF market returns to normalcy, finding undervalued funds based on z-statistics and historical discounts is becoming more difficult. With this in mind, let's take a look at the four Build America Bond CEFs. Although these funds are trading at discounts within their historical norms, they are still good deals on an absolute basis. Although we have previously looked at these funds, now is a good time to check in.

US Economy and Credit Markets Week Ended June 28, 2013

Jul. 01, 2013 - First Trust -  Treasuries rose slightly this this week following last week’s steep sell off as mixed economic data and commentary from various Fed officials signaled that quantitative easing may not end as soon as expected. On Monday 30 year Treasury bonds rallied, snapping a 3 day losing streak after Q1 GDP and Personal Consumption (+1.6% and + 2.4%, respectively) missed expectations.

Bargains Abound as Investors Flee Closed-End Funds
Jun. 28, 2013 - Morningstar, Inc. -  Some avid closed-end fund investors and Morningstar discussion board commentators have bemoaned an overvalued and frothy market, particularly regarding fixed-income funds. But after the market fallout over the past month or so, previously sidelined investors are diving in. Over the last month, the average CEF lost 7% on a net asset value basis and 9% on a share price basis. Fixed-income funds suffered the most; the average taxable fund was down 5% on NAV and 10% on share price, while the average municipal fund lost 10% on NAV and 11.5% on share price. Equity CEFs fared a bit better, but still lost, on average, 6% of NAV and 8% of share price. Share prices have, in general, been falling faster than underlying portfolio NAVs, causing many premiums to shrink and discounts to widen, creating some strong buying opportunities.

Cohen & Steers Closed-End Fund Strategy - May 2013
Jun. 26, 2013 - Cohen & Steers -  
We would like to share with you our review and outlook for the closed-end fund market as of May 31, 2013. For the month, the market price total return of the Morningstar U.S. All Taxable ex-Foreign Equity Closed-End Fund Index was -2.6%, while its return on net asset value (NAV) was -1.3%. Year to date, the index had a total return of 5.5% based on both 
market price and NAV. By comparison, the S&P 500 Index and the Barclays Capital U.S. Aggregate Bond Index had total returns of 2.3% and -1.8% for the month, and 15.4% and -0.9% for the year to date, respectively.(1)
 
Investment Review
Financial markets came under pressure in May after minutes from the latest Federal Reserve meeting indicated that further bond purchases would be based on the pace of economic growth. Given the general improvement in U.S. economic data, the market interpreted the minutes as suggesting that quantitative easing would be tapered sooner rather than later. In response, Treasury yields moved sharply higher—from 1.7% to 2.2% by month end—prompting a selloff concentrated on income-related securities, such as defensive equities and fixed income assets.


A Closer Look at the 2013 CEF IPOs
Jun. 25, 2013 - Morningstar, Inc. -  With 13 IPOs in just the first six months of 2013, it is shaping up to be a banner year for closed-end fund, or CEF, launches. Last year, there were 24 IPOs throughout the entire calendar year--the most since 2007, when there were 41 new fund launches. The big news of last year's IPO docket was the $1 billion launch of PIMCO Dynamic Income (PDI), the largest single IPO since 2007. This year we've had three $1 billion-plus IPOs. PIMCO launched another go-anywhere fixed-income fund (PIMCO Income (PCI)) in early 2013, raising nearly $3 billion in net proceeds. DoubleLine also launched its second go-anywhere bond fund in late April (DoubleLine Income Solutions (DSL)), raising $2.2 billion in net proceeds, and finally, First Trust Intermediate Duration Preferred and Income (FPF )launched in late May, raising $1.4 billion in net proceeds.

The Fed Unintentionally Lays an Egg
Jun. 24, 2013 - Nuveen Asset Management -  

Are Mutual Fund and ETF Investors Leaving Money on the Table?
Jun. 21, 2013 - Morningstar, Inc. -  No matter what the fund vehicle, Morningstar believes that strong management teams, solid portfolios, low expenses, proven track records, and established parent companies tend to lead to above-average performance over the course of a market cycle. For long-term investors who are willing to hold on to their funds throughout an entire market cycle, confidence in the soundness of these fundamental characteristics could help prevent costly trading errors in volatile markets. This is especially true for closed-end funds, or CEFs: Premiums can turn to discounts in a matter of days, adding significant volatility to share price performance.

Fed Slightly More Optimistic
Jun. 19, 2013 - First Trust -  
The Federal Reserve made only slight changes to the text of its statement, but those it did make signal slightly more optimism. It said labor market conditions show “further improvement,” rather than “some improvement” and sees “diminished” downside risks for the broader economy. 

Normally, slightly more optimism on the economy should be taken as a “hawkish” sign for monetary policy. However, today’s statement was devoid of any hints of a tapering of quantitative easing. In addition, we now have a new “dovish” dissenter, St. Louis Fed Bank President James Bullard, who wants the Fed to focus more on its inflation goal given recent inflation readings below the long-term target of 2%. Meanwhile, Kansas City Fed Bank President Esther George continued to dissent against a policy she believes is overly accommodative.


This CEF's Discount May Be Overdone
Jun. 19, 2013 - Morningstar, Inc. -  Early signs indicate that a relatively recent addition to Advent Capital's management team is improving the risk profile of at least one CEF.

Experienced CEF investors see this scenario repeatedly: A fund is punished with a wide discount for its past mistakes, even while there is an improvement afoot. By the time the improvements are concretely confirmed, the wide discount is a distant memory. Such a scenario seems to be playing out with Advent Claymore Enhanced Growth & Income (LCM) and at two other Advent-managed closed-end funds.


The Municipal Market:Rate Increases Appear Overdone
Jun. 18, 2013 - Nuveen Asset Management -  Click here to access "The Municipal Market:Rate Increases Appear Overdone"

People’s Interest In Hybrids Extends Beyond Cars
Jun. 18, 2013 - First Trust -  Click here to access "People’s Interest In Hybrids Extends Beyond Cars"


Where Is The Value in Today's Equity Markets?
Jun. 17, 2013 - Morningstar, Inc. -  In the latest instalment of the Best Advice: Closed-end Funds Forum series, several investment trust specialists evaluated the current market situation, the sustainability of trends seen in the first half of the year, and opportunities and risks that lie ahead in the second half of 2013.

The first five months of this year saw a rise in equity markets in spite of a lack of any real improvement in the wider economic environment. Gains have been focused in certain sectors and regions but, on average, the global equity market returned some 15% to end of May.  

Sloppy Markets Continue
Jun. 17, 2013 - Nuveen Asset Management -  Click here to access "Sloppy Markets Continue"

US Economy and Credit Markets Week Ended June 14, 2013
Jun. 14, 2013 - First Trust -  Treasury prices were higher this week as declines in equity markets and speculation that the Fed would announce new measures of quantitative easing next week kept demand for government debt in place. On Monday, prices fell and 30 year yields hit their highest level in over a year when Standard & Poor’s announced it was raising the credit outlook for the United States as fiscal risks begin to decline. On Tuesday, treasuries rallied for the first time in 3 days as the highest yields in 14 months on 30 year bonds attracted investors to the debt. 

Strategic Review and Outlook: Room to Run?
Jun. 13, 2013 - Nuveen Asset Management -  
Click here to access "Strategic Review and OutlookL Room to Run?"


The CEF Bargin Bin: Nuveen Municipal Funds
Jun. 11, 2013 - Morningstar, Inc. -  The last few weeks have been stressful and exciting for many closed-end fund investors. 

Conflicting Crosscurrents
Jun. 10, 2013 - Nuveen Asset Management -  Click here to access "Conflicting Crosscurrents"

Convertible CEFs: A Look Inside
Jun. 07, 2013 - Morningstar, Inc. -  Convertible securities are benefiting from an improving equity market.

Economic and Financial Market Review and Outlook
Jun. 05, 2013 - Nuveen Asset Management -  Click here to access Nuveen's Economic and Financila Market Review and Outlook

The Only Constant Is Change – Most Of The Time
Jun. 04, 2013 - First Trust -  View from the Observation Deck

Equities Hit Pause
Jun. 03, 2013 - Nuveen Asset Management -  Stocks and other risk assets struggled last week, with the S&P 500 declining 1.11%.1 Equities finished lower on Friday, the final trading session of May. The decline trimmed May’s gains and sealed the second consecutive weekly decline for U.S. equities.

8 Closed-End Funds That Currently Look Extremely Undervalued
May. 31, 2013 - Morningstar, Inc. -  These CEFs are currently trading at significant, attractive relative discounts.

Hey, Where is the Soft Patch?
May. 28, 2013 - First Trust -  The current US recovery is probably the most ridiculed and disrespected we have seen in 31 years of economic forecasting. Conventional wisdom calls it a “sugar high,” it has evidently not reached “escape velocity” yet, and every piece of weaker than expected data is supposedly the beginning of the dreaded “double dip recession.”

Of course, none of this is true, but it fits a narrative – one that works for both sides of the aisle. Conservatives want to paint Obama as an economic fiasco. Liberals want to argue that “austerity” is killing us and “short-sellers” are spending billions trying to create another panic.

Taking Stock
May. 28, 2013 - Nuveen Asset Management -  Click here to access "Taking Stock"

Risk and Return for Emerging-Markets Income
May. 24, 2013 - Morningstar, Inc. -  Though closed-end funds, or CEFs, are known for being excellent income-generating vehicles, many income investors are confused by the distribution payments and subsequently avoid CEFs altogether. This is not entirely unwarranted, as CEF distributions can be quite complex. After accounting for discounts, leverage, return of capital, and return of UNII, a 6% distribution rate might not be all that it appears. Nevertheless, it is worth taking the time to understand two of the dimensions in which investors should view distribution rates: how much risk the fund takes to maintain its distribution and whether the fund is actually earning enough income to meet distribution payments.

But still, even after taking into account these two factors, it is difficult to make any kind of meaningful assessment in a vacuum. With this in mind, let's take a closer look at the distribution profile of the emerging-markets bond CEF category, which includes 11 funds in total.


Fund Face-Off: First Trust Long-Short High-Yield Funds
May. 21, 2013 - Morningstar, Inc. -  With many income-investors petrified of rising interest rates, some are turning to alternative fixed-income strategies. As my colleague Cara Esser previously noted, senior loan funds offer some potential advantages, as the floating-rate coupon payments lower these funds' durations. But with many of the closed-end funds, or CEFs, in this sector trading at hefty premiums, it might be worth exploring other options.

This week, we take a look at two funds designed to accomplish similar goals:  First Trust High Income Long/Short(FSD) (a CEF) and First Trust High Yield Long/Short (HYLS)(an exchange-traded fund). At first glance, the funds appear to be identical, despite being packaged in different wrappers. However, investors interested in the strategy should note that there are some notable differences between the two funds.


(Yawn)...As Equities Advance Another 2%
May. 20, 2013 - Nuveen Asset Management -  

Consider Adding These Positively Rated, Undervalued Funds to Your Portfolio
May. 17, 2013 - Morningstar, Inc. -  In the context of fund investing, conversations of growth versus value often refer to the underlying strategy implemented by fund managers. While these are important distinctions for all fund investors to understand, closed-end fund investors also need to consider the valuation of the fund itself before trading shares.

A completely unscientific poll of our active discussion board members shows that many are value-oriented investors, making buy and sell decisions based on current and relative valuations. Of course, the fundamentals of the underlying fund matter, and long-term investors should look for bargains on funds they believe are worthy candidates that fit in their well-diversified portfolios. There are some CEF investors, however, that play a trading game, looking solely for dislocations in valuation for short-term trading profits.




Fund Face-Off: Eaton Vance's Floating-Rate Funds
May. 14, 2013 - Morningstar, Inc. -  A few weeks ago, we highlighted the floating-rate loan asset class, specifically those in the closed-end fund, or CEF, universe. This week, we highlight a group of funds (both mutual funds and CEFs) from Eaton Vance. While only two of the six funds have Morningstar Analyst Ratings ( Eaton Vance Floating Rate (EVBLX) earns our highest rating of Gold, and  Eaton Vance Floating Rate Income Common (EFT)earns a Bronze rating), the suite of funds is managed by the same team, utilizing the same overall strategy. The biggest differences lie in the use of leverage. The CEFs sport leverage ratios of about 36%, Eaton Vance Floating Rate Advantage (EAFAX)reported a 12% leverage ratio, and the remaining mutual funds do not use leverage.  The six funds also hold varying allocations to high-yield corporate bonds: As of March 31, the smallest allocation was 3% and the largest was 14.5%.

People
Eaton Vance's bank-loan team has a deep bench of knowledgeable and experienced managers and analysts. Overall, the team has been awarded a positive People pillar rating. (For more information about our Morningstar Analyst Rating for Funds and the pillar ratings, click here.)


10 Richly Valued Funds to Avoid Right Now
May. 10, 2013 - Morningstar, Inc. -  With the S&P 500 Index reaching new highs over the past month, many investors previously on the sidelines have begun dipping their toes back into the investment waters, however choppy they may be. Equities have been a particular favorite as credit spreads remain tight, limiting additional price appreciation for many bonds. As such, numerous fixed-income fund managers expect to simply clip coupons this year, a marked difference from the rapid price appreciation we've seen in recent years.

Now that equity markets are roaring back, timid investors are more likely to take the plunge. It's often said that individual investors have woeful market-timing skills, jumping in when markets are rapidly advancing (often entering when it's ripe for a reversal) and bailing only after they've ridden the market to the bottom--only to watch it bounce back as they wait on the sidelines.



Economic and Financial Market Review and Outlook, May 2013
May. 01, 2013 - Nuveen Asset Management -  

Cohen & Steers Closed-End Fund Strategy
Apr. 30, 2013 - Legg Mason, Inc -  
We would like to share with you our review and outlook for the closed-end fund market as of April 30, 2013. For the month, the market price total return of the Morningstar U.S. All Taxable ex-Foreign Equity Closed-End Fund Index was 0.9%, while its return on net asset value (NAV) was 1.3%. Year to date, the index had a total return of 8.3% based on market price and 6.8% based on NAV. By comparison, the S&P 500 Index and the Barclays Capital U.S. Aggregate Bond Index had total returns of 1.9% and 1.0% for the month, and 12.7% and 0.9% for the year to date, respectively.


Thoughts on Income From the Capital Link Forum
Apr. 26, 2013 - Morningstar, Inc. -  Morningstar's Mike Taggart weighs in on the annual conference's general theme and how it relates to the CEF industry.

This week, we attended the annual Capital Link Forum in New York. For the third year in a row, I moderated the CEF Industry Roundtable, but this time, we shook it up a bit. In prior years, the panel's focus had been on the current state of closed-end funds. This year, the panelists and I decided to focus instead on income and education. 


It's Time for a Reality Check on Closed-End Funds
Apr. 25, 2013 - Morningstar, Inc. -  CEFs have a role in risk-tolerant portfolios.

In a recent article, I pointed out that adding closed-end funds, or CEFs, to a portfolio has several benefits for those seeking increased income. Judging from the comments to that article, several Morningstar.com members have already figured this out. For those of us who are heavily focused on CEFs, this notion is common sense. However, most investors are not focused on CEFs, so further explanation and a real-life example may be helpful in gaining a better understanding of those potential benefits.


Nuveen Mortgage Opportunity Term Funds - First Quarter 2013 Review
Mar. 31, 2013 - Nuveen Asset Management -