Timing GIM

[mikew]

Hello
There is some talk on the board about GIM. This is on my watch list and I have been watching it sink since Sept. Any ideas on how low it will go and how it will react?

It now has a 6.06% yield and a 8.86% discount.
It opened at 9.00 on sept 7 and is now 7.92
The biggest historical discount was over 20% at the end of 1999

1) Should the fund recover once the FED quits raising rates? (Is the fed the only factor for the decrease?)

2) Is there a lag time between when rates quit rising and bond funds' prices start to recover?

3) Can anyone see another reason for the strengthening dollar besides the FED?

4) When is Ben taking over?

Cheers
Mike

 

[brewer12345]

1) Don't know.
2) Depends on which rates and what the duration of the bond fund is. If the Fed is raising ST rates, but LT rates are dropping, a LT bond fund would go up.
3) Sure. But you probably would need a macroeconomics textbook to make sense of any real explanation.
4) January.

The funny thing about GIM is that the NAV has not moved that much (between 9 and 8.70 for pretty muc the whole time between Sept and now). The market price has moved a lot more. If I were more of a quant, I would probably do a little study to see if GIM could be used to determine investor expectations about currency moves.

I personally own GIM because it is an easy way to get exposure to an asset class that has low correlation with US equity and bond markets as well as foreign equities. I am essentially running a 60/40 stock bond portfolio allocation for my foreign holding via EFA and GIM. If you are inclined to freak out over volatility, don't buy it.

Just a note on the discount: unlike many, many other CEFs, GIM's managers have a history of liquidating fund assets and buying back shares at a discount to book when the discunt got too wide for too long.

Bonus hint: PDT is a CEF that is now at the biggest discount to NAV for the year (maybe in its entire history). Go look at who the largest owner is.

 

[soupcxan]

Bonus hint: PDT is a CEF that is now at the biggest discount to NAV for the year (maybe in its entire history).  Go look at who the largest owner is.

Wells Fargo, according to Yahoo. Is that supposed to mean something?

TOP INSTITUTIONAL HOLDERS

Holder Shares % Out Value* Reported
WELLS FARGO & COMPANY 45,500 .30 $549,640 30-Jun-05
GARRISON, BRADFORD & ASSOCIATES, INC. 25,000 .17 $302,000 30-Jun-05
JMG Financial Group, Ltd. 10,600 .07 $128,048 30-Jun-05
LASALLE BANK N.A. 10,000 .07 $120,800 30-Jun-05
UBS AG 5,602 .04 $67,672 30-Jun-05
UNIONBANCAL CORP 2,500 .02 $30,200 30-Jun-05
FIFTH THIRD BANCORP 2,399 .02 $28,979 30-Jun-05
U.S. BANCORP (MINNESOTA) 1,600 .01 $19,328 30-Jun-05
DEUTSCHE BANK AKTIENGESELLSCHAFT 1,264 .01 $15,269 30-Jun-05
PEAPACK GLADSTONE FINANCIAL CORP. 1,100 .01 $13,288 30-Jun-05

 

[brewer12345]

Wells Fargo, according to Yahoo. Is that supposed to mean something?

TOP INSTITUTIONAL HOLDERS

Holder Shares % Out Value* Reported
WELLS FARGO & COMPANY 45,500 .30 $549,640 30-Jun-05
GARRISON, BRADFORD & ASSOCIATES, INC. 25,000 .17 $302,000 30-Jun-05
JMG Financial Group, Ltd. 10,600 .07 $128,048 30-Jun-05
LASALLE BANK N.A. 10,000 .07 $120,800 30-Jun-05
UBS AG 5,602 .04 $67,672 30-Jun-05
UNIONBANCAL CORP 2,500 .02 $30,200 30-Jun-05
FIFTH THIRD BANCORP 2,399 .02 $28,979 30-Jun-05
U.S. BANCORP (MINNESOTA) 1,600 .01 $19,328 30-Jun-05
DEUTSCHE BANK AKTIENGESELLSCHAFT 1,264 .01 $15,269 30-Jun-05
PEAPACK GLADSTONE FINANCIAL CORP. 1,100 .01 $13,288 30-Jun-05

Commerce Group (CGI) ows almost 40% of PDT. They have bought up a majority of other CEFs at a discount and then forced the manager to liquidate or buy back stock to close the gap. I imagine the same thing will eventually happen to PDT if the discount stays to big for too long.

 

[mikew]

1) Don't know.
2) Depends on which rates and what the duration of the bond fund is.  If the Fed is raising ST rates, but LT rates are dropping, a LT bond fund would go up.
3) Sure.  But you probably would need a macroeconomics textbook to make sense of any real explanation.
4) January.

The funny thing about GIM is that the NAV has not moved that much (between 9 and 8.70 for pretty muc the whole time between Sept and now).  The market price has moved a lot more.  If I were more of a quant, I would probably do a little study to see if GIM could be used to determine investor expectations about currency moves.

I personally own GIM because it is an easy way to get exposure to an asset class that has low correlation with US equity and bond markets as well as foreign equities.  I am essentially running a 60/40 stock bond portfolio allocation for my foreign holding via EFA and GIM.  If you are inclined to freak out over volatility, don't buy it.

Thanks Brewer,
I am interested in buying but there is no point while it is going to keep falling. The best I can come up with is it will keep falling until the fed stops raising rates.

It seems the fed is the biggest factor for the rise of the dollar. This is suprising to me.

I am overweight in foreign I own
EFA Developed
EFV Value Developed
VWO Emerging
CEE Eastern Europe
I need to get some bonds in there to balance it out. But am willing to wait.

Mike

 

[brewer12345]

Thanks Brewer,
I am interested in buying but there is no point while it is going to keep falling. The best I can come up with is it will keep falling until the fed stops raising rates.

It seems the fed is the biggest factor for the rise of the dollar. This is suprising to me.

I am overweight in foreign I own
EFA   Developed
EFV   Value Developed
VWO Emerging
CEE   Eastern Europe
I need to get some bonds in there to balance it out. But am willing to wait.

Mike

Up to you, of course, but I think GIM is attractive at these levels. You are getting a very well managed bond portfolio at a ~10% discount.