No. of Recommendations: 2
Hi Folgore,

My reply is primarily motivated by having fresh numbers at my disposal that some other people may not have at their immediate avail. I'm not going to pretend to know everything there is to know, and you may have different objectives, but I think some of these CEFs deserve a closer look than you're giving them.

"With a relatively conservative item like munis, how does one walk away with negative returns?"

By selling. Those negative numbers are NAV returns. To be honest, I don't really know how the "market return" is calculated (I assume it's a combination of the NAV return and the distribution flow). Maybe someone who knows more can help out here and clarify or correct me.

Anyway, you won't realize those quoted losses unless you choose to sell, so why are they important? If you looked at individual bonds under the same criteria, you'd probably find the same paper "loss". If your intention is to hold long term, the better measure of your yield is the distribution yield, not the NAV return. If you're in it for the coupon, the change in principal value is not the critical factor.

If you're buying them as an asset for capital appreciation, then the NAV change is a factor. But, from that perspective a group of bonds that are well priced for capital appreciation, should have poor YTD NAV performance. They can't go up unless they've first come down.

My purposes are to get relatively safe tax-free returns for a long time horizon. So, my concern is primarilly the distribution and safety. I looked for a CEF trading at an NAV discount that had a high fraction of AAA bonds, a good distribution yield, a high fraction of their assets on the long end of the curve, and a historically low fund turnover rate to lock in that rate. That may not be your objective, so NAV losses could be a greater concern for you. Those are just my "needs" for this money.

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"The bond broker at Muriel Siebert mentioned a NY water projects bond yielding 5% rated AA. At first, I thought of the 5% and 6% CDs I still have. Then thinking about the federal tax free aspect, it meets or exceeds many corporate bonds as well."

28 of the 30 closed-end NY Muni funds that I've looked at have distribution yields over the 5% for the Muni that you cite. Those numbers are a little stale, so they could have changed slightly, but not a lot... Half are over 6.2. Once again, that's only distribution yield and doesn't incorporate changes in market pricing, which aren't my primary concern.

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"As to Buffett buying munis, does anyone know what exactly he bought? What rating? What yield?"

WEB doesn't kiss and tell... He rarely lets anyone know what he's buying until it's too late to coattail him.

Just my 2 cents.

Best,

Peter
P.S. To all the people that know this shnit better than I, corrections are actively solicited. I want to know what I don't know...
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