E Closed-End Funds And Stocks

The second US trading day this week saw further price deterioration. This is either a trend indicator or a momentary reversal. If you know which it is, you can make your fortune right now by either going long or short. But as a long-term stock market junkie, the one thing I am sure of is that history does not repeat.

The big global news is that the Labour Party will not accept a rushed British exit from the European Union without terms and conditions. That means either negotiations will continue beyond the current deadline, or that a second referendum over whether Britain should leave may take place. The result of this was a jump in the pound sterling to over $1.30, which had the perverse side effect of chopping the share price of large-company British multinational corporations, whose bottom line depends on exports. But if the Brexit nightmare is delayed or canceled, the ultimate impact on UK stocks will be positive.

Meanwhile, there is renewed pessimism about the government shutdown and Chinese trade talks. There are mounting hints that growth is sagging not just in China but all over.

My golden oldie US shares are again up nicely thanks to Wednesday's jump in IBM and smaller ones in GE and Blackberry (BBwhich are offsetting the drop in Microsoft.

Today we catch up on closed-end funds, which tend to be less volatile than single stocks—but not today. And then we turn to company news.


*Wells Fargo Bank is piling into closed-end funds, including the country funds we cover, with very heavy spending, particularly at funds trading at a significant discount from net asset value. One of the problems for my newsletter during this period of upheaval was that Lipper charts from Barron's I rely upon to get data on the discounts of closed-end funds were not providing the net asset values at all. This gave an edge to institutions that do not rely on the data published. I wrote up one of these moves early this week but there are more.

During the market sell-off last Christmas, Wells, itself a manager of closed-end funds, did a spending spree in the shares of rival managed CEFs, according to data provided to the SEC:

It owns nearly 20% of the Japan Equity Fund. JEQ is the fund where it has the 2nd most investment, topped only by 24.6% of Mass. Financial Services Government Market Income Trust (MGF).

It also has double-digit stakes in: Morgan Stanley Asia Pacific Fund (APF), Western Assets Inflation-Linked Opportunity & Income Fund (WIW), MFS Intermediate Income Trust Western Assets (MIN), WA Inflation-Linked Income Fund (WIA), China Fund (CF), Central and Eastern Europe Fund (CEE), Duff & Phelps Utilities & Corporate Bond Trust (DPG); Brandywine Global Income (BWG).

The Wells Fargo buying of other funds was also heavy but in single digits: Eaton Vance Senior Income Trust (EVFEuropean Equity Fund (EEA); First Trust Dynamic European Equity Income Fund (FDEU); Taiwan Fund (TWN); John Hancock Income Security Trust (JHS); Mexico Fund (MXF); Morgan Stanley Emerging Markets Debt Fund (MSD); MS Emerging Markets Fund (MSF), and VoyaAsia Pacific High Dividend Equity Income Fund (IAE), plus others.

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