E Ben Franklin And Pope Francis


*Despite its history, Aberdeen Asia Pacific Income Fund, FAX is not a sell. Having begin life as First Australia Prime Income Fund, these days it is substantially underweight in A$ bonds and moreover has been hit by a selloff related to its Australian heritage. The shares have lost abut 14% YTD, in line with the A$.

*Now that e-trade will not sell in London, and the market-maker offers a bid-ask price for my Africa Opportunity Fund ADRs (AROFF) that you can drive a truck through, despite the fact that the London shares quote in US dollars, so there is minimal risk. So I am pleased that the idea of a fund to invest $1 bn in Black Africa is being launched by TPG, a private equity shop backed by Sudanese billionaire-reformer Mo Ibrahim, who owns Satya Capital. TPG has $70 bn under management, a substantially larger cash pile than Ghanaian analyst Francis Daniels and Boston investment mgr Robert Knapp of Ironside Partners LLC can rustle up. Mr. Daniels suffered from the unexpected impact of Ebola on his investments and the plummeting Ghanaian cedi, but also for having invented a way to create a synthetic media stock, by buying Naspers and shorting its 34% holding, Tencent. We own both.

*Mr Knapp is also a leader in attacking Pimco Dynamic Credit Income Fund, PCI, which we just bought, claiming its alleged under-performance may result from the managers being paid regardless of whether they make money for shareholders. This is not the more global Pimco fund we just bought into, Pimco Dynamic Income, PDI, where the insiders have been buying.

*Since I keep preaching that investors should take a stake in ProShares Ultra VIX short term futures ETF, or UVXY which is a way to buy US stock market volatility, I thought I had best explain how it avoids contango, the way a future pride of something is higher than the current one. You run into it a lot in commodities, and a double weighted ETF owning volatility is subject to contango too. The value of your investment is fixed but the number of shares you own is cut via a reverse split every couple of months if there is no market panic (as there has not been since I began this strategy.) Of course I am sure there will be one eventually, why I keep my UVXY as the number of shares I own goes down and their value goes up. You get a cash payout for shares that are not a multiple of the split level.

The last split took place May 9 at 5:1 after the UVXY price got to $9. This was 16 months after the prior split (when I did not own the stock.)

UVXY aims to achieve double the movement of the S&P 500 VCI short-term futures index. I like the idea of an ETF to avoid expirations on direct positions on the VIX. I like the fact that its price is usually higher than its NAV. While this is an ETF its price tends to head for a premium as soon as the market exhibits weakness.

But I don't like the fact that splits reduce my effective return because compounding doesn't happen and I get dribs and drabs of cash which it will be hellish to account for in my taxes. The original shares issued in 2011 have now split 40:1.

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Disclosure: None. 

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