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An Update on Closed-End Funds

Closed-end funds are funds with a fixed number of shares outstanding and, as a result, trade more like a share of common stock than their open-end fund cousins which trade at their net asset value ("NAV"). Shares of closed-end funds can trade at a price that is either a discount or a premium to their net asset value based upon market demand. This condition can often lead to much greater volatility and price dispersion for closed-end funds when compared to open-end funds. For example, according to the Stifel Nicolaus October 2009 Closed-End Funds Monthly Review report, closed-end funds have traded at an average discount to their NAV of 4.52% over the last ten-year period ... Read More

Let Dubai Serve as a Reminder

Last week, prior to the Thanksgiving holiday, the Dubai government announced that it will look to restructure Dubai World; a government owned conglomerate, and asked creditors for a six-month delay on outstanding debt payments. The total liabilities of Dubai World are estimated to exceed $60 billion with existing creditors spread across much of the developed and emerging world markets. The announcement took much of the world by surprise and caused the U.S. stock market to open over 200 points lower although the drop was essentially cut in half by the close of the shortened trading day last Friday as traders and investors put the announcement into perspective. Additionally, as I write this post, the United Arab Emirates has indicated that it would step in, as needed, to support local banks through a special liquidity facility. This should help to stem fears of a potential run on the local banks that could have negative ramifications throughout the region ... Read More

What is driving the price of Gold?

We have all heard the age-old wisdom that gold can provide for a hedge against inflation. The Federal Reserve has recently contended that inflation is not an immediate threat or concern to them. In fact, Ben Bernanke, Chairman of the Federal Reserve, said in a speech earlier this week that "the U.S. economy still faces considerable challenges but the most likely outcome is moderate growth with subdued inflation." Despite this, Gold has rallied significantly in 2009 - noticeably in recent weeks. What then is accounting for rising Gold prices? ... Read More

Are U.S. Treasuries Still a Safe Haven?

I couldn't help but find it amusing yesterday when one of my fellow panelists during a discussion at The Art of Indexing Summit in New York City suggested that U.S. Treasury Bills, while once considered as a proxy for "risk-free return" perhaps are now a better proxy for "return-free risk." All kidding aside, many well-respected economists throughout the world are now calling into question the perceived safe haven status of U.S. Treasuries and, in a similar vein, if the U.S. Dollar will remain as the world's reserve currency. Regarding the latter, some have suggested that the U.S. Dollar could eventually be replaced by the Euro, the Japanese Yen or even the Chinese Yuan ... Read More

Is the Consumer Losing Confidence?

Consumer confidence in the United States appears to be waning after a recent wave of optimism. According to a recent Reuters/University of Michigan Survey of Consumers, consumer sentiment fell from 73.5 in September to 69.4 in October. Further, the Survey's economic outlook index also decreased, falling from73.5 in September to 67.6 in October ... Read More

Interest Rates and the Value of the U.S. Dollar

The Federal Funds Target Rate has been residing within the 0.00% - 0.25% range for all of 2009 thus far. The Federal Reserve has maintained this target range with the hopes of providing additional credit opportunities to allow for economic stimulus ... Read More

Understanding Treasury Inflation Protected Securities (

According to Russell Investments, as of September 30, 2009, core inflation is currently at 1.40%, below the Federal Reserve's unofficial target range of 1.50% - 2.00%. Hence, many have concluded that inflation is not present and perhaps not an imminent threat. We, however, believe otherwise. We, at Hennion & Walsh, believe that the threat of inflation may be upon us already and the impact of inflation could have a significant impact on the economy and on the portfolios of individual investors ... Read More

Looking to Earnings for Guidance

According to Thomson Reuters, over 70% of companies beat their 2nd quarter estimates which marked the highest percentage of companies surpassing estimates since Thomson Reuters began tracking this type of data back in 1994. To put this in a historical perspective, in a typical quarter, approximately 61% of companies eclipse their estimates. One particular industry showing particular strength was Health Care which interestingly is also one of the only industries that has actually added jobs in the last twelve month period. However, we, at Hennion & Walsh, believe that third quarter earnings should be carefully dissected before reaching any forward-looking conclusions and further believe that this holiday season will likely disappoint and lead to lower fourth quarter earnings than many analysts are predicting at this point in time ... Read More