ORNAX: A Muni fund turning into a REIT? By Lee Munson and Charles R. Major

Lee Munson and Charles R. Major provide independent fund research on Oppenheimer Rochester National Muni A (ORNAX ).

During the 2008 crash, Oppenheimer Rochester National Muni A (ORNAX ) lost over 50% of its worth. It was one of the very worst performers. Before that it had been one of the best. Investors were clearly not expecting that type of drawdown that fast. In an article our firm wrote near the end of 2008, we discussed the oft-misunderstood tobacco revenue bonds, which made up a substantial portion of ORNAX’s bond purchases. The uncertainty of these bonds, coupled with investors’ general misunderstanding of them, led them to be mispriced and under-appreciated. These bonds are still mispriced and under-appreciated today. And they still make up the largest of ORNAX’s holdings, at around 22%. However, when we recently looked under ORNAX’s hood, we found something more interesting. Management has decided on a philosophy that could lead them to enter the property management business, a move that should concern any investor.

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Real Clear Markets – The Euro at Parity? Really?

I want to thank Real Clear Markets for publishing my first article on their excellent site!

You can see the article here.

In a nutshell, I spell out why the euro is not going to parity. More than that, I get to the root of the problem – a strong dollar or yen can kill global trade, including the euro zone. It is a must read for anyone who want to connect the dots between currency and global trade. Let me know what you think.

- Lee

UMBWX – UMB Scott International interview with James Moffett

Here is a re-print of my latest research piece . . . Enjoy!!!

Scout International Fund – UMBWX

Lee Munson and Lorn Davis interview James L. Moffett

In the world of mutual funds, only a handful of names stand out and James L. Moffett, CFA stands tall among them. Running the Scout International Fund (Ticker: UMBWX) since its inception in 1993, Mr. Moffett has garnered a reputation for running a tight ship that repeatedly beats its competitors and the domestic market over the long term. His strategy has remained consistent and simple: look at the international economic, political, and market conditions to choose which countries to invest in. Then, select the best blue chip companies each country has to offer in view of each economy’s prospects. Read the rest of this entry »

QCHA: Getting Old School with the Average Average

Co-Written by Lee Munson, CFA, CFP®, and Lorn Davis
Though investors are constantly preoccupied with the future, it is always beneficial to take a moment and look backwards to rediscover the things that have fallen through the cracks. One such thing that we at Portfolio Asset Management have recently revived from the history books is the un-weighted average percentage gain of all traded stocks on the NYSE. It’s a great indication of the overall sentiment in the market and can be used to create an index to compare with the S&P 500 and the Dow. This index is then used in detecting divergences with the Dow and S&P 500. So, for example, if the Dow and S&P 500 are in the middle of a rally but the average stock’s average gain is comparatively weaker or negative, we can then presume that the rally is deteriorating and narrowing down to the large-caps only, this comes from the S&P 500 and Dow giving a highly skewed image of what is happening in the market due to their weighting system which allows for a handful of Goliath-sized stocks to be the primary data for the calculation of the index. If the average stock’s average gain is leading, we can presume that there is broad participation in the rally and action is lively even for the smaller stocks.
It used to be that you could get the average stock’s average gain easily through the ticker symbol QCHA (Quotron Change) as legend “Buzzy” Schwartz relates in his book “Pit Bull”. But with the proliferation of more focused indices, information regarding the average stock seemingly lost its appeal to investors and consequently the QCHA or any other alternative faded into history. So when we decided at the firm that we wanted to include this indicator in our arsenal we needed to figure out a method to calculate it ourselves, which entailed getting the closing quote table for all traded stocks on the NYSE each day and calculating the average percentage gain from that data. But because we have found this information so useful in our trading, we have mentioned it to others in the investment community and found them to be so intrigued that they wished to include the average stock’s average gain in their indicator set as well. Keep in mind Barron’s runs the QCHA numbers but only at the end of the week, not each day like we do. This prompted us to consider the usefulness of this indicator in this modern age may be directly related to the crowded arena of overly specific indicators and indices tracking minute market details that had originally led to the QCHA demise. Therefore we believe it to be of value for the rest of the investment community to take a closer look at this “dated” indicator and, from its utility, realize that there is always merit in looking backwards. And not just to price histories and annual reports, but also to the techniques and approaches that were used in the past.

CFA Magazine Interviews Lee Munson

Check out my new interview in CFA Magazine. In it I discuss AQR’s Diversified Arbitrage strategy.

Bottoming Out – CFA Magazine Sep 2009

Smart Money – Put Your Cash to Work: Alternative Assets

The excellent Reshma Kapadia interviewed me in Smart Money regarding the topic of alternative asset mutual funds. The quotes are short, so let’s get right into it. . .here is the link.

Many planners are gravitating toward alternative funds that use derivatives. Lee Munson, chief?investment?officer at wealth manager Portfolio LLC, admits that many clients equate derivatives with the kinds of disastrous bets Wall Streeters made before the crash. But not all derivatives are created evil. One of the most popular types of derivative is the stock option, which is why Munson likes the Gateway fund, a big-company stock mutual fund that also sells options, for “scaredy-cats who want equities.” The options limit the amount the fund can rise but also how far it can fall; it does best when the market is “a roller coaster going nowhere,” says Munson. In other words, it helps investors get more for their money when the market is wobbly.

Ok, I am a scaredy-cat when it comes to a bad economy and high unemployment. . .

New Report: Using Closed-End Funds vs. Master-Limited Partnerships

Check out my new research piece on here. It was posted on Seeking Alpha.

I go through and describe, point out trouble areas, and give some general tools for investing in MLP’s. Let me know what you think. Here is an except:

Investing in a closed-end fund such as Tortoise Energy Infrastructure Corp. (TYG) that focuses on producing distributions close to what an investor would get if they were directly invested in the MLPs, presents an attractive opportunity that is uncorrelated with the market and also dispels the tax confusion surrounding MLPs. TYG invests in MLPs in the energy infrastructure sector meaning they are involved in the processing, storing and transporting of crude oil, natural gas, and other similar energy commodities.

Have a good weekend!

GATEX – S+P 500 with less volatility???

Check out the new easy to read report here on the The Gateway Fund, or GATEX. We have been a fan of this fund since starting the firm and it continues to do what it should – track the large cap markets over time with less volatility. Here is an excerpt.

An investor doesn’t need to look any further than the performance of Dodge & Cox’s stock fund (DODGX) last year to realize that the investment environment has been turned upside down. Even the professionals can make big mistakes that cost money and cash flow for investors. It makes one pause and look for alternatives, such as Natixis’ Gateway Fund (GATEX), which attempts to track the S&P 500 with less volatility and thus less return. With an emphasis on dividend producing stocks, the fund engages in selling index calls to increase cash flow and buying index puts for downside protection. It is a long term investment vehicle similar to DODGX in the sense of large cap domestic companies, but has the added bonus of reducing volatility through its hedging.

Enjoy! And please feel free to add comments or criticism!

MOVE it or loose it: the report is out!!!

Check out the latest research piece my the Lee Munson and Patrick Kirts Experience on MOVE. You can go to Seeking Alpha.com or link to it here.

Here are some of the best parts:

In looking for a long-term opportunity, there are a few things we want. First, an illiquidity premium is a must since you are not looking to sell tomorrow. Second, find something with hidden assets, maybe something the average stock screener won’t identify. Third, make sure there are the typical Buffett things like a moat, good management, and a cheap valuation. After that you are alone in the dark.

So, let’s get into our housing comeback play. Like many of our positions, this one is indirect (internet marketing of homes), has some problems, and some hidden features that could give it an edge over the long haul.

Enjoy the report. You can also check out my other independent research at Portfolio, LLC.

In case you missed my piece in New Mexico Business Weekly

You can get the link here. Here are the key points:

Yeah, I got a sure thing for you, all right. Can’t lose a dime (mostly) and anyone can do it. The catch: It will never get you anywhere. Bank CDs and money market funds (MMFs) promise a secure return of capital, but only because they are not designed to do much other than trail inflation (yes, not even beat it!).

Let me know if you have suggestions for my future articles for ‘Money 101′. You can just comment at the bottom of this page.