This week, I want to talk about Closed End Funds (CEF). They're a type of mutual fund that issues a fixed number of shares through a single initial public offering (IPO) to raise capital for their initial investments. The shares can then be bought and sold on a stock exchange, but no new shares will be created and no new money will flow into the fund.
Click here for my favorite pick in this category right now...
At this point of the credit cycle, a lot of securities look cheap.
Business Development Companies (BDCs) are looking exceptionally cheap right now - trading at 82.7% of their net asset value and kicking off very high income of 10% to 17% at the same time.
Due to their structure as closed-end funds that pay high dividends, BDCs are designed to appeal to retail investors.
The problem is that investors often forget that high dividends come with a price - and that price is usually that the loans made by these companies are illiquid and high risk.
And Congress just made the risk much worse...
With the economy beginning to stall, Ben Bernanke's war on the nation's savers rolls on.
From his promise to keep the Fed funds rate near zero through late 2014 to his efforts to push ten-year note yields even lower, the Fed Chairman is a saver's worst nightmare.
