Week 2: I hope everybody bought as much as they could of the three CEFs I recently recommended: AIO, BMEZ, and BSTZ. If you didn’t you can still buy them after their ex-dividend dates (the date after which you do not get the next monthly dividend) because they tend to have lower prices at that point and thus you may be able to buy more shares. If I was relatively young, I’d buy just these three CEFs, let them DRIP (reinvest the dividends) and add to them at every paycheck. Some additional CEFs to consider at this time that have higher dividends and that are selling at discounts are: ECC, CHY, CHI, BOE, BDJ, ETG, and ETO.

On caveat: This appears to be a rotation out of higher growth into value stocks due to expected higher interest rates. Rotations are typical short-run phenomena that do not matter in the longer run. The three tech oriented funds will still outperform in the long-run and the temporary rotation just provides an excellent entry point for which to buy.

New Opportunity (Week3): BMEZ recently raised its dividend by 45% and because it is under duress, it’s yield has increased to 6.63% as of today. The duress BMEZ is suffering is because of regulations threatened by Democrats. The worst the Democrats can do in Biden’s first year is to increase international competition or put in place some type of price control. As per usual, Bernie Sanders threatens to do more harm than good but he has never ever gotten a bill through congress — even a democratic one — so I wouldn’t worry about his threats against his alleged “out-of-control” pharma industry. Thus, a more moderate outcome is expected. Moreover, midterm elections will no doubt favor Republicans and a reversal or offset of whatever the Democrats do is likely. Thus, in the long-run everything political becomes a wash.

Some of what the Democrats want to do regarding pharmaceuticals may not be unreasonable. Generally, our Nation is based on private ownership that rewards technological innovation and advancement. More specifically, the Pharma industry is characterized by very high R & D cost and lengthy development processes that create high risks for the owners (which include investors), especially for newer and more innovative drugs. Re-cooping these costs and offsetting these risks has involved patent protections as well as restrictions on foreign pharmaceutical imports which, in turn, support higher prices.

The social down side to incentivizing costly risk-taking through patents and import restrictions is a strong monopoly effect, but within which there is still a good amount of competition between individual firms. Government created monopolies, like the Post Office and some utilities, require some type of price controls to protect consumers against monopoly pricing. Allowing for increased competition form foreign drug imports doesn’t appear unreasonable either (unless the source of the imports is from firms that do not do any R & D because they are merely manufacturers with inherently lower costs). If foreign imports from pure manufactures do not face exceptionally high tariffs or domestic pharma price controls are too severe, their will be a distortion in resource allocation among the firms in our pharmaceutical industry that will prevent the development of newer and higher risk drugs. Adding to that, higher corporate taxes will lead to more pharmaceutical firms moving their headquarters to foreign countries with lower corporate tax rates and then selling their product back to us.

In sum, I expect any near-term Democratic mistakes to eventually be corrected and that this particular Democratic threat will be more likely to cause BMEZ to become oversold in the short-run, so look for a low price entry or the opportunity to scoop up more. You will also get a higher yield-on-cost.

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The funny thing about Trump’s supporters, aside from many of them going to jail, is that you never know when or where they will turn-up. Because of that, I have begun to refer to them simply as “turn-ups.” Here is a quick quiz.

1. At what venue are Trump supporters most likely to “turn-up?” A. At a covid-19 vaccination site. B. At a seminar on applying the scientific method to ridiculous theories. C. In a graduate level class on understanding comparative advantage in World trade. D. At a KKK rally, having arrived in a pick-up truck.

I hope you enjoyed my humor for the day. In all seriousness, Good Investing!