MHN

The blue line represents MHN over the last 3 years, while the white line is MUB ( a national muni bond fund with no leverage).  The purple line is TLT (governent long term bonds)

Since end of April, the returns have been MHN -20%, MUB  -8% and TLT  -16%  Pretty scary stuff from MHN (and TLT).   If we go back to the beginning of the year, we see even worse form MHN (an additional 10% decline).  Some portion of this is due to the erasure of the premium to NAV that existed and now it is at a 6% discount.

While I do not make any major trimming of my holdings in this ETF, I did reduce when the premiums were over 5%.  That said, I have been buying as the discounts became bigger.

This is a core holding of mine and needless to say, this has been a big negative on my returns.  The questions is (as always) what now going forward.

Probably the biggest negative is the potential for a payout cut.  The latest earnings were .0722 and the payout is .0765 so that is a cause for concern, but I do not believe that will happen yet.  The market may be pricing in a cut, however.  MHN is also suffering from duration and it's exposure to long term rates.  Historically though, muni's have traded at lower rates than treasury bonds because of their tax treatment.  Perhaps the market is pricing in that the tax favored status of muni bonds will be eliminated or reduced somehow.  This is a possibility, but I do not place a high probability on it because I feel that states would suffer tremendously in their ability to access the bond market.

MHN is suffering from a lack of buyers.  It is not an ETF with high volumes, so it can be "manipulated" in an outsize manner by one or two large orders.  I think this is happening as well.  There is no real urgency to buy right now as the market is in a general upswing in bond yields.  Buyers are waiting and sellers are trimming.

For my own part, I am not selling as I feel that earning a 7%+ tax free yield is VERY attractive and I do not feel that NY is in particular trouble.  I am considering buying even more, but I am already around a15% holding in my portfolio, so I don't have much to go on this one - maybe 2-3%.

PFF, JPS,JTP

Where I have bought a bit is in the preferred sector.  PFF is yielding 5.1% and I think this is an excellent buy.  JPS and JTP are lower volume (so higher trading costs), but they are yielding over 7% AND are trading at HUGE discounts to NAV. (over 10%).  

CLMT

I am looking at this one again as it has dropped about 20%.  Their payout ratio is looking a bit high so I am worried, but they have been solid at managing in the past.  I am willing to give them the benefit of the doubt and thinking of buying more.