Tuesday, November 23, 2010

MRF Watch

American Income Fund Inc. (MRF) is one of those slow-and-steady monthly income funds that can produce cashflow from the idle part of a trading portfolio.

It has moved to bull phase, with the next monthly ex-dividend date set for Dec. 1. Sadly, it's about as liquid as a jar of cold peanut butter. Which is to say, not very liquid at all.

ppspsarmacd obvh-a trend ma20ma50ma200
MRF $8.70

MRF pays a 5.75¢ dividend each month, which works out to an annual dividend yield of 7.94%. Not too shabby as a parking place for cash.

The fund has been in an uptrend since October 2008, when interest rates began to plummet. This month's price decline is the the first in five months.

Unlike my other favorite parking place for cash, the corporate junk-bond etf JNK, MRF is heavily weighted toward investment-grade bonds, and about a third are in fixed-rate mortgage-backed securities issued by the government mortgage agencies, with their implicit (now explicitly?) federal guarantee.

However, the fund has an average volume of only 65,000 shares per day, and institutional ownership is only 14%, so the bid-ask spread is higher than I like, and it can take God's own time to fill a large order.

On the Person's table, the price is approaching the upper weekly pivot.

Person's Table
ppspps openupper pivotlower pivot
MRF $8.70 $8.57 nov18 $8.70 +1.0% $7.55 -13.2%

The 20-day moving average is trading below the 50-day ma, a situation that I like not at all. Resistance is a swing high set Oct. 5 as the price began a slow turn to the downside.

Support is the 50-day moving average, and below that a swing low, but one that ignores a sudden large downside anomaly, which occurred Nov. 16 within a 15-minute period, without any news and with recovery within three hours. Go figure!

Reversal Levels
  • $9.28, +6.7% (swing high)
  • $8.70 --- You are here.
  • $8.57, -1.5% (50-day moving average)
  • $8.22, -5.5% (swing low ex-anomaly)
  • $7.84, -9.9% (anomaly)

There is so much to dislike about this fund, and yet it is a reasonable place to park cash.

The monthly dividend minimizes ex-div risk.

It has less default risk than JNK but with comparable returns, and more default risk the Treasury long-term bond fund TLT, but returns to match.

In terms of capital risk from price fluctuation, MRF and JNK are comparable, and MRF has similar risks to TLT but with much greater reward.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

  • h-a trend - Heikin-Ashi trend.
  • obv - On-Balance Volume.
  • pps - Person's Proprietary Signal.
  • psar - Parabolic Stop and Reverse
  • ma20 - 20-day moving average
  • ma50 - 50-day moving average
  • ma200 - 200-day moving average
  • macd - Moving Average Convergence-Divergence

About the glance: The colors indicate the state of each signal.
  • Signal Section:
    • pps, psar, macd: green for bull mode, red for bear.
  • Confirmation Section:
    • obv: green for uptrending, red for downtrending.
    • h-a trend: green for uptrending, red for downtrending.
  • Environment Section:
    • ma20, ma50, ma200: green for above the average, red for below the average.

No comments:

Post a Comment