"TO BET ON A PROLONGED SLUMP IS TO BET AGAINST THE GOVERNMENT, MARKETS, AND HUMAN NATURE."
~James Finucane
Barron’s Magazine writer Jonathan Laing recently profiled 67 year old analyst James Finucane, who has been great at calling stock market lows, including the low reached after the October 1987 crash. He has observed that every major financial crises has created spectacular buying opportunities, especially when crises of the past reached crescendos. To him, the government sponsored bailout of Bear Sterns was a crescendo event. The financial panics of 9-11-2001, 1998 collapse of Long Term Capital Management hedge fund, and the 1994 Mexican peso devaluation were similar in magnitude.
During these crescendo events, many investors panicked and sold out fearing further declines. After government and central bank intervention, the markets moved sharply higher. Buying high and selling low is a hallmark of investor behavior. It provides educated, unemotional participants terrific profits over time.
"ANYONE WHO BELIEVES EXPONENTIAL GROWTH CAN GO FOREVER IN A FINITE WORLD IS EITHER A MADMAN OR AN ECONOMIST"
~Kenneth Boulding, Oxford educated economist
Consumer confidence is at a 17 year low, housing and retail are still slumping, and investors are fearful. Money market cash has soared to approximately $3.5 trillion dollars, versus $2.2 trillion at the market lows of 2003. Interest rates are lower than the rate of inflation, which suggests that governments and the Federal Reserve member banks have a clear incentive to promote growth. Money always goes where it's treated best, and right now many of the world's greatest businesses are on sale. We agree with Finucane's analysis. The fuse for an explosive rally has been lit.
Buy the bargains now before the market takes off.
THE FALLEN ANGELS INCOME FUND (FAINX) IS CURRENTLY RANKED AS THE #1 FUND IN ITS LIPPER CATEGORY, YEAR TO DATE*.
The credit crisis has created many remarkable values for income oriented investors. Current yields between 8% and 12% can be found in various asset classes like gas royalty income trusts, closed-end funds, preferred and convertible preferred issues. Not all income oriented securities merit consideration, and a large number of them continue to be unattractive, even at current depressed levels. Everyone likes the high monthly dividends that FAINX has been able to provide, but we believe the fund's #1 Lipper ranking year to date has more to do with our selection discipline. This issues "fallen angels" generate high current income with significant appreciation potential over the next few years.
FALLEN ANGELS INCOME IDEAS
DWS Multi Market Income Fund (KMM): $8.60**
KMM is a closed-end fund that currently trades at an 8% discount to underlying net asset value while paying a 9% distribution rate. Since its inception in 1989 the fund has traded at a premium multiple times and we believe it will trade at a premium again in the future. The fund is ranked four stars by Morningstar and offers investors both income and appreciation potential at current prices.
Liberty All-Star US Equity Fund (USA): $6.46**
USA is another closed-end fund trading at a substantial discount (currently more than 10%) to underlying net asset value. The distribution at current price levels is more than 11%. The fund invests primarily in a diversified portfolio of equity securities.
Disclosures
*As of 5/31/2008, The Fallen Angels Income Fund was #1 out of 530 in total return, year to date, in the Mixed-Asset Target Allocation Moderate category provided by Lipper. Past performance is no guarantee of future results. The rankings were obtained at http://www.smartmoney.com/top25funds/.
*Closing Price on 6/4/08
The Fallen Angels Funds
Gabriel Wisdom and Michael Moore manage two no-load mutual funds, the FALLEN ANGELS VALUE FUND and the FALLEN ANGELS INCOME FUND.
If you would like more information, please call American Money Management, LLC at (888) 999-1395 today. A prospectus is available at www.amminvest.com.
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Please carefully consider each fund’s objectives, risks, charges and expenses before investing. The prospectus contains this and other important information. Please read the prospectus carefully before you invest. To obtain a prospectus, please call American Money Management Funds at (888) 999-1395. Mutual fund investing involves risk, including possible loss of principal. |
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About American Money Management, LLC
American Money Management, LLC, an SEC Registered Investment Adviser, manages accounts for individuals, companies, trusts and retirement plans. Minimum account size is $100,000 but investors are invited to try a managed account with as little as $25,000 (AMM reserves the right to withdraw this option at any time). For more information on our managed accounts program, please call us at 888-999-1395 or visit us on the web at www.amminvest.com.
Subscribe to The Fallen Angels Report
Every two weeks, subscribers receive the Fallen Angels Report designed to help you find potential bargains that are cheap and timely. The Report is updated and sent out bi-weekly. The editors define Fallen Angels as quality businesses whose value is not currently recognized in the company's stock price.
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Disclaimer
The opinions expressed are those of Gabriel Wisdom and Michael Moore and do not necessarily reflect the opinions of American Money Management, LLC (AMM), an SEC registered investment advisor who serves as portfolio manager to private accounts as well as to mutual funds. Clients of AMM, Mr. Wisdom, Mr. Moore, employees of AMM, and mutual funds AMM manages may buy or sell investments mentioned without prior notice. This newsletter should not be considered investment advice. The opinions expressed do not constitute a recommendation to buy or sell securities. Investing involves risks, and you should consult your own investment advisor, attorney, or accountant before investing in anything. Current stock quotes are obtained at http://finance.yahoo.com. Prices are as of the close of the market on the previous day of trading. |
