Discounts and premiums
Fund managers often give investors different ways to access the same (or a substantially similar) fund. In some cases, investors can buy a listed equivalent much cheaper than the unlisted version. It’s the entire reason our Affluence LIC Fund exists. In this excellent piece, Graham Hand at Firstlinks take a look at the arbitrage opportunity in listed vs unlisted funds.
By the way, the Affluence LIC Fund owns many of the stocks mentioned in the article, including MGF, PICOA, MFFOA, PMC and PAI. And the concept is not limited to LIC’s. The Affluence Investment Fund currently owns a handful of ASX listed REITs trading at decent discounts to the value of their property assets.
Quote of the month.
“Well, uh…thank you very much. We appreciate it. Asshole.”
Jeffrey Skilling, Enron CEO, on April 17th, 2001 – in response to analyst Richard Grubman after he asked why Enron does not produce a balance sheet or cash flow statement with their earnings.
On that day, Enron stock was trading around $60 per share, but had fallen from $90 just 6 months prior. After briefly closing above $60 in early May, Enron stock would never see a share price in the 60’s again. By December of that year, the company had filed for bankruptcy in one of the most famous business collapses of all time.
This month in (financial) history.
On 24 April 1901, volume on the New York Stock Exchange shattered records, mostly due to one stock in particular, Northern Pacific Railroad. In total, 662,000 shares of Union Pacific were traded – two thirds of all shares outstanding for the company.
The buyers (which would not be common knowledge for two weeks) were E.H. Harriman and J.P Morgan. The two were fighting for control of the railroad and attempting to corner the stock. E.H Harriman made a surprise raid and attempted to accumulate enough shares to gain control of Northern Pacific. However, J.P Morgan and fellow railroad tycoon and ally James Hill would quickly be tipped off of his efforts, and responded by purchasing as many Northern Pacific shares as could be found.
James Hill, set a new cross country speed record on his train to get back to New York from out west for the fight. Private trains were sent across the United States to buy the smallest of Northern Pacific lot sizes. The buying would culminated in one of the wildest days in NYSE history on May 9th, 1901 when Northern Pacific stock vaults from $160 to $1,000 in just a few hours.
Vaguely interesting facts.
- Almonds and peaches are members of the same family.
- Female bats give birth hanging upside down, catching the newborn with their wings.
- Clouds are far from weightless. The average cumulus cloud weighs about 5,000 tonnes.
- Flamingos aren’t naturally pink. They’re born gray. It’s their diet of brine shrimp and algae that turns them pink.
- In Sweden, just 1% of garbage gets sent to landfill. And to answer your next question, 47% gets recycled, while a whopping 52% gets incinerated in power plants that convert garbage to energy.
- The odds of giving birth to a baby at 12:01am on January 1 are around 1 in 526,000. *
And finally…should you play Powerball part 2?
As a follow up to last months post, if you must play Powerball (we don’t recommend it as an investment strategy), here’s the maths behind the best Powerball number to choose.
* Bonus vaguely interesting facts. The odds of getting struck by lightning in any given year are also about 1 in 526,000, the same as giving birth at 12:01 on 1 January. And as we learned last month, the odds of winning Powerball are 1 in 134 million. Which means you would need to buy 64 standard tickets (256 games) to have the same chance of winning the lottery as being struck by lightning.