A short term trade pick.

We follow Doug Kass regularly.  His insights on the bearish side keep us grounded and even when we do not think he is correct we value his ideas since he hits home runs consistently on individual buys.  Last year his call on AAMC was absolute dynamite, go look it up and think if you had just bought a few hundred shares one year ago.  He also liked RESI about the same time and it has not done too bad either.  Unfortunately we were not smart enough, or more likely brave enough, to follow him into either pick. We did pick up a couple hundred shares of APPL when he said they were value priced and made some darn good short term profits.  Dougie nailed to the precise month the bottom of the generational bear market in March 2009 and that one we did ride with him up a good ways to some very nice profits. So as we said he can pick'em.   However he tends to be a bear too long in our summation and misses a lot of upside due to his bearishness. We follow a good number of stock pundits to help us get a good feel of the market and Doug is top notch. 

His latest longs are Ford, symbol F, and lately Citigroup, symbol C.  But the one he has been pounding the table on recently is closed end municipal bond funds.  Now we do NOT like bond funds since you are open to interest rate rises and serious drops in value.  We DO like individual bonds since you can hold them to maturity and keep your principal in tack.  So with that said we have been surveying his CEF picks and thoughts here.  Note that Doug Kass's thoughts are that due to worries over Detroit bonds and the muni market in general the values of these funds have been unduly punished.  Many of the closed end funds are federal tax free, but not state tax free and we do not like paying state income taxes as part of the possible long.  However today we picked up on a idea where we can have our cake, Dougie's pick, and eat it too, as in no state tax as well. 

The symbol is NNC, a Nuveen fund that holds NC municipal bonds with a few other non taxable entities throw in for liquidity.  The bond ratings average BBB, which is good investment grade, and the monthly payout currently is just over 5% tax free.  The price as we write is around $12 per share. The kicker here is that net asset value is about $13.67 and that is over 12% off the selling price. So if Dougie is right and these funds return to correct pricing we get to sit on 5% tax free payout and maybe a 12% or so bump in capital gains in short order, read two months. 

We will be buying in the next day or so since the ex-divy date is generally around the 10th of the month.  Hoping for a sell in the first quarter of 2014.  Now understand this trade could likely be like watching paint dry as there will be no big quick move here.