Trader’s Narrative

Well, it is the end of another year. And if you are a trader, your thoughts turn invariably to the January effect and more specifically, how you can use this phenomenal annual pattern to generate alpha.

There are a few ways to take advantage of the January effect. My personal favourite is on closed-end funds (CEFs). I’ve outlined the whole trading plan here: My Year-End Strategy.

With the turmoil in the bond market this year, a lot of bond funds and other “yield” vehicles have gotten beaten to a pulp. Which means there are a lot of unhappy longs who are selling for tax-loss year end reasons.

I feel like a kid in a candy store this year.

I’ll just feature one example: BlackRock Municipal Bond Fund (BBK), but for a vowel, my namesake. Almost everyone who bought this this year is facing losses:

Notice the upsurge in volume - a telltale sign. And the way it has fallen to technical support at $14.

Hope you had a great year, and see you in 2008