DailyWealth: What Frank Trotter is Buying Now

What Frank Trotter is Buying Now
By Dr. Steve Sjuggerud
September 28, 2007

"Frank... you're a big shot at a multibillion-dollar bank... what do you think of this idea?"

Six weeks ago, I asked Everbank.com founder Frank Trotter to punch holes in my latest investment idea...

(I can't be an expert in every field, of course. So I try to have good contacts, like Frank, to help me when I have an idea in their area of expertise.)

I told Frank my idea... I wanted to take advantage of the big banks temporarily losing their minds, causing the credit markets to freeze up.

So I told Frank I wanted to recommend closed-end funds that hold "senior secured loans." (I wrote all about these in the September 17 DailyWealth).

In mid-August, these things were in freefall. I thought they were cheap... but I wanted to be sure I wasn't missing something...

So I called Frank. He said I wasn't missing anything. It was a great idea. He wished he could buy those small closed-end funds for his bank. But they're too small for him.

Fast forward to today...

I had dinner last night with Frank, who was visiting from his home in St. Louis. I asked him about senior secured loans again. I was concerned the market itself wasn't improving fast enough. We've picked up some dividends, but the prices haven't gone up yet.

Frank was confident that a few major players are about to come out with big funds with the sole purpose of scooping up these types of secured loans. Frank still agrees with me and thinks the idea is a good one.

Two weeks ago, I mentioned one of these funds to you. The Eaton Vance Senior Income Trust (EVF). It's still trading at a 7% discount to its net asset value and still paying out a huge 8% dividend.

A number of funds offer similar discounts to their net asset values and dividend payment. To research the most attractive ones, you can go to www.etfconnect.com. Click on "Find a Fund," and then go to the "Closed-End Fund" drop-down box for "Loan Participation Funds." You'll find a table that lists them with their yields and discounts.

If Frank Trotter is right and big institutions come in and start scooping up the loans, then we have more gains to come in these safe funds, like EVF and the ones I recommended to my paid subscribers. If you're not on board yet, you ought to check out the closed-end funds specializing in senior secured loans...

Good investing,

Steve

P.S. I like Frank. Yesterday afternoon, he gave me a call. We only had dinner plans. But he was early. "Hey Steve, it's the incoming tide. I'm 15 minutes away from you. I'm here for the surfing lesson you promised me." I doubt there are many St. Louis men in their mid-50s that want to try surfing for the first time. Yesterday, Frank Trotter did. He succeeded too! He stood up. He probably traveled 30-40 yards on his longest ride. Go Frank! Sorry no photos... this time... But he says he'll try it again... We'll get the photographic evidence then! Learn more about Frank's business at www.everbank.com.

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.

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ANOTHER CHINA GROWTH STORY

China needs steel.

Already, the country consumes half of the world's steel, and it's going to need lots more.

Analysts predict that iron ore prices will rise 30% next year, as the world's largest producers will not be able to meet China's growing demand for cars, railroads, and buildings.

Iron ore miners, already trading at all-time highs, will see margins explode in the next few years. Early to the trend, Steve Sjuggerud recommended the world's largest commodities company, BHP Billiton, last year. His readers have made more than 120%. If China has anything to say about it, those gains aren't even close to ending.

You know, it's a bull market.

–Sean Goldsmith

There's a large inventory of unsold condominiums in the Miami market. Economists are saying major cities like Miami and Los Angeles have been in a housing recession for the past year, the worst in 16 years.

To move inventories along, developers have gone to the auction block to get them sold.

On Thursday evening, at the Miami Biscayne Bay Marriott Hotel, the gavel struck as auctioneers sold about 20 units in the 119-unit Platinum development owned by Alex Redondo.

When it was all over, [a bidder] walked away with a two-bedroom unit on the 19th floor. To put the price in perspective, a one-bedroom priced at $350,000 sold on average at auction for $176,000, almost half.

– CBS

Citic Securities Co. is the world's fastest-growing brokerage firm thanks to the booming market for Chinese stocks, and Wall Street may have to get used to the industry neophyte challenging Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. as the biggest.

Founded just 12 years ago, Beijing-based Citic now has a market capitalization of $40.7 billion, or $8.8 billion more than Lehman Brothers Holdings Inc., $24.4 billion more than Bear Stearns Cos. and $16.4 billion more than Charles Schwab Corp., after more than tripling in 2007. Haitong Securities Co., China's No. 2, also eclipsed Bear Stearns as the seven largest U.S. brokers lost $37 billion in value this year.

– Bloomberg

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