Lessons For This Week: Still Safe To Enter This Rally? - Part 2 [View article]
Gunzo, thx for kind remarks fair enough - crystal ball currently being repaired actually all I thought I was saying is that I wouldn't bet against it meaning even though the fundamental case (beyond its being propped up by QE) is weak, you don't want to go short against this kind of momentum - that was my chief message, sorry if wasn't clearer. My hometown of Jerusalem famous for prophets, don't have the knack for it, sadly.
I don't know how much farther it will continue to rise. Momentum suggests rally not done
Lessons For This Week: Still Safe To Enter This Rally? - Part 2 [View article]
oh brother, I feel your pain. one thing to sit on sidelines for a year or two. another to do so for 4-5. Fortunately I did a pile of buying in early 2009 in certain currency diversified income stocks, but still frustrating to have idle cash.
Though with most income stocks still paying relatively low yields, not huge opportunity cost.
That said, once S&P 500 broke through decade old resistance, have to recognize that strength and consider some cautious buying, small positions, at least with some good divvy stocks that will keep paying regardless. Also keep stop losses in place so losses from pullback at acceptable levels. Occasionally get some dips on specific opportunities. Recent drop in LINE a classic case, though not without some risk.
right now looking to capitalize on USD strength to pick up assets denominated in harder money. Not doing it yet, in search stage. Hoping USDCAD continues its rise against a decade of decline so can pick up more good CAD income stocks.
If you haven't considered diversifying assets by currency exposure as well as asset and sector class, consider it, especially for income stocks so you get some currency diversified passive income. The book up in the left margin a good guide to that - can view chunks for free on amazon page via the Look Inside feature.
Still keeping a chunk of cash on side. Rather lose 5% opportunity per year and be ready to move when EU or ME or something creates a scare.
Lessons For This Week: Still Safe To Enter This Rally? - Part 2 [View article]
thanks for worthwhile comments. re: double BBs, no magic, just one of the few tools that has some real use when price at historical levels and have no support / resistance reference points
Coming Week Market Movers And Outlook For The Rest Of 2013 [View article]
Founder,
I do.
I'm not saying corrections fun, but that is what happens. You can choose to ride it out or set stop loses so that you're probably out of your position at a much smaller loss.
stop losses provide some imperfect protection (don't help much if your stock gaps below stop loss order).
there are pros and cons to setting tighter or looser stop losses. Tighter ones minimize loss but you'll risk spending more time and money monitoring when to get back in and on fees to just buy back something that dropped briefly. Looser ones avoid that but mean you leave more money on the table.
Your personal strategy will depend greatly on how much time you care to invest in monitoring investments, type of investments, etc.
For example, long term income investors holding steady dividend payers with dominant businesses have more reason to just ride out the fluctuations. Traders obviously take an opposite approach.
.... and yes, how you set stop loss would definitely be influenced by how volatile the stock is. For example a lot of good Canadian income stocks and MLPs have low daily trading volumes which can make them prone to volatile moves, so you need to set wide stops or risk getting stopped out for just a random drop
Weighing The Week Ahead: Are You Ready For Some Fedspeak? [View article]
Hi Jeff,the usual good work, keep it up! quick question. You wrote that among last week' bad news was:
• Household debt is lower - by 11.4% from the 2008 peak. Put another way, the U.S. consumer is reducing debt at the same time that overall consumption has been solid. See the details from Jeffry Bartash at MarketWatch.
How's this bad? deleveraging AND solid consumption? would expect one or the other but not both? sounds like best of both worlds?
if they do announce tapering USD to soar (and those who know me know I'm know USD fan long term) but this would be huge for USD, especially if EU forced to stay loose or ease further.
Excellent opportunity for USD based investors to at that point pick up assets linked to/denominated in/providing income stream in harder currencies. Not hard or any riskier than any other trading or investing if you know how. Search for the one book on safer, simpler ways to do it: The Sensible Guide To Forex. Full disclosure, I'm the author. see its amazon page for free excerpts, reviews , synopisis
Energy Transfer Partners: The Pieces Are Falling Into Place [View article]
"Given the significant increase in cash in 1Q13 shown in Table 6, unrestricted cash on hand at March 31, 2013 was $1.28 billion" -how do you get this figure? not obvious from table 6 unless I'm missing something
Use Linn Energy To Build Income Now [View article]
NB: a lot of confusion about MLPs in IRAs. Short version - given outperformance, not necessarily wrong at all.
biggest fear seems to be UBIT, but you need six-figure cost basis typically to incur UBIT tax. The UBIT exemption is $1k of UBIT income, and that's per account, so you can beat that with multiple IRAs.
other negatives are tax reporting and payment complexity, and 'wasted' tax deferral.
however, consider an avg low risk midstream pipeline operator paying ~5.5% vs. 100-200 bp less for comparable REITS and Utilities (never mind blue chips or bonds) and the yield justifies the added tax reporting headaches.
If you're a LINE believer, that yield is another ~200 bps higher, before considering yield growth
4 Scary Charts Warning Of The Next Financial Crisis [View article]
btw, on BOJ website FAQ page, when asked about default risk their answer is that bond repayments will be handled responsibly (not that they'll necessarily be paid, paid on time, in full, etc).
4 Scary Charts Warning Of The Next Financial Crisis [View article]
Good article
little new info re: Japan, but worth repeating
similar fate to JPY and Japan awaits others with same fundamental problems and inclination to rising debt and money printing.
Key point: those holding JPY, (also USD, EUR, GBP among others need to diversify their assets by currency exposure just as they diversify by asset and sector class. Need not be complex.
For only book extant on safer, simpler ways to get that currency diversified portfolio, either for traders or income investors, search The Sensible Guide to Forex - winner of FXStreet.com' s Best forex book for 2013. Disclosure: I'm the author. You can view parts free on its amazon page, just use the title as search term.
Linn Energy (LINE) CEO Mark Ellis disputes the assertion in the negative Barron's article that its units may be worth far less than the current quote: "We've had three different analyses done... None of the valuations [is] anywhere close to what was represented over the weekend in the Barron's article." LINE plans to raise its dividend ~6.2% this year, not cut it. LINE +1%, LNCO +1.3% premarket. [View news story]
Meanwhile WFC comes out with article in support of LINE.
. “We continue to believe LINE’s distribution is secure and poised to grow at a mid-single-digit annual growth rate over the next five years,” the Wells Fargo analyst wrote. Also, “we continue to believe the LNCO financing vehicle provides the company with a competitive advantage and could help both support distribution growth and improve Linn’s leverage ratios over the coming years.”
also per mlpprofits.com:
The proprietor of the bearishly disposed hedge fund cited started this shop only in November, reportedly with just $50 million in assets. Among those on the other end of this trade is the investing legend Leon Cooperman, whose Omega Advisors fund held $150 million worth of Linn at year-end"
Boost Your Portfolio Returns With MLP Funds [View article]
Good article, a few comments:
re: UBIT/UBTI: UBTI generally not an issue for retirement accounts unless holding 6 figure positions, meanwhile MLP outperformance over past decade far exceeds competing income investments in both income and appreciation. Also, while markets in general have risen under Fed's liquidity pump, the growth story for many of the MLPs is real due to new energy sources and technologies, which have generated a need for $100-200 bln in cap spending in industries in which MLPs are located.
re: MLP funds: Those with C-corp organization sacrifice return due to corp structure,like: Taxation at entity level Need to retain cash to pay for future tax payments on deferred taxes fees Some of these use leverage to make up for return lost, which introduces own risk
Some ETFs tend underperform index due above burdens on return
ETNs bear credit risk of issuer and liable to lose value if issuer takes credit rating hit, these are unsecured and so risk total loss if creditor insolvency
funds have their place but generally agreed to underperform comparable basket of MLPs
RE: political risk: none seen at this time. Risk of elimination like that seen in 2006 in Canada minimal for a number of reasons: In 1987 Congress confronted the issue of non-resource companies abusing MLP status. Rather than choosing they ‘toss out the baby with bathwater” approach favored in Ottawa, they chose to to tighten restrictions
Fracking technology has created unmet demand for pipelines and other midstream and gathering services. MLPs offer cheaper capital and better encourage formation of these needed midstream assets needed to exploit new energy sources and technologies .
Current trend, if anything, is for Congress to expand MLP status. The most recent MLP legislation is the MLP Parity Act, aimed at expanding qualified MLP activities to certain renewable energy industries which have thus far struggled to find funding. Allowing the MLP structure would make it easier to attract capital, especially from large, traditional energy firms which could create MLPs in order to to monetize/offload renewable assets by dropping them into their own newly created MLP, which would transfer cash to the parent sponsor/creator by selling shares at higher yields than the parent can due to the MLP pass through nature that cuts out corporate tax
Significant risk: field decline risk – some of new sources from fracking showing faster than expected depletion
Environment: lots of evidence of problems, but paucity of conclusive studies, partly due to reluctance of governments to fund studies that might kill off big revenue generator.
Admittedly, politics of 'fairness' (aka tax the productive ones) may trump reason.
Biggest risk is that tho MLPs have historically low correlation to overall market that correlation not only exists it tends to rise in times of selloffs. A risk given market's elevated level that is not supported by traditional drivers of new highs like robust global growth and corp earnings outlook, but rather central bank money pump and financial repression (aka low yields in bonds)
Finally, all MLPs are USD denominated and so,unlike the sadly departed Canadian royalty trusts, don't provided badly needed income instrument with USD diversification. (though hard asset link of most MLP mitigates inflation risk somewhat.
key point to know with funds is that they're an imperfect tradeoff - solves taxation reporting/payment issues at cost of lower yield and at times different set of risks. Again, UBIT not an issue for most retirement a/cs unless have 6 figure position, even then if keep to lowest UBTI level MLP return may still justify
Lessons For This Week: Still Safe To Enter This Rally? - Part 2 [View article]
thx for kind remarks
fair enough - crystal ball currently being repaired
actually all I thought I was saying is that I wouldn't bet against it meaning even though the fundamental case (beyond its being propped up by QE) is weak, you don't want to go short against this kind of momentum - that was my chief message, sorry if wasn't clearer.
My hometown of Jerusalem famous for prophets, don't have the knack for it, sadly.
I don't know how much farther it will continue to rise. Momentum suggests rally not done
Lessons For This Week: Still Safe To Enter This Rally? - Part 2 [View article]
Though with most income stocks still paying relatively low yields, not huge opportunity cost.
That said, once S&P 500 broke through decade old resistance, have to recognize that strength and consider some cautious buying, small positions, at least with some good divvy stocks that will keep paying regardless. Also keep stop losses in place so losses from pullback at acceptable levels. Occasionally get some dips on specific opportunities. Recent drop in LINE a classic case, though not without some risk.
right now looking to capitalize on USD strength to pick up assets denominated in harder money. Not doing it yet, in search stage. Hoping USDCAD continues its rise against a decade of decline so can pick up more good CAD income stocks.
If you haven't considered diversifying assets by currency exposure as well as asset and sector class, consider it, especially for income stocks so you get some currency diversified passive income. The book up in the left margin a good guide to that - can view chunks for free on amazon page via the Look Inside feature.
Still keeping a chunk of cash on side. Rather lose 5% opportunity per year and be ready to move when EU or ME or something creates a scare.
Lessons For This Week: Still Safe To Enter This Rally? - Part 2 [View article]
re: double BBs, no magic, just one of the few tools that has some real use when price at historical levels and have no support / resistance reference points
Coming Week Market Movers And Outlook For The Rest Of 2013 [View article]
I do.
I'm not saying corrections fun, but that is what happens. You can choose to ride it out or set stop loses so that you're probably out of your position at a much smaller loss.
stop losses provide some imperfect protection (don't help much if your stock gaps below stop loss order).
there are pros and cons to setting tighter or looser stop losses. Tighter ones minimize loss but you'll risk spending more time and money monitoring when to get back in and on fees to just buy back something that dropped briefly. Looser ones avoid that but mean you leave more money on the table.
Your personal strategy will depend greatly on how much time you care to invest in monitoring investments, type of investments, etc.
For example, long term income investors holding steady dividend payers with dominant businesses have more reason to just ride out the fluctuations. Traders obviously take an opposite approach.
.... and yes, how you set stop loss would definitely be influenced by how volatile the stock is. For example a lot of good Canadian income stocks and MLPs have low daily trading volumes which can make them prone to volatile moves, so you need to set wide stops or risk getting stopped out for just a random drop
Weighing The Week Ahead: Are You Ready For Some Fedspeak? [View article]
Hi Jeff,the usual good work, keep it up! quick question. You wrote that among last week' bad news was:
• Household debt is lower - by 11.4% from the 2008 peak. Put another way, the U.S. consumer is reducing debt at the same time that overall consumption has been solid. See the details from Jeffry Bartash at MarketWatch.
How's this bad? deleveraging AND solid consumption? would expect one or the other but not both? sounds like best of both worlds?
Is A QE Exit Really Scary? [View article]
Excellent opportunity for USD based investors to at that point pick up assets linked to/denominated in/providing income stream in harder currencies. Not hard or any riskier than any other trading or investing if you know how. Search for the one book on safer, simpler ways to do it: The Sensible Guide To Forex. Full disclosure, I'm the author. see its amazon page for free excerpts, reviews , synopisis
Energy Transfer Partners: The Pieces Are Falling Into Place [View article]
"Given the significant increase in cash in 1Q13 shown in Table 6, unrestricted cash on hand at March 31, 2013 was $1.28 billion" -how do you get this figure? not obvious from table 6 unless I'm missing something
Is Atlantic Power A Safe Investment? [View article]
Use Linn Energy To Build Income Now [View article]
biggest fear seems to be UBIT, but you need six-figure cost basis typically to incur UBIT tax. The UBIT exemption is $1k of UBIT income, and that's per account, so you can beat that with multiple IRAs.
other negatives are tax reporting and payment complexity, and 'wasted' tax deferral.
however, consider an avg low risk midstream pipeline operator paying ~5.5% vs. 100-200 bp less for comparable REITS and Utilities (never mind blue chips or bonds) and the yield justifies the added tax reporting headaches.
If you're a LINE believer, that yield is another ~200 bps higher, before considering yield growth
4 Scary Charts Warning Of The Next Financial Crisis [View article]
4 Scary Charts Warning Of The Next Financial Crisis [View article]
little new info re: Japan, but worth repeating
similar fate to JPY and Japan awaits others with same fundamental problems and inclination to rising debt and money printing.
Key point: those holding JPY, (also USD, EUR, GBP among others need to diversify their assets by currency exposure just as they diversify by asset and sector class. Need not be complex.
For only book extant on safer, simpler ways to get that currency diversified portfolio, either for traders or income investors, search The Sensible Guide to Forex - winner of FXStreet.com' s Best forex book for 2013. Disclosure: I'm the author. You can view parts free on its amazon page, just use the title as search term.
Atlantic Power Management Discusses Q1 2013 Results - Earnings Call Transcript [View article]
Atlantic Power Management Discusses Q1 2013 Results - Earnings Call Transcript [View article]
Linn Energy (LINE) CEO Mark Ellis disputes the assertion in the negative Barron's article that its units may be worth far less than the current quote: "We've had three different analyses done... None of the valuations [is] anywhere close to what was represented over the weekend in the Barron's article." LINE plans to raise its dividend ~6.2% this year, not cut it. LINE +1%, LNCO +1.3% premarket. [View news story]
. “We continue to believe LINE’s distribution is secure and poised to grow at a mid-single-digit annual growth rate over the next five years,” the Wells Fargo analyst wrote. Also, “we continue to believe the LNCO financing vehicle provides the company with a competitive advantage and could help both support distribution growth and improve Linn’s leverage ratios over the coming years.”
also per mlpprofits.com:
The proprietor of the bearishly disposed hedge fund cited started this shop only in November, reportedly with just $50 million in assets. Among those on the other end of this trade is the investing legend Leon Cooperman, whose Omega Advisors fund held $150 million worth of Linn at year-end"
Hmmm. who do you go with? not hard choice
Boost Your Portfolio Returns With MLP Funds [View article]
re: UBIT/UBTI: UBTI generally not an issue for retirement accounts unless holding 6 figure positions, meanwhile MLP outperformance over past decade far exceeds competing income investments in both income and appreciation. Also, while markets in general have risen under Fed's liquidity pump, the growth story for many of the MLPs is real due to new energy sources and technologies, which have generated a need for $100-200 bln in cap spending in industries in which MLPs are located.
re: MLP funds: Those with C-corp organization sacrifice return due to corp structure,like:
Taxation at entity level
Need to retain cash to pay for future tax payments on deferred taxes
fees
Some of these use leverage to make up for return lost, which introduces own risk
Some ETFs tend underperform index due above burdens on return
ETNs bear credit risk of issuer and liable to lose value if issuer takes credit rating hit, these are unsecured and so risk total loss if creditor insolvency
funds have their place but generally agreed to underperform comparable basket of MLPs
RE: political risk: none seen at this time. Risk of elimination like that seen in 2006 in Canada minimal for a number of reasons:
In 1987 Congress confronted the issue of non-resource companies abusing MLP status. Rather than choosing they ‘toss out the baby with bathwater” approach favored in Ottawa, they chose to to tighten restrictions
Fracking technology has created unmet demand for pipelines and other midstream and gathering services. MLPs offer cheaper capital and better encourage formation of these needed midstream assets needed to exploit new energy sources and technologies .
Current trend, if anything, is for Congress to expand MLP status. The most recent MLP legislation is the MLP Parity Act, aimed at expanding qualified MLP activities to certain renewable energy industries which have thus far struggled to find funding. Allowing the MLP structure would make it easier to attract capital, especially from large, traditional energy firms which could create MLPs in order to to monetize/offload renewable assets by dropping them into their own newly created MLP, which would transfer cash to the parent sponsor/creator by selling shares at higher yields than the parent can due to the MLP pass through nature that cuts out corporate tax
Significant risk: field decline risk – some of new sources from fracking showing faster than expected depletion
Environment: lots of evidence of problems, but paucity of conclusive studies, partly due to reluctance of governments to fund studies that might kill off big revenue generator.
Admittedly, politics of 'fairness' (aka tax the productive ones) may trump reason.
Biggest risk is that tho MLPs have historically low correlation to overall market that correlation not only exists it tends to rise in times of selloffs. A risk given market's elevated level that is not supported by traditional drivers of new highs like robust global growth and corp earnings outlook, but rather central bank money pump and financial repression (aka low yields in bonds)
Finally, all MLPs are USD denominated and so,unlike the sadly departed Canadian royalty trusts, don't provided badly needed income instrument with USD diversification. (though hard asset link of most MLP mitigates inflation risk somewhat.
key point to know with funds is that they're an imperfect tradeoff - solves taxation reporting/payment issues at cost of lower yield and at times different set of risks. Again, UBIT not an issue for most retirement a/cs unless have 6 figure position, even then if keep to lowest UBTI level MLP return may still justify