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Dan Plettner

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  • Tortoise Energy Capital: Structural Inefficiency for MLP Exposure Apparent in Shareholder Report [View article]
    Dear LinusVanPelt

    I am not your Financial Advisor and I am not offering you financial advice. I merely license trading data, including MLP trading data to Covestor Ltd. ("Covestor"). Covestor is a Registered Investment Advisor.

    Anything (including C-Corporation financial product wrapper) affecting NAV performance affects any investment in any account, IRA or otherwise. That's not to say anyone should be buying MLP assets in any form in an IRA account.

    If someone has both IRA and taxable wealth, and chooses any MLP exposure they might be served from asking their Financial Advisor (assuming their financial advisor is privvy to all related financial issues) whether the MLP asset class exposure is more financially efficient in the IRA or the taxable account, and whether or not it should be in a single security wrapper.

    In the world we live in with the financial industry model being what it is, the Financial Advisor much like the Advisor and sponsor of a fund product is largely in the business of gathering assets. The standards you set for those from whom you consider taking advice may have a large consequence on what you do and how efficiently you do it.

    Again, I am not your Financial Advisor.

    Respectfully Yours,
    Dan Plettner
    Dec 6 09:00 AM | Likes Like |Link to Comment
  • Kayne Anderson MLP Investment and Kayne Anderson Midstream / Energy Fund: Alternate Structural Sacrifices, Similar Marketing Outcomes [View article]
    Dear AlexR

    In every single case of MLP "funds", there is a choices between sacrifices:

    1) Intend to constrain MLP holdings to 25%, which may have consequences as positions fluctuate in value (change of policy, or turnover risks)

    2) Deferred tax liability affecting NAV performance

    Of course, deferral could be reduced by recognizing gains, but that just hides the issue and still wastes uncle sam's perpetual interest free loan on tax liability associated with owning MLPs.

    Such is the simple truth about efficient MLP investing not generally meshing well with funds, in my humble opinion. Of course, there are ETNs, which have their own problems.

    I own MLPs directly, as disclosed. Technically, Covestor shows up as the Investment Advisor on my quarterly brokerage statements, but that's merely because I license my portfolio data to them for their model. As far as Covestor's Direct Ownership Model, questions that must be addressed to them (866-825-3005).

    Direct Ownership is unique in the way I handle the MLP asset class. I love CEFs generally because I usually believe there are many opportunities to generate alpha.

    Again, here is a link to the Epstein piece:


    I haven't yet done a write up on TTO, but I'll add it to my list of things to do.

    Respectfully Yours
    Dan Plettner
    Dec 4 09:36 AM | Likes Like |Link to Comment
  • Kayne Anderson MLP Investment and Kayne Anderson Midstream / Energy Fund: Alternate Structural Sacrifices, Similar Marketing Outcomes [View article]
    Dear "Oldguy67"

    Thanks for the kind words. But the opening of one's eyes is a choice made by the reader, not the writer.

    Shall you find yourself more alert than you were before making such a choice upon reading, give the credit to yourself. The same information can be put in front of 100 people and not everybody will grow wiser in the opportunity to contemplate it.

    Respectfully Yours
    Dan Plettner
    Dec 3 09:49 AM | 1 Like Like |Link to Comment
  • Here's a Third Way to Determine When You Have Enough to Retire [View article]
    We are not talking about the same thing, at all. I am talking about a major C-Corporation structural inefficiency of the "wrapper" for MLP exposure, leading to significant tax liability affecting NAV performance, which may be more significant than all other expenses combined. As of August 31, 2010 TYY's deferred tax liability was $83,711,497 (more than $83 million) on $690,388,032 in Total Assets.


    Such data is merely the symptom of the underlying structural inefficiency of using a single security for a diversified set of underlying MLP holding constituents. The cost of the inefficiency grows as the underlying assets appreciate.

    In the same document, you’ll also read “At August 31, 2010, the balance sheet reflects a net deferred tax liability of approximately $83.7 million or $4.34 per share.”

    The $4.34 per share represented what so far had been the NAV cost of the structural inefficiency for long MLP positions not yet closed on the Investment Company’s books. As assets continue to do well, the structural inefficiency will continue to degrade the NAV performance by about one-third, whether positions are sold or held.

    In short, no, we are not talking about the same thing in any way. This isn’t a pittance we’re talking about… it a major structural inefficiency for using these sorts of products for MLP exposure.

    It might be appropriate to contemplate not only the structural inefficiency's effect on NAV, but the supply/demand effect on market valuation as knowledge of these products' structural inefficiencies becomes more widespread.

    Respectfully Yours,
    Dan Plettner
    Dec 2 03:00 PM | 2 Likes Like |Link to Comment
  • Here's a Third Way to Determine When You Have Enough to Retire [View article]
    You state "Much of the expense ratio of stuff like TYY and TYG reflects this double tax whammy"

    Such a statement is factually untrue. The roughly two-thirds proportional NAV participation in the performance of underlying constituents (before expenses) is generally reflected in the CEFs' corporate tax liability, not expenses.

    It may be useful to read the following by Chuck Epstein, editor of MutualFundReform:


    The harsh reality is that these are tremendously inefficient products for MLP investing. Same with the ETF (AMLP), and MLP focused mutual funds. That's not to say that I'd call the ETNs efficient either. I love CEFs, but the only way I own MLPs is directly.

    Its a unique MLP asset class phenomenon.

    Respectfully Yours
    Dan Plettner
    Dec 2 12:26 PM | 5 Likes Like |Link to Comment
  • Here's a Third Way to Determine When You Have Enough to Retire [View article]
    Dear Alex Trias

    I realize that what you are offering is a case study approach and that mentions of specific securities are secondary to your core message by design.

    But please know in mentioning what "Sandra finds" (about what you as an author own) that TYY and KYN have some highly significant inefficiencies as single security products for accessing MLP yields. These inefficiencies are common among competing single security MLP products, but unique from Closed-End Funds or ETFs for other (non-MLP) asset constituents.

    The issue is that if a wrapped up portfolio is more than 25% MLPs, it generally must account for tax liability as a C-Corporation, not a Registered Investment Company ("RIC"). In such cases, NAV performance is generally constrained to about two-thirds that of the underlying assets.

    Respectfully Yours,
    Dan Plettner
    Dec 2 10:16 AM | 5 Likes Like |Link to Comment
  • Short-Selling PIMCO Global Stocks Plus and Allianz's Inconsistent Distribution Policy [View article]
    Dear “Investsor RBL”

    .185 is a nominal amount. Not sure why you are calling a nominal amount a “policy”. By that logic, was the policy of NFJ and every other fund changed each time a distribution was altered?

    Data like Return of Capital (“ROC”) and Undistributed Net Investment Income (“UNII”) is useful within a context, but I frequently observe the data being cited out of context. For a dividend capture fund like AOD or AGD, the “NII” is effectively manufactured by the velocity of dividend capture rotation trading. The mechanism or classification of distribution didn’t make NAV any more or less sustainable when subjected to abnormally large distributions in my humble view.

    Without getting into Alpine issues, including the reported holdings of Alpine Woods and dividend capture rotation trading as an alternate mechanism of what effectively is self liquidation distribution governance, let me just try and clarify two things. First, your comments are always welcome (especially when negative) and you do not need to make any excuses for calling me silly or naïve. If your conclusions have merit, they will showcase accordingly. If not, it won’t. Second, effective self-liquidating distribution governance is not about NAV going to zero because of portfolio managers making bad investments or portfolio decisions, rather paying a distribution that dwarfs what NAV performance can keep up with on a normal basis. No need to focus on outliers in either direction. Take a peek at long term charts with or without the outlier periods.

    Short selling is roughly 1% of my overall investment picture, but if you think I’m less than perfectly objective here that is certainly your prerogative.

    Respectfully Yours,
    Dan Plettner
    Nov 29 11:41 PM | Likes Like |Link to Comment
  • Supply, Demand and Other Factual Observations of Neuberger Berman CEFs [View article]
    Of course, and distributions are but one of many factors relevant to Closed-End Fund investing. Also, distributions are not guaranteed in perpetuity. Ultimately, I think its important to do focused research not limited on just simple quantitative data that is free and readily available to all market participants who can read a newspaper.

    Your comments and critique are always welcome, whether we agree or disagree on any topic, point, or the contextual relevance of either.

    Respectfully Yours
    Dan Plettner
    Nov 29 01:55 PM | Likes Like |Link to Comment
  • Supply, Demand and Other Factual Observations of Neuberger Berman CEFs [View article]
    Buying discounts in that neighborhood usually (not always) require wearing some blinders, or lacking the savvy to recognize problems.

    At present, such a discount is available in EQS, but my observations lead me to pass because the discount may well be justified. For those who share your interest in perpetual holding of CEFs irregardless to whether the discounts are justified and/or perpetual, they can see the type of observations that may justify expert avoidance at extraordinary discounts here:

    Neither EQS, nor any of the Neuberger Berman funds are among Closed-Ends that I have any financial interest in. Also, I'm not suggesting that EQS or the Neuberger Berman funds are direct comparables. To be succinct, I think "there is a price for everything," a quote which in relation to Closed-End Funds I credit Phil Goldstein.

    Respectfully Yours;
    Dan Plettner
    Nov 29 01:51 PM | Likes Like |Link to Comment
  • Supply, Demand and Other Factual Observations of Neuberger Berman CEFs [View article]
    Dear “Chamois16”

    To the extent you are trying to point out what is not mathematically without any relevance at all, I think your critique is merited. But, if you are trying to argue more than an academic point, for comparative relevance over the chance in discount (technically, the relative valuation’s “delta”) I think you may be missing overall context.

    To use an analogy, I think you are suggesting with a $1000 bill in one’s back pocket they lean over and pick up a penny off the ground. Not wise for those whose familiarity of the Closed-End Fund arena informs their caution.

    But, again, technically you are correct about a mathematical relevance. So, as long as you are lucky in doing so, you will still have your $1000. And a penny too. I’m going to focus on what I think is dramatically more significant. I respect your right to focus on anything you like.

    Critique is always welcomed. I would encourage you not to sensationalize the relevance of the trivial at expense to what is most relevant.

    Respectfully Yours,
    Dan Plettner
    Nov 29 01:41 PM | Likes Like |Link to Comment
  • Short-Selling PIMCO Global Stocks Plus and Allianz's Inconsistent Distribution Policy [View article]
    Dear “Guest 1”

    Your overall perspective appears to be one of “survival of the fittest” or “buyer beware”, which although not addressing disclosure issues (answer 6) is otherwise consistent with a expert, competitive, market mentality. Obviously, you have chosen not to concern yourself with the hazards those who are not expert enough to evaluate for themselves are exposed to.

    I would point to your words in answering question 4 to highlight where you stand on sustainability… “PGP will fizzle before NFJ without change to the distribution governanace of each........thus distribution governanace is highly revelant.......”

    Your other observations appears deeper than your perspective offered on point 1, where I think you may be focused on mechanics to such an extent that you omit your own opinion as to the long term sustainability of NAV, even with those mechanics.

    Respectfully Yours,
    Dan Plettner
    Nov 29 01:25 PM | Likes Like |Link to Comment
  • Short-Selling PIMCO Global Stocks Plus and Allianz's Inconsistent Distribution Policy [View article]
    Nothing is above critique, certainly not my written observations, or myself. I believe discussion on the topics brought up by “Investstor RBL” is appropriate. I appreciate critique. Different perspectives make for good discussion, especially when focused on merits.

    After stripping away comments purporting my own naivety (at times with sensational flare), I count several topics worthy of discussion:

    Timing: “Investstor RBL” asserts my piece would have been more timely “in late 2008 (or) early 2009 when the value of PGP was falling like a rock and it looked as if it was going to self liquidate.”

    In response, I assert that betting against PGP at any time throughout that window would have been deemed reckless by Mr. Market, and punished. Fundamentally, we would appear from this “Investstor RBL” comment alone to have a completely different perspective of what constitutes effective self-liquidation in distribution governance.

    Further, I am focused on what is occurring under governance control with somewhat normal environmental conditions, not the one time effect of outlier periods that cause all assets to be dramatically revalued lower (’08 and early ‘09) or dramatically revalued higher (late ’09). In contrast, the “Investstor RBL” appears focused on outlier periods.

    Distribution Policy: “Investstor RBL” asserts “PGP is continuing to pay .185 because that is their distribution policy. PGP bets its future that they can earn the monthly distribution through transaction gains of all types.”

    I assert such a simplified statement is naïve, although inconsistent with the source. As “Investstor RBL” once acutely implied an understanding of in commenting ( to someone who failed to understand the effective self-liquidation of alternate securities AOD and AGD (while those were technically “earning” their distributions), the governance choice of paying more than NAV performance can keep up with over time can prove unsustainable, in practice, it constitutes what effectively is a self-liquidation distribution policy.

    I think it can be argued that PGP continuing to pay .185 for PGP constitutes a significant variance in the hazards inherent in Allianz’ distribution governance. While there have been many comments offering many perspectives, I don’t recall seeing a comment that disagrees in premise without essentially just arguing “buyer beware” on PGP.

    Rationale for Owning PGP: “Investstor RBL” asserts “It is obvious that the people who hold PGP believe in the ability of the manager to achieve those gains”

    I assert “Investstor RBL” inherently demonstrates in using the word “gains” the hazard that owners assume PGPs asset base (not just income) can be sustained with the current nominal distribution amount maintained. Going back to the peer disclosure example in the article, Cornerstone discusses what their policy is, and isn’t. I would ask “Investstor RBL” whether Pimco is holding itself to a lower standard of protecting its investors from hazardous faith in what history suggests impractical.

    As to whether experts think the rationale (or faith) itself is merited, one might look at PGP’s shareholder base which has either bought or not sold. A rather lonely significant institutional holder earns fees for Unit Investment Trusts (“UITs”), which are not actively managed.

    Even without placing any judgment on why Allianz/Pimco’s distribution governance is (in)consistent, I would ask “Investstor RBL” whether the variances between companies of standards of disclosure. Those who are not institutional investors who assume much of Allianz or Pimco’s brands for meeting a higher standard (rather than a lower standard) may in practice be subject to particular hazards with PGPs market valuation. Of course, such is only my opinion.

    Respectfully Yours
    Dan Plettner
    Nov 29 01:11 PM | Likes Like |Link to Comment
  • Supply, Demand and Other Factual Observations of Neuberger Berman CEFs [View article]
    There are plenty of details to evaluate relevance from a technical perspective for mathematical significance of a theoretically static discount. (ie: Expenses in contrast to size of discount, distributions being paid purely in cash versus some distributions being paid in NAV performance destructive newly issued shares at market discounts, etc.)

    I could have been more verbose and specified relevance “by my standards”, as opposed to the highly technical reading of “Chamois16” assuming I was arguing total mathematical insignificance (which was not my intent).

    Any writing risks being too verbose (and not getting to the point), and being not verbose enough (and risk a general statement being taken out of the intended context as would appear to be the case from “Chamois16’s” comment).
    Nov 27 02:52 PM | 1 Like Like |Link to Comment
  • Morningstar CEF Ratings: Good Inverse Share Price Performance Predictor [View article]
    I wish you very well in enjoying the content that you understand on this venue. Your standards and opinions are your own and I will make no effort to request censorship of your voice, whether grounded in merited or not. Voices generally display merits or lack thereof very well.

    With respect, I’ve substantively agreed with the premise of Joe Ecqome’s piece here. I’ve also withheld any particular opinions as to possible irony. Such is hardly consistent with being a pundit, although I will acknowledge having a history of standards of merit that are alternate to those displayed by your comment.

    Happy Holidays,
    Dan Plettner
    Nov 26 12:56 PM | 1 Like Like |Link to Comment
  • Morningstar CEF Ratings: Good Inverse Share Price Performance Predictor [View article]
    I believe detailed assessments of qualitative nuances are absolutely essential to the prospect of an efficient Closed-End Fund investing process.
    Nov 25 03:16 PM | 1 Like Like |Link to Comment