MLP Master: A Conversation With Elliott Gue [View article]
There is merit in Elliot’s perceived catalyst (tax rates dynamics) and those paying a steady rising distribution may warrant interest on that basis, but people need to be familiar with the K-1 headaches as well as why these distributions are not taxable. There is conflict of interest in the group, where general partners can be incentivized to run them into the ground paying out cash flow (not earnings) at unsustainable levels.
IMHO, the challenge is defining tradeable opportunities versus actionable long term allocation plays. For an actionable idea based on Elliot’s perceived catalyst, the credibility of management is paramount. And, there may be less risky, less conflicted, lower maintenance ways to act on the same catalyst.
Also, Elliot is one of the few MLP “experts” who has not been recommending KSP at all the wrong times. His views of management credibility may have had great merit, even when there were IMHO valid reasons to be long.
Ignore the Media. Read Some SEC Filings. This Is the Year to Chase Alpha [View article]
Sharing your penchant for drilling into SEC filings, I’d like thank you for a refreshing, well stated premise that appreciates alpha. Inputs that influence broad market movements are so broadly available (and so broadly assessed by competing talent) that it is unwise to ever allow oneself the same conviction in broader market assessments as what can be achieved by putting forth talent and the greatest effort researching individual issues. Those who utilize talent researching single issues where other market participants are less focused on the relevant dynamics have a permanent edge that is unattainable by trying to anticipate the short term benefits (or detriments) of beta.
In reference to another reader’s comment… it would be impractical to expect the author to direct what to look for in SEC filings. True research is an art form. Every type of issue is unique, and individual issues of similar type are often unique. For any given issue, you must appreciate what dynamics affect market valuations, and find the data points that allow for the anticipation of such dynamics.
Mr. Brochstein’s piece certainly did not give away any research and one should not expect quality detailed buy-side research to be free. It’s a challenging predicament the author is in. If he 1) is talented, 2) has put forth the effort to identify opportunities to achieve alpha, and 3) gives away his intellectual property, how does he benefit from his talent? My point is simple. The author’s premise comes through. And, those in need of quality talented buy-side research (which this author may or may not have) must at some point be willing to compensate the talent and effort.
Fidelity’s Free ETF Trading Is Actually Bad for Investors [View article]
Great work, you are absolutely on the mark here.
For companies like Schwab and Fidelity, offering “Commission Free ETFs” represents an effective marketing program. In investing and in life.... smart people make buying decisions whereas fools get sold. Although the masses rarely choose the best options among financial products, popular choices will always be the best targets for marketing programs. ETFs are certainly in vogue right now.
You won’t see Schwab or Fidelity offer free trading in Closed-End Funds, which in many cases provide superior alternatives to savvy investors.
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.
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.
MLP Master: A Conversation With Elliott Gue [View article]
We share the same intentions with different phrasing. Yes, the MLP instrument/mechanism defers taxes (because the distributions themselves do not trigger taxation event, rather a step down in cost basis)... which is why MLP allocations on the tax rate dynamics you cite really need to be focused on names with long term visibility and credibility IMHO.
It does look like a no-brainer trade, and it has for a long while. The “easy thesis" (a popular trade that everybody can understand and many implement) sometimes works (ie: buying Berkshire ahead of the split and selling into the S&P 500 announcement). But, many of us have learned a lesson about such popular, apparently easy trades...
The popularity and perceived certainty of an easy thesis is precisely what can require painful unwinding when markets move irrationally. As such, portfolio managers are wise to give extra consideration to their own concentration risk when considering such a popular thesis.
In all probability, Taleb will prove accurate in the long termt, but I'd prefer to focus my capital on an equally logical thesis that is much less commonly recognized or implemented.
If this series of articles is truly “about conflicts within the investment fund industry” it has to potential to be groundbreaking. But will the work be objective? I’ve done an enormous deal of investigative research on the subject. If the goal here is propaganda, Part 2 and Part 3 may just turn out to be objective after reader comments regardless of how the articles themselves are written. I’m curious who (Gwailo or readers) will introduce the relevance of Merrill Lynch and others firms.
As a publicly anonymous author, Gwailo’s work here will be very interesting.
Will this really be “about conflicts within the investment fund industry”? The subject seems to be governance and ethics.... The current boards of SRO and SRQ proposed a liquidity event, providing their shareholders the opportunity to sell without being subjected to any discount at all.... GF recently conducted a tender offer, another shareholder friendly activity.
I don’t see any mention of those positive governance decisions which reflect on conflicts of interest within the investment industry... I did here observe a picture of a burning building with a Deutsche Bank headline. I’ve also observed some interesting choices in Gwailo’s former writings.
To be clear there is nothing wrong with Gwailo being an anonymous author. The question is the validity of the work’s stated purpose. Gwailo might be surprised to know some things I know.
CEF Week in Review: Riskier Fund Types Rule [View article]
I've done extraordinary DD on not only the man, but the entire situation. So much so that I am now appropriately perceived as an "axe-grinder"; my due diligence left me so disturbed that I could not hide my disgust. Joe too has done due diligence, evidenced by his graphical depiction of the myriad of Horejsi Trusts. Joe has learned with professional writing experience to withhold personal judgments from writings about investments because sentiment and investment interests frequently vary.
I concur with Joe's ultimate investment thesis, if not every detail. Owning BIF right now does not require believing in Stewart R. Horejsi as a human being. BIF shareholders who perceive the same problems with Horejsi(s) and the current Board of Directors, can benefit themselves by using their Proxy power rather than selling their stakes (back to Horejsi Family Interests) at 78 cents on the dollar.
As an aside, those staying abreast of everything on BIF may be interested to know that Part III is now available in Instablog form. I have not yet decided to submit it as an article here on SeekingAlpha.
On May 10 09:45 PM oldman wrote:
> Stewart R. Horejsi > > Anything with this name I will never own. Do your own DD.
AMJ: For MLP Yields Without More IRS Paperwork [View article]
“Low Sweat Investing”:
My compliments to your professionalism in touching on these issues in comment, rather than choosing to deflect as a lesser author would have. It appears from your comment that you likely have a grasp on the insider motivation for short-term abuse. Also I compliment your observation of the Closed-End Fund group of MLP funds trading at a premium. The same observation has been true of other “in vogue” focus (ie: China A Shares, Russia, etc). Of course what is in vogue is often not valued appropriately.
I think there is an argument to make that while MLP pricing may already be irrational, the group’s bubble peak could be sometime in Q4 or 2011. And, I think your passive instrument likely to fare better from here to the valley than will the Closed-End Funds.
The reason I suggest being cautious in recommending passive instruments for the group is that the type of investor who chooses passive instruments rarely makes a timely exit. In the late 90’s the quality names in the internet bubble perhaps included names like AOL, Yahoo and for infrastructure, Exodus. Do you think passive investors buying a group of such names a year before the peak are happy they ever entered the arena?
Again, I compliment your work for pointing out a product less-inappropriate for a certain type of investor. And, on your professionalism.
It does look like a no-brainer trade, and it has for a long while. Such an “easy thesis" (a popular trade that everybody can understand which gets implemented in mass) sometimes works. For example, buying Berkshire ahead of the split and selling into the S&P 500 announcement was an "easy thesis" that worked. But they do not always work and many of us have learned a lesson about such popular, apparently easy trades...
The popularity and perceived certainty of an easy thesis is precisely what can require painful unwinding when markets move irrationally. As such, portfolio managers are wise to give extra consideration to their own concentration risk when considering such a popular thesis.
In all probability, Taleb will prove accurate in the long term. But I'd prefer to focus my capital on an equally logical thesis that is much less commonly recognized or implemented.
Fiduciary / Claymore MLP Opportunity Fund: A Hazardous Mean Reversion Candidate [View article]
(Facetious/ Sarcastic tone is intentional)
Dear Gruber,
You mean a security I want no long or short position in, went up in a down market? I must be quite the fool. Clearly if it outperformed on a market price basis for one day, I am an idiot for it not being my favorite security of all.
Gruber, your entire comment history is comprised of critiquing me and attempting to provide testimonials for the work of "Joe Ecqome". A number of your comments have been edited (without my request) by SA editorial in such a manner that they now on the face would appear to an uninformed reader as less lacking in objectivity.
Feel free to comment on my work anytime, Gruber. I would ask that Seeking Alpha not edit your comments to make you appear sane.
Fiduciary / Claymore MLP Opportunity Fund: A Hazardous Mean Reversion Candidate [View article]
Although the compliments are never necessary, thank you for the kind words, Ron. Whatever the subject, I contemplate your appraisals very seriously because I respect your work and voice.
Although Ron is far more accepting of the inefficiencies with the MLP focused ETNs than I am, Ron's observations on the ETF "AMLP" are among the best work that I've read on Seeking Alpha.
Broadly, I think there is much merit to Ron's contributions. I respect his voice, process, and observations. Below, are links to two of Ron's pieces on AMLP worth particular observation. Both were also recognized by SA editorial and published as "Investment Views":
Municipal Debt Funds: Are These Yields Unsustainable? [View article]
Are the charts and seemingly implausible high yields data? Sure. Does the naked eye want to agree with you, Karl? Yes. But do some research. What your piece doesn’t do is look at the group and identify what has caused the upward move. If you don’t know why Muni CEFs went into favor, how can you evaluate whether the move is mature or otherwise.
If you get into really evaluating the dynamics, you just may find that the naked eye doesn’t do an assessment of this group justice. You may find the rationality in the moves surprising, and not yet mature. Short term borrowing rates and more nominally attractive risk-free alternatives do not appear plausibly imminent as negative catalysts under current fiscal policy.
You might consider to take a hard look at the whole group’s dynamics, then look at funds within the group individually. Poorly founded broad strokes rarely paint masterpieces.
Personally I have an even stronger taste for other asset classes at present, but I think your bearish CEF munis call here is built on a very flimsy foundation.
Eaton Vance Risk Managed Diversified Fund: A Deep Look at a Recently Discounted Market Price [View article]
Dear “Guardian3981”
Are you treating the return of capital designation from a covered call fund similarly to return of capital from a fund having no tax advantaged strategy? Is that not the classification of distribution one wants from a covered-call fund? Readily available quantitative data on Closed-End Funds means different things for different types of funds.
Regarding moving averages, I think what you are observing is the quantitative reflection of the impetus. Point is, understand what is causing that data, and know what it reflects. Evaluate whether the market is right, or inefficient in any particular instance.
Although I wonder in reading your comment whether you read the full piece, I thank you for your comment. Different opinions make for markets and I think your perspective is the prevailing market understanding on ETJ at present. It is appreciated to know the underlying understandings of those who hold a different view to my own. If everybody agrees on any security, the market price is either efficient or dramatically in error.
MLP Master: A Conversation With Elliott Gue [View article]
IMHO, the challenge is defining tradeable opportunities versus actionable long term allocation plays. For an actionable idea based on Elliot’s perceived catalyst, the credibility of management is paramount. And, there may be less risky, less conflicted, lower maintenance ways to act on the same catalyst.
Also, Elliot is one of the few MLP “experts” who has not been recommending KSP at all the wrong times. His views of management credibility may have had great merit, even when there were IMHO valid reasons to be long.
Ignore the Media. Read Some SEC Filings. This Is the Year to Chase Alpha [View article]
In reference to another reader’s comment… it would be impractical to expect the author to direct what to look for in SEC filings. True research is an art form. Every type of issue is unique, and individual issues of similar type are often unique. For any given issue, you must appreciate what dynamics affect market valuations, and find the data points that allow for the anticipation of such dynamics.
Mr. Brochstein’s piece certainly did not give away any research and one should not expect quality detailed buy-side research to be free. It’s a challenging predicament the author is in. If he 1) is talented, 2) has put forth the effort to identify opportunities to achieve alpha, and 3) gives away his intellectual property, how does he benefit from his talent? My point is simple. The author’s premise comes through. And, those in need of quality talented buy-side research (which this author may or may not have) must at some point be willing to compensate the talent and effort.
Respectfully Yours
Dan Plettner
Fidelity’s Free ETF Trading Is Actually Bad for Investors [View article]
For companies like Schwab and Fidelity, offering “Commission Free ETFs” represents an effective marketing program. In investing and in life.... smart people make buying decisions whereas fools get sold. Although the masses rarely choose the best options among financial products, popular choices will always be the best targets for marketing programs. ETFs are certainly in vogue right now.
You won’t see Schwab or Fidelity offer free trading in Closed-End Funds, which in many cases provide superior alternatives to savvy investors.
Here's a Third Way to Determine When You Have Enough to Retire [View article]
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:
www.mutualfundreform.c...
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
Here's a Third Way to Determine When You Have Enough to Retire [View article]
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
MLP Master: A Conversation With Elliott Gue [View article]
Taleb vs. Treasuries [View article]
The popularity and perceived certainty of an easy thesis is precisely what can require painful unwinding when markets move irrationally. As such, portfolio managers are wise to give extra consideration to their own concentration risk when considering such a popular thesis.
In all probability, Taleb will prove accurate in the long termt, but I'd prefer to focus my capital on an equally logical thesis that is much less commonly recognized or implemented.
Deutsche Bank's Strange Curse [View article]
As a publicly anonymous author, Gwailo’s work here will be very interesting.
Will this really be “about conflicts within the investment fund industry”? The subject seems to be governance and ethics.... The current boards of SRO and SRQ proposed a liquidity event, providing their shareholders the opportunity to sell without being subjected to any discount at all.... GF recently conducted a tender offer, another shareholder friendly activity.
I don’t see any mention of those positive governance decisions which reflect on conflicts of interest within the investment industry... I did here observe a picture of a burning building with a Deutsche Bank headline. I’ve also observed some interesting choices in Gwailo’s former writings.
To be clear there is nothing wrong with Gwailo being an anonymous author. The question is the validity of the work’s stated purpose. Gwailo might be surprised to know some things I know.
CEF Week in Review: Riskier Fund Types Rule [View article]
I concur with Joe's ultimate investment thesis, if not every detail. Owning BIF right now does not require believing in Stewart R. Horejsi as a human being. BIF shareholders who perceive the same problems with Horejsi(s) and the current Board of Directors, can benefit themselves by using their Proxy power rather than selling their stakes (back to Horejsi Family Interests) at 78 cents on the dollar.
As an aside, those staying abreast of everything on BIF may be interested to know that Part III is now available in Instablog form. I have not yet decided to submit it as an article here on SeekingAlpha.
On May 10 09:45 PM oldman wrote:
> Stewart R. Horejsi
>
> Anything with this name I will never own. Do your own DD.
AMJ: For MLP Yields Without More IRS Paperwork [View article]
My compliments to your professionalism in touching on these issues in comment, rather than choosing to deflect as a lesser author would have. It appears from your comment that you likely have a grasp on the insider motivation for short-term abuse. Also I compliment your observation of the Closed-End Fund group of MLP funds trading at a premium. The same observation has been true of other “in vogue” focus (ie: China A Shares, Russia, etc). Of course what is in vogue is often not valued appropriately.
I think there is an argument to make that while MLP pricing may already be irrational, the group’s bubble peak could be sometime in Q4 or 2011. And, I think your passive instrument likely to fare better from here to the valley than will the Closed-End Funds.
The reason I suggest being cautious in recommending passive instruments for the group is that the type of investor who chooses passive instruments rarely makes a timely exit. In the late 90’s the quality names in the internet bubble perhaps included names like AOL, Yahoo and for infrastructure, Exodus. Do you think passive investors buying a group of such names a year before the peak are happy they ever entered the arena?
Again, I compliment your work for pointing out a product less-inappropriate for a certain type of investor. And, on your professionalism.
Respectfully Yours
Dan Plettner
Taleb: Short U.S. Government Bonds [View article]
The popularity and perceived certainty of an easy thesis is precisely what can require painful unwinding when markets move irrationally. As such, portfolio managers are wise to give extra consideration to their own concentration risk when considering such a popular thesis.
In all probability, Taleb will prove accurate in the long term. But I'd prefer to focus my capital on an equally logical thesis that is much less commonly recognized or implemented.
Fiduciary / Claymore MLP Opportunity Fund: A Hazardous Mean Reversion Candidate [View article]
Dear Gruber,
You mean a security I want no long or short position in, went up in a down market? I must be quite the fool. Clearly if it outperformed on a market price basis for one day, I am an idiot for it not being my favorite security of all.
Gruber, your entire comment history is comprised of critiquing me and attempting to provide testimonials for the work of "Joe Ecqome". A number of your comments have been edited (without my request) by SA editorial in such a manner that they now on the face would appear to an uninformed reader as less lacking in objectivity.
Feel free to comment on my work anytime, Gruber. I would ask that Seeking Alpha not edit your comments to make you appear sane.
Respectfully Yours,
Dan Plettner
Fiduciary / Claymore MLP Opportunity Fund: A Hazardous Mean Reversion Candidate [View article]
Although Ron is far more accepting of the inefficiencies with the MLP focused ETNs than I am, Ron's observations on the ETF "AMLP" are among the best work that I've read on Seeking Alpha.
Broadly, I think there is much merit to Ron's contributions. I respect his voice, process, and observations. Below, are links to two of Ron's pieces on AMLP worth particular observation. Both were also recognized by SA editorial and published as "Investment Views":
seekingalpha.com/artic...
seekingalpha.com/artic...
Respectfully Yours,
Dan Plettner
Municipal Debt Funds: Are These Yields Unsustainable? [View article]
If you get into really evaluating the dynamics, you just may find that the naked eye doesn’t do an assessment of this group justice. You may find the rationality in the moves surprising, and not yet mature. Short term borrowing rates and more nominally attractive risk-free alternatives do not appear plausibly imminent as negative catalysts under current fiscal policy.
You might consider to take a hard look at the whole group’s dynamics, then look at funds within the group individually. Poorly founded broad strokes rarely paint masterpieces.
Personally I have an even stronger taste for other asset classes at present, but I think your bearish CEF munis call here is built on a very flimsy foundation.
Respectfully Yours,
Dan Plettner
Eaton Vance Risk Managed Diversified Fund: A Deep Look at a Recently Discounted Market Price [View article]
Are you treating the return of capital designation from a covered call fund similarly to return of capital from a fund having no tax advantaged strategy? Is that not the classification of distribution one wants from a covered-call fund? Readily available quantitative data on Closed-End Funds means different things for different types of funds.
Regarding moving averages, I think what you are observing is the quantitative reflection of the impetus. Point is, understand what is causing that data, and know what it reflects. Evaluate whether the market is right, or inefficient in any particular instance.
Although I wonder in reading your comment whether you read the full piece, I thank you for your comment. Different opinions make for markets and I think your perspective is the prevailing market understanding on ETJ at present. It is appreciated to know the underlying understandings of those who hold a different view to my own. If everybody agrees on any security, the market price is either efficient or dramatically in error.
Respectfully Yours,
Dan Plettner