Some may also be worried about CG's big recent investment in Chinese shopping malls. China is slowing, and many think that a credit bubble there is about to burst.
As for the dividend, I was surprised. I will try to write another article on CG soon. I should cover the dividend in that. The good news is that there has been good insider buying at CG lately, so you probably want to wait for a rebound. http://on.barrons.com/...
Rapid Mortgage Rate Increase Raises Many Questions About Armour Residential REIT [View article]
AllStreets: The hedges are mostly swaps and swaptions. Some treasuries too if memory serves. The real "takeaway" is that they are all dependent on Treasury yields to work. Since Treasury yields went up much less than mortgage rates in this case, they have not worked well so far in Q2. Plus they were only designed to cover about 50% of the losses in the first place. Therefore they covered likely less than 25%.
Encana 2013 Gets Write-Ups, New Reserves, Double The Liquids Production, And A 4.5% Dividend [View article]
For Q1 2013 cash flow generated was $579 million. Operating earnings were $179 million or $0.24 per share. The negative part was unrealized hedging losses and foreign exchange losses (mostly unrealized hedging losses). This just means that the price of natgas went up during the quarter. When this happens the hedges, which go many quarters out, become less valuable. However, ECA has not actually lost money in the process. It now gets to sell its hedged natgas for the same amount. Plus it gets to sell its unhedged natgas for a higher amount. The loss statement required by GAAP indicates losses that are in fact a mirage.
Encana 2013 Gets Write-Ups, New Reserves, Double The Liquids Production, And A 4.5% Dividend [View article]
I should have put the rationale for higher natgas prices in the article:
1. Some large producers/developers have greatly scaled back natgas development to allow prices to rise. CHK and ECA are two examples. This should allow demand to grow against supply over time.
2. More natgas is being used by utilities to generate electricity. There are two reasons for this. One is that natgas was excessively cheap last year, which spurred conversions. It is still cheap, just not as cheap. A second is that natgas is generally "greener" than coal, so many environmentalists are calling for the conversion of their coal powered power plants to natgas, solar, or wind.
3. An increasing number of cities are moving to natgas powered public transportation. This is greener and cheaper. Buses, taxicabs, and garbage trucks are typical uses.
4. Beginning in 2015, we will see natgas exported from North America to other countries via new LNG (liquified natural gas) plants. This should quickly scale up over time. My general impression is the Kitimat plant in British Columbia may be the first to go online.
5. There is considerable ground swell to increase the use of natural gas for transportation, especially trucking. GE and CHK are sponsoring the CNG (compressed natural gas) refilling station growth movement. There are also some LNG refilling stations being built. A natgas for TRANSPORTATION ACT has been floating around Congress for several years, if this ever passes, we should see an immediate increase in natural gas prices.
6. There is a long term secular bull market in energy due largely to increasing emerging market demand. Natgas will have to fill some of this demand. In fact forecasters such as BP envision natgas as fulfilling an increasing part of this demand. The US will have to get with the program soon; or it will be extremely economically costly to the US, especially since the US does have extensive natgas resources.
Encana 2013 Gets Write-Ups, New Reserves, Double The Liquids Production, And A 4.5% Dividend [View article]
HighOnDividends: You obviously did not pay any attention to the article. Part of it was about the write-downs. That was where most of the loss came from. In reality the natural gas reserves didn't change with respect to physical quantities of natural gas. The prices have already come back up quite a bit; and the company will soon "write-up" the value of its reserves (regain the losses). In this sense the recent losses, as long as natural gas prices do keep recovering, were mostly a mirage (an accounting event rather than actuality). The FPE indicates expected return to good profitability soon. Of course, you can choose to ignore all such signs, including the greatly increased natgas prices between Q2 2012 and Q2 2013.
Also naturally during this process some hedges become less valuable. However, this does not mean ECA is really losing money as the price of natgas goes up. The natgas is becoming more valuable at the same time.
Bean counters don't do well in this kind of industry. They only want to believe the numbers, which often don't seem to make sense. However, GAAP accounting rules often end up distorting reality for such companies. They fail the bean counters. If you understand what is going on behind the accounting numbers, you are better off investing in some other area. Good luck.
virtalex: For those familiar with the industry, this was not surprising. The value of oil and gas assets is assessed by a rolling twelve month valuation of prices for the commodity involved. Since the nadir of natgas prices (about $1.90/MMBtu) was in the spring of 2012, that rolling average was decreased dramatically for FY2012. Hence the values of natgas properties had to be adjusted downward.
Thus far in 2013 prices for natural gas have been much higher. Few if any people expect a repeat of the $1.90/MMBtu prices seen in the spring of 2012. Natgas property values are more likely to be adjusted upward in FY2013 than to be adjusted downward, even if there is a double dip recession.
rlp2452: I know they needed to pay down on their credit line (for instantaneous buys); or they could be about to make a new buy. They are perpetually reviewing buy candidates.
Kick Far Overbought, Triple Topped Lululemon To The Curb [View article]
It now appears that this was a good short call at least for the near term. Christine Day resigning helped it further downward. Cramer calling for a short after the earning release will likely help it further downward. All this help made me look good; but it was over priced. It deserved to fall. We'll see how far it does fall. However, when it is already down almost 20%, it may be time to take some of your shorting profits.
Oh yes, Bill Gross (PIMCO) announced there is a 60% chance of a global recession today. That has to be helping the short case too.
Near 20% Dividend Payer American Capital Agency Is Set Up For A Huge Q2 2013 Loss [View article]
Chart in error: One conscientious reader has pointed out the the stock chart is of the wrong stock. I apologize for this. However, virtually everything I said about the technicals remains true. AGNC is oversold; and it is in a technical downtrend.
9.8% Dividend Payer Breitburn Energy Partners Turned In An Ugly Q1 - What's The Outlook? [View article]
The general theory lately is that most good dividend payers have been being hit because bond yields are going up. There is logic to this. However, BBEP and a number of other energy MLPs pay such good dividends that they are still great stocks even with higher bond yields. It is unlikely that bond yields will go dramatically higher until the Fed gets completely out of the way. This means it will be another two years at least. During this time BBEP and other energy MLPs should continue to be good investments. Perhaps they will be afterward too. We will have to see what the bond yields ultimately go to.
You should keep in mind that high bond yields mean high inflation. High inflation usually means oil prices (and other commodity prices) will go up. Higher oil, gas, and NGLs prices will mean much higher profits for BBEP and other energy MLPs. If this occurred they would pay much higher dividends. This would tend to undo the lower stock price theory on higher bond yields.
In other words, you just have to wait to see how everything shakes out. At this point BBEP is getting hit for mostly emotional reasons and as a member in the high dividend paying group. The Big Boyz like to take many stocks down, so they can later make more money on them as they go up. What is going on now seems more likely to be in this category.
Union Pacific: The Little Engine That Could...Make You Money [View article]
david foster 1: There are problems with any method you select. A study is generally a better bet because they have already dealt with some of the pitfalls of doign such surveys. Further a survey is a lot of work to do properly. Hence I used one that was already done.
I was just trying to ballpark things. I think the study figures do that.
Many people as a rule of thumb say trucking prices are about 300% higher than rail costs. However, as you can see from the table that can vary a lot with distance. I am sure it varies a lot with which railroads and/or truckers are being used too. It can vary with the price of fuel. I could go on. However, the real point is that there is no one specific answer or magic number or ratio. You can only ballpark the figures. I have done that.
As for your comment about the cost of the tracks, etc., you are getting off point. The only relevant costs for comparison are the shipping charges (for trucking and rail). They give an idea of how much pricing power railroads are likely to have over trucking. Yes the cost of running the railroad, which includes maintenance costs, is important to overall profit; but it is not important to comparing the current costs of two different forms of shipping. In this case we are just trying to see why shippers are likely to go with one over the other. Plus we want to see what kind of pricing power the railroads are likely to have.
A trucking company has to pay to maintain its trucks too. This is a big expense. It has dispatchers, insurance, etc. Try not to get too far off the point. Yes all costs enter into the profit picture. However, some costs are relatively fixed. Others such as shipping charges can be raised to earn more profit, if there is pricing power ability. Time, safety and reliability, and price are the important factors here. I was merely trying to show pricing power ability.
The Bakken Makes 5.64% Dividend Payer Investors Real Estate Trust A Secular Growth Story [View article]
The Utica-Collingwood shale formation is one people are looking at. It has yet to be evaluated extensively yet. There are others too. Breitburn Energy (BBET) is waiting for others to tell it how valuable these fields are as they are underneath currently producing fields. I think Encana (ECA) may be one of the companies looking at these. I hope this is helpful. I haven't looked recently, so the news could be more up to date than I am saying.
11% Dividend Payer The Carlyle Group Is Harvesting Great Investments [View article]
http://nyti.ms/14hss0V
Another part of the problem is Calpers sold its stake in CG.
http://on.wsj.com/14hsu92
Some may also be worried about CG's big recent investment in Chinese shopping malls. China is slowing, and many think that a credit bubble there is about to burst.
As for the dividend, I was surprised. I will try to write another article on CG soon. I should cover the dividend in that. The good news is that there has been good insider buying at CG lately, so you probably want to wait for a rebound.
http://on.barrons.com/...
Rapid Mortgage Rate Increase Raises Many Questions About Armour Residential REIT [View article]
The hedges are mostly swaps and swaptions. Some treasuries too if memory serves. The real "takeaway" is that they are all dependent on Treasury yields to work. Since Treasury yields went up much less than mortgage rates in this case, they have not worked well so far in Q2. Plus they were only designed to cover about 50% of the losses in the first place. Therefore they covered likely less than 25%.
Rapid Mortgage Rate Increase Raises Many Questions About Armour Residential REIT [View article]
Encana 2013 Gets Write-Ups, New Reserves, Double The Liquids Production, And A 4.5% Dividend [View article]
Encana 2013 Gets Write-Ups, New Reserves, Double The Liquids Production, And A 4.5% Dividend [View article]
1. Some large producers/developers have greatly scaled back natgas development to allow prices to rise. CHK and ECA are two examples. This should allow demand to grow against supply over time.
2. More natgas is being used by utilities to generate electricity. There are two reasons for this. One is that natgas was excessively cheap last year, which spurred conversions. It is still cheap, just not as cheap. A second is that natgas is generally "greener" than coal, so many environmentalists are calling for the conversion of their coal powered power plants to natgas, solar, or wind.
3. An increasing number of cities are moving to natgas powered public transportation. This is greener and cheaper. Buses, taxicabs, and garbage trucks are typical uses.
4. Beginning in 2015, we will see natgas exported from North America to other countries via new LNG (liquified natural gas) plants. This should quickly scale up over time. My general impression is the Kitimat plant in British Columbia may be the first to go online.
5. There is considerable ground swell to increase the use of natural gas for transportation, especially trucking. GE and CHK are sponsoring the CNG (compressed natural gas) refilling station growth movement. There are also some LNG refilling stations being built. A natgas for TRANSPORTATION ACT has been floating around Congress for several years, if this ever passes, we should see an immediate increase in natural gas prices.
6. There is a long term secular bull market in energy due largely to increasing emerging market demand. Natgas will have to fill some of this demand. In fact forecasters such as BP envision natgas as fulfilling an increasing part of this demand. The US will have to get with the program soon; or it will be extremely economically costly to the US, especially since the US does have extensive natgas resources.
Encana 2013 Gets Write-Ups, New Reserves, Double The Liquids Production, And A 4.5% Dividend [View article]
You obviously did not pay any attention to the article. Part of it was about the write-downs. That was where most of the loss came from. In reality the natural gas reserves didn't change with respect to physical quantities of natural gas. The prices have already come back up quite a bit; and the company will soon "write-up" the value of its reserves (regain the losses). In this sense the recent losses, as long as natural gas prices do keep recovering, were mostly a mirage (an accounting event rather than actuality). The FPE indicates expected return to good profitability soon. Of course, you can choose to ignore all such signs, including the greatly increased natgas prices between Q2 2012 and Q2 2013.
Also naturally during this process some hedges become less valuable. However, this does not mean ECA is really losing money as the price of natgas goes up. The natgas is becoming more valuable at the same time.
Bean counters don't do well in this kind of industry. They only want to believe the numbers, which often don't seem to make sense. However, GAAP accounting rules often end up distorting reality for such companies. They fail the bean counters. If you understand what is going on behind the accounting numbers, you are better off investing in some other area. Good luck.
Oversold Safe Haven, 8.9% Dividend Payer Vanguard Natural Resources Is Seeing Growth [View article]
Thus far in 2013 prices for natural gas have been much higher. Few if any people expect a repeat of the $1.90/MMBtu prices seen in the spring of 2012. Natgas property values are more likely to be adjusted upward in FY2013 than to be adjusted downward, even if there is a double dip recession.
Oversold Safe Haven, 8.9% Dividend Payer Vanguard Natural Resources Is Seeing Growth [View article]
I know they needed to pay down on their credit line (for instantaneous buys); or they could be about to make a new buy. They are perpetually reviewing buy candidates.
Kick Far Overbought, Triple Topped Lululemon To The Curb [View article]
Oh yes, Bill Gross (PIMCO) announced there is a 60% chance of a global recession today. That has to be helping the short case too.
Near 20% Dividend Payer American Capital Agency Is Set Up For A Huge Q2 2013 Loss [View article]
One conscientious reader has pointed out the the stock chart is of the wrong stock. I apologize for this. However, virtually everything I said about the technicals remains true. AGNC is oversold; and it is in a technical downtrend.
9.8% Dividend Payer Breitburn Energy Partners Turned In An Ugly Q1 - What's The Outlook? [View article]
You should keep in mind that high bond yields mean high inflation. High inflation usually means oil prices (and other commodity prices) will go up. Higher oil, gas, and NGLs prices will mean much higher profits for BBEP and other energy MLPs. If this occurred they would pay much higher dividends. This would tend to undo the lower stock price theory on higher bond yields.
In other words, you just have to wait to see how everything shakes out. At this point BBEP is getting hit for mostly emotional reasons and as a member in the high dividend paying group. The Big Boyz like to take many stocks down, so they can later make more money on them as they go up. What is going on now seems more likely to be in this category.
Union Pacific: The Little Engine That Could...Make You Money [View article]
There are problems with any method you select. A study is generally a better bet because they have already dealt with some of the pitfalls of doign such surveys. Further a survey is a lot of work to do properly. Hence I used one that was already done.
I was just trying to ballpark things. I think the study figures do that.
Many people as a rule of thumb say trucking prices are about 300% higher than rail costs. However, as you can see from the table that can vary a lot with distance. I am sure it varies a lot with which railroads and/or truckers are being used too. It can vary with the price of fuel. I could go on. However, the real point is that there is no one specific answer or magic number or ratio. You can only ballpark the figures. I have done that.
As for your comment about the cost of the tracks, etc., you are getting off point. The only relevant costs for comparison are the shipping charges (for trucking and rail). They give an idea of how much pricing power railroads are likely to have over trucking. Yes the cost of running the railroad, which includes maintenance costs, is important to overall profit; but it is not important to comparing the current costs of two different forms of shipping. In this case we are just trying to see why shippers are likely to go with one over the other. Plus we want to see what kind of pricing power the railroads are likely to have.
A trucking company has to pay to maintain its trucks too. This is a big expense. It has dispatchers, insurance, etc. Try not to get too far off the point. Yes all costs enter into the profit picture. However, some costs are relatively fixed. Others such as shipping charges can be raised to earn more profit, if there is pricing power ability. Time, safety and reliability, and price are the important factors here. I was merely trying to show pricing power ability.
Union Pacific: The Little Engine That Could...Make You Money [View article]
It is just one study from 2011. There is a link in the article above the table.
The Bakken Makes 5.64% Dividend Payer Investors Real Estate Trust A Secular Growth Story [View article]
Union Pacific: The Little Engine That Could...Make You Money [View article]