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John D. Thomason

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  • Dividend Stocks: Which Way To Go - Blue Chips Or High Yield? [View article]
    Hi, rcw120,

    Your approach sounds like mine to a certain extent. The years you list certainly tested stocks greatly - if a company navigated those environments successfully, it would seem to me that they should be a good bet going forward. When you get to your final list, why don't you share it with SA readers? Either via a regular article or an Instablog posting. I'm sure your research will provide some useful insights.

    Thanks for commenting.

    John D. Thomason
    Jan 30 09:20 AM | Likes Like |Link to Comment
  • Dividend Stocks: Which Way To Go - Blue Chips Or High Yield? [View article]
    Hi, Uain53,

    I have owned LINE in the past, and I currently own BBEP, which suspended distributions for a year during the crisis of 2008-2009, but then resumed and is today paying out tremendously. I also believe, as you do (as I think I gathered from your comment), that oil prices are not likely to decline anytime soon, if ever, so producer MLPs should be fine, commodity price risk is not much of a risk. I should have added a comment to this effect into the article.

    John D. Thomason
    Jan 29 08:31 AM | Likes Like |Link to Comment
  • Dividend Stocks: Which Way To Go - Blue Chips Or High Yield? [View article]
    Hi, Monty,

    Thanks for the encouragement. I haven't done a review and summation of my entire portfolio with allocations by group for awhile - and it is overdue. I do watch my allocation % to the "ultra-high yielders" group, which right now is about 12%, spread across about 10 to 12 companies. I would get nervous if this went over 15%. Also on a weekly basis I track my % of cash vs. the entire value of all accounts as marked to market. If I'm operating properly per my approach, cash % should go up as the market goes up (and I'm taking profits), and should go down as the market goes down (and I'm finding stocks to buy). Right now I'm at 31% cash. I want to go shopping, but at this time the market is not (as usual) co-operating. This probably goes under the heading, "be careful what you wish for!" Other than ultra-high yielders at 12% and cash at 31%, I don't have current allocation %'s. I'm fairly heavily weighted with large-caps, spread across various sectors. Other holdings are preferreds, MLPs, utilities, property REITs, and foreign stocks, plus a few of what O'Neil (founder of IBD) calls "cats and dogs", and I call "legacy" holdings, bought when I knew even less than I know now. I believe I'm fairly well-diversified as far as stocks go. Some would say I'm not very diversified as I have no bonds, funds, gold or silver, and no stocks that do not pay a dividend - but that is my choice.

    Thanks for commenting.

    John D. Thomason

    Jan 28 11:01 PM | Likes Like |Link to Comment
  • Annaly Capital: A Bond Fund In Disguise [View article]
    Terrific analysis, Shaun. The Mortgage REITs certainly are followed by a lot of investors, especially NLY. There are a lot of strong opinions held. I consider NLY a speculation, but as Cramer has said in his books, it's OK to allow yourself to speculate a little, as long as you are under control with it. Even Ben Graham said there is nothing inherently wrong with speculation, as long as you are aware that speculating is what you are doing, and you are not fooling yourself by thinking you are investing.

    John D. Thomason
    Jan 17 09:05 AM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    Thanks. If you missed it, see the comment above by Alan Brochstein, an SA contributor, and read the article that he provided a link to, also on the subject. I only mentioned very recent SA articles in the section in my article on SA articles. Alan's article is from a few months ago, but certainly recent enough to be very relevant.

    John D. Thomason
    Jan 16 11:46 PM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    I stayed away from MREITs until 2011. I decided to tiptoe in a little, attracted by the high yields, like everyone else. I own these in my trading account (MB Trading), where it is cost-effective to accumulate in small increments, plus sell and buy back, because of the low commissions. I started out with NLY;

    Bought 3/22/2011 @ $17.90, had planned to buy more, but decided to sell instead on 6/30/2011 @ $18.06, realizing a small gain and collecting the first two dividends of 2011. So this was a successful get in, get out dividend-capture trade. As I state further on, it looked like $18 was a high, so I figured that maybe it would be better to sell & get back in at a lower price later.

    Decided I shouldn't have sold, went back in so as to not miss any dividends, acquiring my present position in four small increments:

    Bought 7/18/2011 @ $17.78
    Bought 7/27/2011 @ $17.25
    Bought 8/8/2011 @ $16.50 (this was the August sell-off)
    Bought 12/23/2011 @ $16.95 (just before the ex-dividend date)

    I have collected the 3rd and 4th dividends of 2011 on the first three tranches of shares, and the 4th only on the last buy.

    As to why sell at $18 - NLY has only gotten above $18 twice in the last two years, and only then just for a few days, and also just barely over $18: in 2010 in March, and in 2011 in June. So $18 is about as high as it's going to get, and when it does, it probably won't stay long. So it is a good time to sell, you likely will be able to buy it back at a lower price. With $1.00 commission per trade (actually 1 cent/share, minimum commission $1.00), I have no hesitation to sell and buy back.

    As for MFA, I have acquired my holding in three increments:

    Bought 7/11/2011 @ $8.31 (paid too much)
    Bought 10/7/2011 @ $6.28 (the October market sell-off)
    Bought 12/23/2011 @ 7.15 (just before the ex-dividend date)

    I collected the 2nd dividend of 2011 with the first buy, and only the last dividend with the other two share additions.

    At this point I will follow the plan laid out in the article - add more upon a decline, sell or sell a covered call if the stocks go up.

    These stocks, and this type of trading around, are not my usual approach with, for example, a blue-chip like Johnson and Johnson (JNJ). It just reflects my perception of the risk inherent in these names.

    This was a lot of detail - it just reflects the real world of in and out trading that isn't always neat and straight-forward.

    If this goes South really bad, perhaps I will do a follow-up article on the wisdom of avoiding MREITs, with examples.

    John D. Thomason

    Jan 16 11:30 PM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    The 1/3 of 1% was MFA, which is a low-priced stock, and I did not pick up a lot because I planned (and still plan) to add to the position. Also, I view it as a bit riskier because it is largely non-agency MREIT.

    I tend to start small and thus can have a position that is, percentage-wise, not very much. I will add to a position as general market sell-offs present opportunities.

    Jan 16 10:47 PM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    I think my previous two responses pretty well summed up my thoughts on the risks & so on - and my current exposure is under 1%, so that has to be a message that I am fearful of the risks. If that weren't the case (the perceived risk), why not have 25%, even 50% in MREITs? While I don't like to lose $, even if only 1%, it isn't going to affect my lifestyle, as long as it doesn't happen too often. As for whether it's worth bothering with, I guess for me it is, just to sample that asset class. If I didn't fear the risks, I would own a lot more.

    John D. Thomason
    Jan 16 02:57 PM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    Hi, Alan,

    It seemed to me like the recent articles, at least, tended towards the positive towards MREITs. The thrust of my approach was that someone mesmerized by the high yields should at least consider the downside & the recent history (and how ideal it has been for MREITs) before jumping in. Only someone with considerable expertise (like yourself) would be able to delve into how the portfolio is constructed & come up with a clearer picture of the risks. For less sophisticated types like myself, I am depending upon the MREIT's management team. Owning one of these stocks is, among other things, a wager on the expertise of that team and how well they will navigate the choppy waters to come. These guys aren't blind to the likely future trends. And as for these trends, buying or even holding on to these stocks now is also a wager that things won't change suddenly & dramatically for the worst (for the MREITs) for a while yet. I agree the window is closing, but how quickly is the question. I fully expect the dividends to be reduced as conditions (again, conditions for the MREITs) deteriorate. What I am counting on is the entities will survive to pay again another day. Also, I am expecting to be able to add a little at reduced prices, all the while staying under my % allocations. At least I'm not saying, "yeah, it's great, jump in, the water's fine!"

    Finally, I hope anyone reading this or any other article takes the time to read the comments as well - they likely will gain perspective and learn a lot besides what the author said in the article. Many times, the comments contain information that is as good as or better than the article.

    Thanks for your input.

    John D. Thomason
    Jan 16 02:43 PM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    I think you are ahead of me in your thinking on this. I agree that track record is probably the best indicator. Not only of market prices and dividends paid, but in the unique case of MREITs, debt/equity and interest rate spreads. Tracking these over a few years is insightful, I believe. The two MREITs I looked at showed that D/E was quite a bit lower now than at the start of the five-year period I looked at. That tells me that the managements are more cautious now than they were five years ago. The spreads over time are also instructive. I think this is largely out of management's control, it just reflects the environment that they have to operate within. And I could see that the environment went from not great to terrific for them over the time frame - but how long can "terrific" last? It is slowly deteriorating, it seems to me, and I expect the deterioration to continue. As far as what other MREITs to consider, I would suggest entering the symbol in the "search by author, etc", box and pull up some articles. I know AGNC has been touted to some degree, and that one is the next one I plan to look into.

    Thanks for commenting.

    John D. Thomason
    Jan 16 07:51 AM | Likes Like |Link to Comment
  • Should Investors Hold MLPs In Retirement Accounts? Another Perspective [View article]
    Hi, Jersey27fan,

    Thanks much for elaborating at length as you have. I appreciate the time and effort that I know it must have required. You certainly "expanded my perspective a bit", or more accurately, expanded it a lot! I did state in my article, and indeed in all of my articles, that I am not a financial professional, so the readers would be aware of that fact. My contribution to the SA readership is to share my experiences, and in some cases try to cut through the complexities and restate things in more understandable terms for the non-professional. I'm going to continue on trying to accomplish this "mission" that I have defined for myself, and with meaningful feedback from people like yourself, I believe that I will get better at it.

    Thanks for all of your time on this.

    John D. Thomason
    Jan 12 02:14 PM | Likes Like |Link to Comment
  • Should Investors Hold MLPs In Retirement Accounts? Another Perspective [View article]
    I had not considered that an investor might hold multiple positions in the SAME MLP at different brokerages - why you would do that is beyond me. If I understand you correctly, you are saying that you receive one K-1, which shows all the holdings in that MLP across all brokerages. I understand that the partnership maintains the records, so I can see how that could occur. So do you send copies of the K-1 to all the brokerages where you have holdings in that MLP? I would be interested in knowing how that would work. Regarding the $1000 vs $1500, I agree that $1000 is the level that if exceeded will result in the 990-T being filed. A respondent to Reel Ken's article stated that spreading IRA-held MLPs around (but never having a given MLP at more than one brokerage) to multiple brokerages to avoid going over $1000 at any of the brokerages was not a useful strategy because the IRS rule was that an aggregate total UBTI of all MLPs across all IRAs was limited to $1500, after which tax would be due. And as I said, no one responded as to whether this was the rule, and if so, how it would be handled.

    Why don't you present this situation as a comment to Reel Ken's article? I would be interested in his take on it.
    Jan 12 02:23 AM | Likes Like |Link to Comment
  • Should Investors Hold MLPs In Retirement Accounts? Another Perspective [View article]
    Hi, firstinsnow,

    The UBTI that gets reported to the IRS is the TOTAL UBTI for ALL MLPs that you have with a single brokerage. It is the BROKERAGE that reports UBTI to the IRS, not the MLPs, on IRS form 990-T. They only report it to the IRS if the total for a tax year exceeds $1000. Further, the brokerage can only do this if you forward to them copies of all the forms K-1 that you received from the individual MLPs. If you have multiple IRA's with different brokerages, each brokerage is only concerned with the MLPs that are held at that brokerage. Theoretically, it is possible that you could have MLPs at several brokerages, with the aggregated total UBTI over $1000 (actually, $1500, see my last sentence), but with the total at any single brokerage under $1000, then it would not get caught unless you were audited by the IRS. Finally, as if this isn't enough, someone said that the IRS rule is the UBTI tax kicks in if the aggregated UBTI across all brokerages exceeds $1500. I have not confirmed this, and no one responded when I brought it up in a comment on Reel Ken's article. Further, there is no mechanism for enforcing this, or even for how the taxpayer would voluntarily handle it, since it would require brokerages to deal with it cooperatively.

    Thanks for the comment. I had forgotten how much fun this topic is to discuss.

    John D. Thomason
    Jan 11 06:03 PM | Likes Like |Link to Comment
  • BDCs Then and Now: One Investor's Real-World Experiences And Recommendations [View article]
    It looks like I messed up again, typing in what I intended to be a reply to you and instead typed it in as a new comment. Just wanted to clarify and put in a reply so you will be notified. See below for my original reply.
    Jan 11 03:10 PM | Likes Like |Link to Comment
  • BDCs Then and Now: One Investor's Real-World Experiences And Recommendations [View article]
    I concur. I haven't paid much attention to TTO in the past year, but they definitely are not a high-yielder like one would expect from a BDC.

    John D. Thomason
    Jan 11 01:47 PM | Likes Like |Link to Comment
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