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John M. Yenkes

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  • Natural Gas: Why Prices Are Headed Lower, And How To Profit [View article]
    Selling UNG or BOIL short, or buying put options, would be a better strategy. With the leveraged nature of these ETFs, even a short term bounce of 10-15% in natural gas prices would send KOLD plummeting. ALL of these products decay over time, regardless of whether they are long or short. I would advise you to look at the chart of AGQ, a leveraged silver ETF. It's not a matter of if, only when this will be the ultimate fate of KOLD as well.
    Apr 20 02:49 PM | Likes Like |Link to Comment
  • Natural Gas: Why Prices Are Headed Lower, And How To Profit [View article]
    napavines1,

    Yes, I agree some MLPs offering an attractive risk/reward, notwithstanding the current trend of natural gas. Several of these companies have fully hedged their gas production for the next 1-2 years. Despite my bearish short term view on the price of natural gas, I also hold MLPs in my core long-term portfolio, including allocations in Legacy Reserves (LGCY) and Linn Energy (LINE).
    Apr 12 05:19 PM | Likes Like |Link to Comment
  • Natural Gas: Why Prices Are Headed Lower, And How To Profit [View article]
    Thank you Todd. I think the price decay or "tracking error" actually adds to overall return if you are shorting these leveraged products. Regarding surging production and crude, are you referring to the 50/1 price ratio of oil to natural gas? If so, I agree this cannot go on forever. A barrel of oil has the energy equivalent of 6,000 cubic feet of natural gas. With 1,000 btu per cubic foot for natural gas, this works out to 6 mmBTU, or about $12 per barrel ($0.90 per gallon) at today's prices. Even with the higher marginal costs for storage, transportation, and distribution, compressed natural gas for vehicle use can be purchased for $1.69 per GGE, which is less than half the current cost of gasoline. If this spread continues, eventually (and that might be a long eventually) infrastructure and market demand will catch up, and the oil/gas ratio will shrink, resulting in oil prices falling, gas prices rising, or a combination of both.
    Apr 12 03:27 PM | Likes Like |Link to Comment
  • Natural Gas: Why Prices Are Headed Lower, And How To Profit [View article]
    Adam,

    Yes, I firmly believe prices will be higher in the future. Regarding demand, several large manufacturing companies dependent on natural gas are already planning to relocate from abroad. A few of the major automobile companies have also unveiled preliminary plans for new vehicles that run on natural gas. Also, the 80% delta between domestic and international prices will inevitably spur investment into large scale export of LNG. However, all of these sources of new demand will require huge capital investment and take years to implement. If you want to go long natural gas today, instead of the commodity, I would suggest buying high quality exploration and production companies, such as Chesapeake (CHK) and Cimarex (XEC).
    Apr 12 12:48 PM | Likes Like |Link to Comment
  • Stocks As 'Giffen Goods,' New Market Data, And ETF Performance [View article]
    untrusting,

    1) Holding equities long term has returned more than any other asset class. I would say holding cash, bonds, or precious metals long term would make someone a bigger "sucker."
    2) The economic outlook continues to improve, and thus the Fed has signaled that they will begin weening the market off of further QE.
    3) High frequency algorithmic trading accounts for a large portion of the daily volume, but has nothing to do with actually valuing a company and making a decision to hold it long term. Are you talking about day trading? This does not qualify as investing.
    4) Casino?
    5) This is my point. They irrationally believe it is better to allocate into "safer" assets such cash, bonds, and precious metals. I argue the value of equities relative to these alternatives makes it a better investment at this point in the economic cycle.
    6) Again, this is exactly my point.
    Apr 4 11:53 AM | Likes Like |Link to Comment
  • Stocks As 'Giffen Goods,' New Market Data, And ETF Performance [View article]
    For retail investors, I would argue stocks are more related to the economic concepts of Veblen goods or the bandwagon effect. Giffen goods have a positive elasticity of demand, meaning price is the only thing that creates further demand (gold and silver would be a better candidate for this label). Retail investors being fashionably late to the equity market party is a recurring phenomenon, and they are even slower to react this time based on the severity of the last downturn and unnerving climate of political divisiveness. Given current p/e ratios and the speed with which the U.S. economy continues to gain traction, along with negative real interest rates, there is a good argument that your average sidelined retail investor is acting irrational. Such pessimism continues to provide wonderful buying opportunities for investors, and this wall of worry will inevitably give way to reality.
    Apr 3 06:15 PM | Likes Like |Link to Comment
  • Bond Market Update: Canaries In The Coal Mine [View article]
    I'm writing a follow up article this week. It appears the inverse correlation between the bond and equity markets is beginning to break down. That is to say, yields are continuing to rise even as the equity markets are flat or down significantly. I believe this tends to support the thesis above, and is another indicator fixed income allocations should be reevaluated.
    Apr 3 05:43 PM | Likes Like |Link to Comment
  • REIT Focus: Digital Realty Trust, Inc. [View article]
    Hi iSEEKit, you should check out quantumonline. It's free and provides a great resource for preferred stock, including DLR-E. Personally, I would rather (and do) own the common stock. My reasoning is twofold, (1) I believe they will continue increasing dividends for the foreseeable future. At my current basis, I'm yielding around 5% on the common, which is only 175 bps less than the preferred. Even if you buy the common at today's price, you will yield 4% and if they continue increasing dividends, you will receive a higher yield than the preferred well before the 2016 call date, and (2) there is no chance for appreciation on the preferred at $25.85 a share. You will only yield 6.75%, and if and when it is called at $25, you are guaranteed to lose capital. Conversely, as dividends increase on the common, you will enjoy capital appreciation as well as yield. Good luck!
    Mar 27 08:26 PM | 2 Likes Like |Link to Comment
  • REIT Focus: Digital Realty Trust, Inc. [View article]
    The CEO's comment is reassuring in that (DLR) will continue executing a proven strategy of buying under performing or "value add" properties that require significant capital improvements, and then turn the tenant profile with higher quality leases that will command a lower capitalization rate should they chose to dispose of the asset.
    Mar 27 08:03 PM | Likes Like |Link to Comment
  • Bond Market Update: Canaries In The Coal Mine [View article]
    You are correct, over a time horizon of a year or more, (TBT) will increasingly do a poor job of tracking the underlying bond market index. I would not advise anyone to purchase this as a hedge for more than a one year time horizon. My personal belief is that a sharp sell off could be in the making, and thus I am willing to accept some time decay for greater short term protection.

    For investors looking to purchase a longer term hedge that will track the market, they might be interested in the iPath US Treasury Long Bond Bear (DLBS). This exchange traded note is backed by Barclays and will not experience time decay similar to leveraged exchange traded funds such as TBT.
    Mar 26 08:34 PM | Likes Like |Link to Comment
  • Bond Market Update: Canaries In The Coal Mine [View article]
    I agree with Peter, in the short term it will depend on what you own. As the economy improves, some heavily discounted bonds will appreciate in value, more than offsetting any impact of spread compression versus government bonds. On the other hand, some higher quality bond issues with longer maturity dates could be negatively impacted. Over the longer term, all types of bond prices will be negatively affected by rising Treasury yields.

    I currently own the iShares high yield bond fund (HYG), which was purchased in October of 2011. This ETF currently yields around 7.32% and has an average time to maturity of 5.11 years. I do not plan on liquidating this position any time soon. In the event of a quick bond market sell off this year, I have a stop loss order set slightly below my acquisition price at $85.15.
    Mar 26 08:24 PM | Likes Like |Link to Comment
  • REIT Focus: Digital Realty Trust, Inc. [View article]
    The specialty use and difficultly re-tenanting a vacant building is a fair point, but it's also a double edge sword. It's also not as easy for tenants to leave without considerable cost. I don't believe this will be a real threat to earnings as long as the sector continues growing and the economy stays on the mend. As to whether I would purchase such assets, assuming I could borrow at the current long term rates, and depending on the tenant lease term, rent escalations, and credit quality, I would absolutely buy many of their assets at a trailing 6% cap. There are plenty of institutional quality assets trading below this level today, although admittedly many are in the multifamily sector.
    Mar 17 02:34 AM | 1 Like Like |Link to Comment
  • REIT Focus: Digital Realty Trust, Inc. [View article]
    "Our cap rate of 8% is in line with the average cap rate for industrial type properties per a CBRE 2011 cap rate survey."

    The problem of valuing REITs based on a cap rate aside, DLR doesn't own average industrial type properties, they own highly technical and specialized "class A" data centers with a significant economic moat as compared to other types of commercial real estate. These assets couldn't be any further from average industrial properties. With fixed borrowing costs below 4%, a cap rate near 6% provides a healthy spread in yields. The real problem with your analysis is that it fails to mention there are still significant prospects for long term growth in this industry. More companies will be investing in their online business, as well as taking advantage of economies of scale offered by cloud computing.

    Disclosure: Long DLR
    Mar 16 04:29 PM | 2 Likes Like |Link to Comment
  • Looking Like A Bottom For TBT [View article]
    seekingalpha.com/insta...
    Mar 16 01:33 AM | Likes Like |Link to Comment
  • U.S. Treasuries Bubble: Beginning To Burst? [View article]
    http://seekingalpha.co...
    Mar 16 01:32 AM | Likes Like |Link to Comment
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47 Comments
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