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John M. Yenkes

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  • How To Invest In Annaly Capital Management Safely [View article]

    Not to pile on too much here, but you have obviously never actually executed this trade. If you had, you would realize it is a near certainty you will be called away the day before ex-div unless the stock price has dropped considerably. In my opinion, if you are an income investor, the time premiums offered for mREITs are so thin it's not worth writing covered calls and risk losing the dividend. Also, unless you are only holding a single stock in your portfolio at any given time (which is unwise), this sort of strategy hurts your overall return in the long run, because you are forced to sell your "winners" too early, leaving stocks that have under performed on a relative basis. If you want to sell covered calls for income, you are better off picking a growth stock you are long term bullish on that has a higher beta and larger premiums. Take Chipotle (CMG) for example. The 2014 $420 LEAP is $76, over 18% premium.
    Apr 22, 2012. 07:39 PM | 8 Likes Like |Link to Comment
  • Silver - Prepare for the Flood [View article]
    First, a quick bit of history.

    The growing popularity of tulips in the early 17th century caught the attention of the entire nation; "the population, even to its lowest dregs, embarked in the tulip trade". By 1635, a sale of 40 bulbs for 100,000 florins (also known as Dutch guilders) was recorded. By way of comparison, a ton of butter cost around 100 florins, a skilled laborer might earn 150 florins a year, and "eight fat swine" cost 240 florins. (According to the International Institute of Social History, one florin had the purchasing power of €10.28 ($14) in 2002.)

    By 1636, tulips were traded on the exchanges of numerous Dutch towns and cities. This encouraged trading in tulips by all members of society; reports recounted people selling or trading their other possessions in order to speculate in the tulip market, such as an offer of 12 acres (49,000 m2) of land for one of two existing Semper Augustus bulbs, or a single bulb of the Viceroy that was purchased for a basket of goods worth 2,500 florins.

    Many individuals grew suddenly rich. A golden bait hung temptingly out before the people, and, one after the other, they rushed to the tulip marts, like flies around a honey-pot. Every one imagined that the passion for tulips would last forever, and that the wealthy from every part of the world would send to Holland, and pay whatever prices were asked for them. The riches of Europe would be concentrated on the shores of the Zuyder Zee, and poverty banished from the favoured clime of Holland. Nobles, citizens, farmers, mechanics, seamen, footmen, maidservants, even chimney sweeps and old clotheswomen, dabbled in tulips.

    Sound familiar? I find it interesting that basically almost 400 years later people still fall for the same trick. I bet the chimney sweeps had the same empty feeling in the pit of their stomach silver bulls are now starting to feel. I mean what a sales job these people bought into. Honestly, what if someone came to your door (today it's Pat Boone on late night infomercials) and tried to convince you to trade all of your cash for some shiny metal because it is a BETTER type of money than yours. Except his is not readily used as a medium of exchange in trade or business, and you have to pay money to store it somewhere, and it doesn't produce any income, and the bid/ask spread creates a huge premium if you actually want to cash it in to buy something. Oh yeah, I almost forgot, ultimately you are almost certain to lose value unless fiat currency and all of western society collapses. Not as bad as paying $35k for a tulip bulb, but I digress.

    Long Sept. 11 AGQ 105 puts.
    May 6, 2011. 08:43 PM | 4 Likes Like |Link to Comment
  • How to Play the Gold and Metals Bust - 3 Short Plays [View article]
    Short term bounce up to $38-$40 and then the bear raid will continue.

    Long Sept 11 AGQ 105 puts.
    May 6, 2011. 08:43 PM | 3 Likes Like |Link to Comment
  • How To Invest In Annaly Capital Management Safely [View article]
    If we are talking about risk management, selling puts is a good way to get burned.
    Apr 23, 2012. 07:37 PM | 2 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, 2012. 08:26 PM | 2 Likes 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, 2012. 04:29 PM | 2 Likes Like |Link to Comment
  • Natural Gas: Why Prices Are Headed Lower, And How To Profit [View article]
    These products are not appropriate for anyone looking to invest in natural gas long term, and should only be used for (1) short term trading, or (2) shorting longer term, typically via put options. First, you should understand that BOIL is tied to the Dow Jones Natural Gas Index, and is designed to track 2x the DAILY return of this index. The underlying index tracks forward month futures contracts on natural gas. Commodity futures contracts specify a certain date for physical delivery of the underlying commodity. Assuming you don't actually want the commodity, in order to avoid delivery and maintain a long position, nearby contracts must be sold and new forward month contracts purchased ("rolled forward"). Currently, natural gas is in steep contango, meaning the longer dated contracts are significantly more expensive than near dated contracts. In fact, the curve is so steep that if you were to simply roll forward every month for the next year, it would cost 95% of the current price in roll expense. Said another way, roughly speaking, prices need to double just to stay even on the investment. This is part of the reason why the index is down 65% while the spot price of gas is down only 48% over the past 12 months. Now imagine a financial product that DOUBLES this and you understand why using BOIL as a buy and hold vehicle for natural gas is a bad idea. If you are bullish on natural gas, you are much better off buying stock in natural gas producers and companies that will profit from a price rebound. Some ticker symbols that come to mind include (LINE), (CHK), (LGCY), (XCO), and (VNR). Some of these companies have hedged their gas positions out for several years and maintain healthy dividends despite current low prices.
    May 2, 2012. 12:50 AM | 1 Like Like |Link to Comment
  • Natural Gas Has Nowhere To Go But Up [View article]
    "Just look at the above chart and tell me that you would have any confidence that prices will stay at $2 for very long. Really?"

    I agree, it will not be at $2.00 for very long. We will be under $1.50 before the fall. While technical analysis might be helpful for picking entry and exit points, for a commodity like natural gas, using price history to conclude it can't go any lower shows naivete as to how this market operates. The supply/demand fundamentals and steep contango issues should be addressed before any technical analysis even begins.

    "At $2 per mmBTU even conventional production has become unprofitable. The hydraulic fracturing or "fracking" which has been responsible for the modestly increased supply in the U.S., will go away completely at these prices. And it won't come back until we are safely in the $8-10 range, especially when there is $100 oil to drill for in the Bakken."

    False. The majors are still making money well under $2. We are still producing more gas than last year, and with storage levels 52% higher, we will run into storage problems unless something changes dramatically from today.
    Apr 26, 2012. 06:20 PM | 1 Like Like |Link to Comment
  • Annaly And Other mREITs: Lower Dividends And Stock Prices To Come [View article]
    While I am optimistic the economy will continue to improve, and believe the FED will have to raise short term rates before 2014, there are a lot of economists and fund managers that believe we are in for a protracted "new normal" where rates stay low for a very long time while economic growth remains muted. In the extreme, this would be somewhat analogous to Japan's lost decade (er, two decades). I think the possibility of this long term structural change is wholly discounted by those who demonize mREITs. If true, and the overall U.S. market languishes for another decade, it would make these investments a tremendous opportunity. Again, my bias is to say it is unlikely, but it is something to consider when looking at the mREIT sector.
    Apr 24, 2012. 07:15 PM | 1 Like 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, 2012. 02:34 AM | 1 Like Like |Link to Comment
  • Silver - Prepare for the Flood [View article]
    Look out below!!! Next stop for SLV, $24.
    May 11, 2011. 06:48 PM | 1 Like Like |Link to Comment
  • Silver - Prepare for the Flood [View article]
    So when the Fed eventually reverses its monetary policy and begins to tighten the money supply as the economy improves, you will be able to accurately time the top then, right?
    May 11, 2011. 06:45 PM | 1 Like Like |Link to Comment
  • Silver - Prepare for the Flood [View article]
    If you are looking for a hedge against inflation, why not buy large cap equities instead? The companies earnings will all be in inflation adjusted dollars, and they pay out dividends in inflation adjusted dollars. What happens if the current bond market is right, and you are wrong, and we don't have hyperinflation?
    May 8, 2011. 03:46 PM | 1 Like Like |Link to Comment
  • Silver - Prepare for the Flood [View article]
    I will address each point individually.

    First, the nominal high reached decades ago was the result of serious market manipulation and a failed attempt to corner the market, so I'm not sure what relevance it brings to the discussion. In fact, I would argue the severe price correction and subsequent return to market based valuations is a more important aspect of that period of time.

    Regarding silver being "so important in our way of life," I would offer the fact that fabrication demand has been relatively flat over the last decade, and has actually fallen dramatically in some sectors (photography, silverware, etc).


    At the same time, what has increased is speculation (ahem, "investment"), which has exploded as a sector of silver demand nearly 5,000% in the last decade, led in large measure by the advent of financial ETF instruments which now allow easier access to silver exposure for the masses. In fact, current ETF holdings could meet ALL industrial application demand for an entire year.

    Regarding "above ground availability being destroyed," I would offer that the supplies of silver coming out of the ground have also increased significantly in the last several years. For now, this supply has been easily absorbed by the investment community. But supply in this regard is a lagging indicator. That is to say, it takes a significant amount of time to startup or increase mining operations in order to meet the increase in demand. Make no mistake, there is plenty of silver currently in the ground, and as mining companies scramble to ramp up production and capitalize on high prices, available supply will also rapidly increase. Additionally, scrap recoveries that were previously uneconomical are also sure to increase future supply.

    I'll leave it up to you to deduce what will happen to the price of silver should the speculation music stop right when huge new physical supplies are coming on line. Hint: It's the same thing that happens in every bubble cycle.

    I am a little unsure what you are asking regarding monetary policy and the Federal Reserve? Treasuries do have a cost, it's called interest payments, and it generates income for the bond holder. That's something silver cannot offer. In fact, it actually costs you money to store it somewhere, and to exchange it for those "phony" dollars you hate so much. Also, and most importantly, silver comes without any guarantee that 100% of your capital will be returned.
    May 8, 2011. 06:41 AM | 1 Like Like |Link to Comment
  • 14% Dividend Stocks Offer High Returns And High Risks [View article]
    I bought more TWO today along with new positions in CYS, HTS, DX, and CHKR. I'm looking for a secondary from AGNC, or at least a technical correction, and will buy back in if we get back under $33.
    Jul 13, 2012. 03:59 PM | Likes Like |Link to Comment