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Night Heron  

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  • AT&T And 'Losing' To Inflation [View article]
    Morningstar reports the relevant statistics. Over the past 15 years AT&T's total return, including dividends, has been 0.62% which is lower than the average inflation rate of 2-3% over the same period. Over the past 1 year the total return has been 2.43% which is about the same as inflation.

    Over periods of 3, 5, and 10 years AT&T's total return has beaten inflation but trailed the S&P500:
    http://bit.ly/1dM8uUn
    Dec 26, 2014. 05:20 AM | 3 Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    You're right that what "should" be happening is not what's been happening to date. But if rebate-oriented buyers are the ones setting the price, they must not be thinking very clearly about what their potential income is.
    Dec 17, 2014. 07:50 AM | Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    You could be right, but I have trouble believing many people are buying this for the rebate today. If they're sophisticated enough to understand the rebate, they should be sophisticated enough to know that the trust is expiring and the remaining short rebate won't pay them enough to justify the current price.

    Here's the back of the envelope calculation for somebody who thinks they're guaranteed to be lent out: the short rebate is 100%, but they have to split that 50/50 with their broker, and they'll only get it for 4 months (till termination). So the expected rebate income is effectively 17% of the current price, which is $1.75 today and is likely to decline. 17% of $1.75 is $0.30. That's the most you could possibly expect to collect in short rebates, and it's optimistic because it assumes the price stays at $1.75, which it probably won't. It also assumes the shares stay lent out until termination, which they probably won't.

    Add that $0.30 to the remaining distributions of $.40 or so, and rebate-oriented investors shouldn't be paying more than $.70 for this trust.
    Dec 17, 2014. 07:48 AM | Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    More than 90% of shareholders aren't getting any rebate income, so to them the shares are only worth about $0.40, which is the total of future distributions.

    The shares are worth somewhat more -- say $1 -- to shareholders who are getting rebate income, but that's less than 10% of shareholders, and they don't set the price by themselves. The share price should be set by a dynamic equilibrium of buying and selling between the 90% who don't get rebate income and the 10% who do.
    Dec 16, 2014. 08:16 PM | Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    Right, but that only affects its value to you. Its value to someone else, say at a broker that doesn't lend out or doesn't share rebate fees, is different. The equilibrium price is an average across all investors.

    There are some papers on this in the finance literature.
    Dec 16, 2014. 08:10 PM | Likes Like |Link to Comment
  • The Great Debate Winner - Bull Vs. Bear On Gramercy Property Trust [View article]
    Individuals can differ about whether volatility is a good thing or a bad thing. But the idea that investors should demand higher returns if prices are more volatile is a cornerstone of modern portfolio theory. The name of this website is Seeking Alpha, where Alpha refers to risk-adjusted return, where risk is defined as volatility.
    Dec 16, 2014. 12:57 PM | Likes Like |Link to Comment
  • The Great Debate Winner - Bull Vs. Bear On Gramercy Property Trust [View article]
    To clarify: as of Dec 9, 2014, the 1-year return on GPT was 9%, vs 14% for the S&P500. Then GPT announced a secondary offering and went up a further 10%. So the outperformance occurred entirely during the last few days. Was the bull right or just lucky?
    Dec 16, 2014. 09:28 AM | 2 Likes Like |Link to Comment
  • The Great Debate Winner - Bull Vs. Bear On Gramercy Property Trust [View article]
    Are you sure the bull won? The 1-year return on GPT was comparable to the S&P500, and had more volatility.
    Dec 16, 2014. 09:17 AM | 2 Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    In principle, it shouldn't be possible for 10% of shareholders to set the price of a trust. For 90% of shareholders, the right move at current prices is to sell, and that selling pressure should drive the price down to where it's not worth that much to the 10% of shareholders whose shares are lent out.

    I'm describing what should happen if the 90% were informed and rational. What's actually happened has been somewhat different to date.
    Dec 15, 2014. 08:44 PM | Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    I wouldn't say the logic is flawed. It's often the case that the fair value is different for different shareholders. What you're saying is that WHX is worth more to a shareholder whose shares are lent out than it is to a shareholder whose shares aren't lent out. I agree, and if you average all those shareholders together, you find that the average value of the short rebate is less than 2 cents per share.
    Dec 15, 2014. 08:35 PM | Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    Thanks for sharing that
    Do you still hold GNI or WHX. Have you made or lost money so far?
    Dec 10, 2014. 11:21 PM | 1 Like Like |Link to Comment
  • Tax Loss Selling May Be A Large Factor In 2014 For Oil And Gas Trusts [View article]
    I ran the numbers. Including distributions increases the average 2-month return by about 4%. More interestingly, it makes WHX and GNI stand out from other trusts: http://seekingalpha.co...
    Dec 9, 2014. 05:08 PM | Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    Here's my source for saying 1% of GNI is short. How would you double-check this?
    http://bit.ly/1w3BFcq
    Dec 7, 2014. 07:56 PM | Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    WHX is a much newer trust and it seems likely that fewer of its shares have been forgotten by their holders.
    Dec 7, 2014. 07:56 PM | Likes Like |Link to Comment
  • Why Haven't Whiting Trust USA I And Great Northern Crashed With Other Royalty Trusts? [View article]
    GNI is a very old trust and I'm sure you're right that many of the shares are held by inheritors who have all but forgotten about them.

    However, GNI's price isn't set by the forgotten shares. It's set by the small fraction of shares that are trading every day. And somehow there are buyers every day at prices of $21-24 even though the shares are worth $14. Who are the buyers, and what are they thinking?
    Dec 7, 2014. 07:55 PM | Likes Like |Link to Comment
COMMENTS STATS
384 Comments
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