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Reel Ken

 
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  • Why I Bought Linn Energy In My Roth IRA [View article]
    Hi Joneb,

    First... you can achieve a negative UBTI, not from the share price falling, but from operational losses. The "I" in UBTI stands for INCOME, so in essence, negative INCOME. Any such losses can be carried forward to offset future UBTI from LINE, but not offset other income from other MLPs or other sources.

    I'm not going to go into tax law history, but basically certain types of investments (mainly partnerships) have their income taxed, even if the entity is otherwise tax exempt. There is a rationale for it, but, as I said, it requires me to go into the history of tax exempts.

    The issue revolving around MLPs in ROTH stems from UBTI. There are two parts to it .... annual UBTI and UBTI recapture. Once again, the issues are complicated, I've written exhaustive articles for SA and you may want to catch up on it.

    However, here's a "shortcut" to the issues.

    1) Annual UBTI in excess of $1000, as reported on the K-1 is taxed each year. If you only have a small position, it may never occur.

    2) Recapture UBTI is a tax imposed when you sell your shares. It's a complicated calculation, but to simplify... the cumulative distributions that you received each year, minus any UBTI that you already reported on your K-1, will be taxed on sale. Not that simple, but you get the idea.

    So, the end result is ..... you may have to pay some tax and that will reduce your net yield. Also, there is some paperwork issues. Not much of a problem for small holdings, but it increases as your holdings increase.

    Let me know if you need more.
    Dec 22, 2014. 07:59 AM | Likes Like |Link to Comment
  • Energy sector weighs heavily on European shares [View news story]
    It seems everyone just misses the big picture.

    When oil prices fall (or anything else, for that matter), it simply shifts where the money in circulation goes.

    In the present case, capital is shifted from BIG OIL, OPEC, etc., to the consumer.

    So, certain parts of the global econ-system benefit at the expense of other parts. Whenever you take money from the wealthy and distribute it to the middle, luxury expenditures decrease and staples increase.

    Now, generally that just means a shift in sectors, not a loss.

    But, when it comes to the stock market (today's version of the stock market, that is) ... well... BIG MONEY doesn't like taking money from BIG OIL and throws a tantrum. After all, the stock market is all about making the rich, richer. So the stock market is simply voting that it would rather have BIG MONEY and BIG OIL walk together.

    Once this hissy-fit is over, look for a rebound. Meanwhile, consumer staples is worth a look.
    Dec 12, 2014. 07:51 AM | 2 Likes Like |Link to Comment
  • 321K jobs added in November [View news story]
    Hi Mark,

    I guess it's all a matter of how one looks at it.

    Do we want not-so-good numbers so we can continue to get "free money" so we can continue to cash in on inflated markets until they burst and also continue the great capital shift to those that have ... from those that don't....

    ....or.......

    Do we herald good economic news...putting more people to work...increased wages, etc... so that the economy can stand on its own two feet and everyone gets a piece of the pie.

    So, in that framework, it's either good news or bad news....your choice.
    Dec 5, 2014. 11:12 AM | 3 Likes Like |Link to Comment
  • Senate fails to approve Keystone XL pipeline [View news story]
    Hi ads7w6,

    I'm sorry, but I have to disagree with you. STRVROB asked for another possible word having denied that "fails to approve" shows bias.

    I was simply illustrating another phrase that highlighted two different explanations, each carrying its own, different, subliminal meaning.

    I never proffered that one was correct or not, just that there are different explanations and the choice of one over the other demonstrates bias. So, in that regard, I believe my post was not, as you suggest, wrong.

    Now, I can deal with your particular point ... The most appropriate phrase is not "fails to approve" but, rather, "fails to pass".

    "Fails to approve" has a subliminal meaning, indicating that the passage would have been satisfactory, whereas "fails to pass" simply states that the vote was insufficient.
    Nov 19, 2014. 07:40 AM | 1 Like Like |Link to Comment
  • Senate fails to approve Keystone XL pipeline [View news story]
    Hi strvrob,

    "Rejects" would be another choice instead of "fails to approve."

    The subliminal meaning of these are quite different and each, in its own way, demonstrates bias.
    Nov 18, 2014. 09:14 PM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time To Buy Commodities? [View article]
    Excellent article.

    Most "novices" confuse between correlations and coincidences. Your article points out how too many have made this mistake on the QE/S&P coincidence.

    Seasoned professionals have learned that simply comparing data points does not a correlation make. Unless one can establish a verifiable REASON .... the infamous "WHY does "A" cause "B" "....to corroborate a correlation .... well...it is simply a coincidence.
    Nov 16, 2014. 08:04 PM | Likes Like |Link to Comment
  • Hedging With Options Using SPY As An Example [View article]
    Hi User,

    Glad to help.

    First, let me say that PVolt makes an error when he says "....short put will not gain $5. It will only gain the extrinsic ATM value of the weekly puts at 110 strike ......" In fact, the short put gains the extrinsic (as he says) but the short put also gains the INTRINSIC value to the extent it was ITM.

    There will be times when the drop in SPY and the loss associated with it will be greater than the increase in the far-dated put. That's because the delta on SPY is 100% and the long put has a delta of only 50%. If SPY continues to drop, the delta on the put increases.

    So, downward movement is protected and the loss is maximized at the premium paid for the far-dated put. Now, since the weekly puts generate extrinsic premium in targeted amounts, OVER TIME, it will offset the far-dated premiums, so a down move is completely covered.

    The problem, as I have written about many times, is never in a down or continued down market. It is the see-saw market where SPY drops and then bounces back up. If the weekly short put is sold at a strike that is not deep enough ITM, then the "over-bounce" can result in losses.

    So, it is very important to always sell the weekly puts as deep ITM as one can, even sacrificing some extrinsic after a big drop. Otherwise, one is forced to sell OTM puts after a big bounce, hoping for it to drop again and this is sort of "market timing".

    Hope this helps, if you need more, let me know.
    Nov 13, 2014. 07:32 AM | Likes Like |Link to Comment
  • Here's Why Gold Prices Have Been Declining [View article]
    You say.... ".....If the current fiat-money system outlives me, my gold holdings will simply pass on to my heirs. That's the perspective owners of gold have historically had. And that's the perspective current owners of gold should remember when watching fluctuating gold prices in dollar terms."

    So, let's say you're right and fiat doesn't survive you. Do you have enough gold to live on and do you have enough for your children to live on after you pass?

    Or... is it like vanishing potable water, asteroid encounters, nuclear war and everything else...you just hope it never happens because there is no long term solution to Armageddon.
    Nov 6, 2014. 06:01 PM | 5 Likes Like |Link to Comment
  • GM says not liable for pre-bankruptcy cars [View news story]
    Hi ellatruth,

    You make four statements ...

    1) "I Will Never Buy A New GM Car Or Truck"

    2) " Will Only Buy A GM Car Or Truck If It Is Selling Far Beneath The Blue Book Value And Represents A Steal Of A Deal"

    3) "I Will Vote Against Any Politician That Every (sic) Bales You Out

    4) "I Must Admit Going To College May Have Been A Mistake, I Should Have Quit High School And Gone To Work For You"

    Based on the contradictory nature of 1) and 2) .... the syntax in 3) .... your over-capitalization .....

    I think your problem may have been that you went to the wrong college, not that you would have been better off quitting High School
    Nov 6, 2014. 06:40 AM | 8 Likes Like |Link to Comment
  • Slaying Fiction About Gold And QE [View article]
    If I read your chart correctly....

    At the beginning of QE, GLD was around $60 +/-. Now it is around $110 +/-.

    And from this you conclude that QE did not benefit GLD.

    Though I may agree that QE is but one of many factors that influences the price of gold, when I look at your "proof"... sorry I just don't get there.

    Unless, of course, compressing data points and scales is your idea of submitting correlations.
    Nov 5, 2014. 07:08 PM | 1 Like Like |Link to Comment
  • Hedging SPY With Options: The Not So Nuts And Bolts [View article]
    Ho raduu,

    Yes I am always in the market ---24/365. The long far dated puts guarantees that regardless of down, my loses are temporary and manageable.

    I believe the market will always serve up surprises and I don't really try to time it. I'm ITM regardless of the "noise".

    When I try to "market-time" I'm still 100%/365. Just lower the strike on the weeklies. I've gone ATM and OTM at times and have won some/lost some. My guess is that, overall, I would have done better staying ITM.

    It's important to remember (and I have to remind myself at times) that the danger is never a dropping market. The long puts take care of that. The danger is a see-saw market and the only way to mitigate that possibility is to stay ITM.

    So, over the years, I've simply learned to discipline myself to stay ITM no matter how I feel about things. In moments of weakness, I stray ... after all we're all human. But if I could change any of my past trades they would be to have gone deeper ITM after a drop, not ATM or OTM.

    Hope this helps.

    RK
    Nov 1, 2014. 12:05 AM | Likes Like |Link to Comment
  • Hedging SPY With Options: The Not So Nuts And Bolts [View article]
    Hi Oldfashioned,

    It is my understanding that SA allows options only as an "incidental".

    The article must be analysis about a particular stock and it can offer options as part of that.

    My articles tend to emphasize options strategies over stock analysis so they don't seem to "fit in". I may try to put out a general market overview and "sneak" some option strategy into it.

    Thanks for asking,

    RK
    Oct 31, 2014. 08:05 AM | Likes Like |Link to Comment
  • Hedging SPY With Options: The Not So Nuts And Bolts [View article]
    Hi Raduu,

    The strategy has been working as planned all year. I keep selling ITM weeklies for target extrinsic.

    Naturally there will be "temporary losses" on a drop...such as we recently had... but I keep to the plan, waiting for a bounce. The last few weeks represent the third time there has been a drop, just this year. It seems like it happens several times each year ...year in and year out. The only times I've actually lost money is when I strayed from the path and let fear take over. I've learned the hard way to not over-think-- just stick to a proven plan.

    The far-dated long puts keeps me invested without over-reacting. That's their purpose. It is essential to "protect" these long puts after a drop and stay as DITM as you can. Even if it means temporarily sacrificing some extrinsic.

    My "thesis" is ..... until there is some indication of a recession, market should be flat to up and that's how I play it. I believe, absent a recession, previous highs will be re-captured. I don't try to time the market ... just keep to the "manual" until there is a major trend turn.

    If it looks like a recession is on it's way, then I'll adjust to ATM or OTM weeklies to capitalize. Until then ... just business as usual.

    There's a SA contributor --- Jeff Miller--- that I follow. He's got excellent weekly updates on his view of the market. When he starts predicting a recession, I'll change course. I try to avoid all the other "noise".

    Good luck... if you need more ... juct let me know.

    RK
    Oct 18, 2014. 09:44 AM | Likes Like |Link to Comment
  • Florida pension fund to pull Pimco investment [View news story]
    Hi Deja Vu,

    I've had quite a lot of experience with managers of these types of public pension accounts.

    Their primary objective is to "cover their behinds". They will move money away from PIMCO for one reason, and one reason only ......

    .......... When it comes to investing "the peoples money" their primary consideration is preserving their own jobs, titles and income ....... If they leave money with PIMCO and it underperforms they will be subjected to second guessing. When it comes to their own money, they use common sense investing. It doesn't matter what happens with future returns on "the peoples money", they are always safe in "following the leader".

    After all, their interests are in collecting their pension, much more so than investing your pension.
    Oct 8, 2014. 02:23 PM | Likes Like |Link to Comment
  • Two charged with insider trading on Herbalife [View news story]
    Hi Dampflok,

    Not necessarily.

    Some insider trading cases are complex and the SEC treads very carefully and slowly. This is especially true when multiple positions are involved. Sophisticated "insiders" have many "tricks" up their sleeves. They learn to obfuscate their activity.

    For instance, placing numerous trades (some winning, some losing) all around the trigger date, making it appear more random, etc..

    This particular case seems like it was a slam dunk. A "nobody" all of a sudden buys lots of puts. Probably no previous trading pattern in the stock. SEC can goe to court not needing to tie lots of obfuscations together.

    Everything's a guess, but no one is in the clear until the Statute of Limitations runs out (5, or 6 years depending upon factors, as long as it's not patterned)
    Oct 1, 2014. 10:17 AM | 6 Likes Like |Link to Comment
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