Rip, As you know, most firms raise funds through a combination of debt & equity. With interest rates at historic lows, it is wise to load up on debt now but that does not mean that if and when rates are higher MLPs will not issue debt that will cost them more. I think that was a fair point of the author.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Mikejack, Here are some alternatives that do not incur the excessive expense tax hit that the MLP ETFs do. Just to be clear, I did not say there were ETF alternatives. I am not aware of any ETFs that avoid that extra tax. If I did, I would buy it. But my understanding is that ETFs are the wrong security to invest in MLPs because they have to pay tax which significantly reduces your return.
ETNs (yes, I know there is credit risk with them but let me say there is credit risk with just about every investment. We all have to make our own evaluation of the risk/reward. I believe the risk can be reduced by buying ETNs from several different issues and monitoring their credit rating - that's what I did) or the corporate versions some MLP companies offer are the way to go, in my opinion. If one is concerned about the risk of an issuer one can decide to sell at the first sign of a financial issue. Right now, the issuers are doing well. I don't see one defaulting overnight with the value of the security going to zero. That's my judgement. Others may disagree.
Some ETNs: AMJ. IMLP, MLPI, MLPY (I own AMJ and MLPI)
Traditional stock version of MLPs: LNCO, EEQ, KMI, KMR (I own KMR)
Hope this helps. A 4% or greater haircut makes these ETFs completely unattractive to me.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
There are at least 1/2 dozen far more cost effective alternatives to getting non K-1 exposure to the MLP sector that have been in one way or another covered on SA. Owning a MLP ETF is a mistake regardless of whether you have made money or not. You would have done better utilizing one of the alternatives. You should be thanking Ron for enlightening you. Stay stubborn my friends. It's only your money.
Anthony, Nice article. As I read I too knew you were going to get some blow back. That's what happens when someone goes against the grain.
However, you exposed some issues that have puzzled me for quite some time. Intuitively I suspect much of what you said has merit. If nothing else, it addressed some issues that brought out some counter arguments which are there for everyone to consider.
What concerns me is that too many investors may not understand what they've bought and think that those endlessly increasing distributions will continue because they don't know where or how that growth comes from. Once the spigot is turned off, many could panic and sell. I expect pipeline distributions to continue to grow but at a slower rate. My understanding is their contracts have some rate increases built in and better than other fixed income alternatives.
I also think you brought up some good points about the depreciation vs. the life expectancy of the pipelines and production wells which supply those pipelines. It's good to consider that.
Thanks for bringing up the other side of the story and thanks to those that politely contributed as well. Politeness should be mandatory to keep this wonderful site useful to all.
What You Are Told About Inflation Protection Is Wrong [View article]
Nice article.
I wonder if until recently, there was a correlation between inflation and real estate, at least before the recent real estate collapse.
Secondly, Bloomberg Asia had an interesting segment a few weeks ago in which they had an analyst show an amazing correlation between gold and India GDP. I don't recall the time-frame and could not find it on their site. Even the Bloomberg reporter was surprised at how closely the two appeared. The price of Gold may be simply a factor of good old supply and demand.
An Unconventional View Of Utility Stock Performance During Initial Interest Rate Hikes [View article]
Scooter, I was responding to a comment about general US economic conditions, not a particular investment/plant. Obviously that plant was built because a company determined there would be demand for it's product and it would be a profitable endeavor despite what the posted said. That proves the point. If there is an opportunity for a profitable investment, it will be made regardless of the politics.
JPMorgan's New 5.15% Junk Rated Preferred Trading At A Premium - What's Up? [View article]
Very nice posting. Wish there were more explaining the downside of preferreds at such low interest rate levels. There are a couple of contributors that have been posting what seems to be positive one sided postings without providing the other side of the story. I applaud you for doing so. The banks are very sophisticated financial organizations. They are rightly taking advantage of a distorted market to raise super cheap capital.
An Unconventional View Of Utility Stock Performance During Initial Interest Rate Hikes [View article]
What company will invest until demand is there for their products? There is still overcapacity and insufficient demand. If and when demand picks up, they will invest regardless of cost, regulations or taxation if it is profitable. Period.
The Apple-Microsoft Comparison Is Valid [View article]
Apple has some very good products but is far from the range of products Microsoft. Apple's products perform very well but are way over-priced compared to the competition and that is why they may remain a niche player IF they can continue to innovate. Remember it is only very recently that Apple shined with the release of the IPhone which has been quickly mimicked. They almost went bust with their overpriced PCs. You can take it or leave it but that is the truth. One trick wonders are not worth massive multiples and hoarding cash only leads to waste. Look at their massively over budget and late $2 Billion new campus. Money burns a hole in egoistical corporate chiefs.
Dividend Stock ETFs: Trading Growth For Yield [View article]
FYI, It took me about 30 seconds to look up SDY historical distributions on the sponsor's site. The March 2010 dividend was $0.378985. While I am a daily user of Yahoo, relying upon their financial data is foolish to say the least. If something doesn't look right, it probably isn't. Before publishing or making a financial decision, one really should check a little deeper, no?
How Preferred ETFs Can Juice Your Income Portfolio [View article]
Banks issue preferreds because they qualify as capital (similar to stockholders equity, retained earnings, loan loss provisions and more) such that they are [supposed to be] the first line of defense after loan loss reserves to protect against losses. It's a lot more complicated. See Wikipedia here for a good explanation on capital http://bit.ly/121ft45
Yes Virginia, There Is A Dividend Growth ETF Portfolio That Delivers [View article]
Cranky, thanks for your articles. I like the fund method for the simplification & diversification benefits you mentioned. I'm turning towards simplification so I can put my portfolio on autopilot for the future.
Linn Energy Vs. LinnCo: And The Verdict Is... [View article]
Pemdragon, To be honest, after I read the comment, I browsed up to see what was being referenced. I saw the image and was so turned off by it that the last thing I would do was click to see it clearer. My eyes are not as sharp as they used to be so I could not read the words. I may stand corrected. Can't stomach looking at that image. Utter vile.
Five Risks Of MLP Investing [View article]
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Here are some alternatives that do not incur the excessive expense tax hit that the MLP ETFs do. Just to be clear, I did not say there were ETF alternatives. I am not aware of any ETFs that avoid that extra tax. If I did, I would buy it. But my understanding is that ETFs are the wrong security to invest in MLPs because they have to pay tax which significantly reduces your return.
ETNs (yes, I know there is credit risk with them but let me say there is credit risk with just about every investment. We all have to make our own evaluation of the risk/reward. I believe the risk can be reduced by buying ETNs from several different issues and monitoring their credit rating - that's what I did) or the corporate versions some MLP companies offer are the way to go, in my opinion. If one is concerned about the risk of an issuer one can decide to sell at the first sign of a financial issue. Right now, the issuers are doing well. I don't see one defaulting overnight with the value of the security going to zero. That's my judgement. Others may disagree.
Some ETNs: AMJ. IMLP, MLPI, MLPY (I own AMJ and MLPI)
Traditional stock version of MLPs:
LNCO, EEQ, KMI, KMR (I own KMR)
Hope this helps. A 4% or greater haircut makes these ETFs completely unattractive to me.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
MLPs - How To Start A Bubble [View article]
However, you exposed some issues that have puzzled me for quite some time. Intuitively I suspect much of what you said has merit. If nothing else, it addressed some issues that brought out some counter arguments which are there for everyone to consider.
What concerns me is that too many investors may not understand what they've bought and think that those endlessly increasing distributions will continue because they don't know where or how that growth comes from. Once the spigot is turned off, many could panic and sell. I expect pipeline distributions to continue to grow but at a slower rate. My understanding is their contracts have some rate increases built in and better than other fixed income alternatives.
I also think you brought up some good points about the depreciation vs. the life expectancy of the pipelines and production wells which supply those pipelines. It's good to consider that.
Thanks for bringing up the other side of the story and thanks to those that politely contributed as well. Politeness should be mandatory to keep this wonderful site useful to all.
What You Are Told About Inflation Protection Is Wrong [View article]
I wonder if until recently, there was a correlation between inflation and real estate, at least before the recent real estate collapse.
Secondly, Bloomberg Asia had an interesting segment a few weeks ago in which they had an analyst show an amazing correlation between gold and India GDP. I don't recall the time-frame and could not find it on their site. Even the Bloomberg reporter was surprised at how closely the two appeared. The price of Gold may be simply a factor of good old supply and demand.
An Unconventional View Of Utility Stock Performance During Initial Interest Rate Hikes [View article]
JPMorgan's New 5.15% Junk Rated Preferred Trading At A Premium - What's Up? [View article]
An Unconventional View Of Utility Stock Performance During Initial Interest Rate Hikes [View article]
The Apple-Microsoft Comparison Is Valid [View article]
Performance Comparison Of Selected MLPs [View article]
Not All ETFs Are Created Equal [View article]
Dividend Stock ETFs: Trading Growth For Yield [View article]
How Preferred ETFs Can Juice Your Income Portfolio [View article]
http://bit.ly/121ft45
Yes Virginia, There Is A Dividend Growth ETF Portfolio That Delivers [View article]
Linn Energy Vs. LinnCo: And The Verdict Is... [View article]
To be honest, after I read the comment, I browsed up to see what was being referenced. I saw the image and was so turned off by it that the last thing I would do was click to see it clearer. My eyes are not as sharp as they used to be so I could not read the words. I may stand corrected. Can't stomach looking at that image. Utter vile.
Thanks for pointing it out.