Use Linn Energy To Build Income Now [View article]
I think some are equating cash flow, specifically adjusted EBITDA, to earnings, Net Income, or profit. But the definition of adjusted EBITDA leaves out real cash expenses, such as depreciation, interest, and taxes. If the company pays cash for acquisitions, that cash is allocated over time through depletion, depreciation and amortization. The acquisitions are not free. The DD&A simply allocate the cash cost over a period of time.
And the DCF calculated far exceeds GAAP Net Income, adjusted for distortions such as unrealized gains/losses on derivatives, and oil/gas reserve impairments. So, the distributions that have been paid through 2012 far exceed the actual earnings of LINE. That means the shortfall has to be made up through new equity being issued or through obtaining debt. I call that leveraging. If you are comfortable with that, cool. I am not.
You as an individual, may make money on LINE by buying low and selling after a period of time, collecting the distributions. But anything you receive that didn't come from earnings is coming either from other unitholders' contributions or through the issuance of debt. In the end, all owners, as a whole, can not get anymore out of LINE than its real earnings. That's it. That's how the accounting equation works. But, not one is paying attention to earnings, at all. Cool, I am getting out as soon as I can get $40 for my shares.
What Will $2 Million Get You In Retirement? [View article]
The article isn't worthless, it just doesn't apply to 90% or better of folks.
I think the reason most people don't achieve this level of monetary wealth is due to a host of factors, some health related, some family related, some job related, some intelligence related. Not everyone makes wealth their goal in life. A lot of people grow up in less than ideal environments and it takes them a large part of their adult life to figure out their strengths.
MLPs And Interest Rates, How Right Is Mr. Gundlach? [View article]
MLPs have to continually make new acquisitions to grow, don't they? Won't that add to the interest expense if rates are higher, issuing debt at higher rates? Plus, if they have notes maturing and need to issue new ones, won't that add to the interest expense also? And I haven't mentioned a floating rate credit facility, which would also add more interest expense as rates rise.
Seems to me it could eat away at DCF available for distributions.
MLPs And Interest Rates, How Right Is Mr. Gundlach? [View article]
"4. December 19, 2008 through April 1, 2010: Interest rates rising rapidly - "Money printing madness, gold is going to $10,000, start making reality TV shows about people building bunkers for the end of the world, they have to be right this time.""
Are we looking at the right chart? What is an MLP's interest rate on debt based upon, treasury rates or the prime rate or some index linked to the prime rate? The prime rate had been declining since 9-18-2007 and was at its low of 3.25% on 12-16-2008. I'm thinking banks base their loans on the prime, not treasuries?
Prime Rate "The term originally indicated the rate of interest at which banks lent to favored customers, i.e., those with good credit,"
"The Federal funds rate plus a much smaller increment is frequently used for lending to the most creditworthy borrowers today, as is LIBOR, the London Interbank Offered Rate. The Federal Open Market Committee (FOMC) meets eight times per year wherein they set a target for the federal funds rate. Other rates, including the prime rate, derive from this base rate."
What do treasuries have to do with how much a bank charges to an MLP for debt? It's the prime rate or LIBOR, not treasuries, as best I know.
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
I was researching another author's articles and ran into a quote by you, Jonk:
"AGNC's losses that quarter were related to its derivatives (hedges which go out years -------------------------
AGNC's losses for the quarter were for REALIZED ACTUAL UNDILUTED losses...
when they first reported that loss, before the filings, I assumed the losses were "unrealized" losses on their hedges for the future... they were not... they were REALIZED losses... in otherwords the kind of earnings you look for from a company. now everyone in this business takes Realized and unrealized losses on hedges, that is what they are for... but NO ONE in this business takes that sort of REAL losses, far more than they earned for 6 months, possibly 9 months.
that is the kind of thing that you check for... I was blown away when they filed, and it turned out to be REAL losses... something by the way they didn't mention in their "earnings" release... gee.. sort of par for the course with AGNC...
an investor should be taking away from this a pattern AGNC does when reporting earnings... (mostly an investor shouldn't be investing in a management that would constantly pull this sort of shindig when they report) " ----------------------...
You have misinterpreted what is happening here. This is referring to 2nd qtr, 2012 for AGNC. Let's look at that 10-Q, link below. Page 4 shows the consolidated statements of comprehensive income. Under the category of: "Other (loss) income, net" is the line, "Loss on derivative instruments and other securities, net" showing a loss of ($1.029) billion. I think you have interpreted this as being all "realized" losses. That is not correct.
Go to page 35 of the 10-Q. Under "Gain (Loss) on Derivative Instruments and Other Securities, Net", is a table showing all "Realized" and "Unrealized" gains and losses on derivatives for the quarter and for the first six months of 2012 and 2011. Referring to 2012's numbers, the ($1.029) billion at the bottom is the sum of "realized" and "unrealized" gains and losses. Note the caption near the bottom of the page, "Total unrealized gain (loss) on derivative instruments and other securities, net " of ($655) million. This number is included in the ($1.029) billion of losses, but the ($655) million in losses are "unrealized", as the caption states.
So these are not realized losses. They are unrealized. They have been included in AGNC's earnings for 2nd qtr. because under GAAP, for any derivatives used as hedges but not designated as hedges for accounting purposes, the changes in fair value of those derivatives must be included in net income for the period.
FAS 133 states: "For a derivative not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change."
AGNC makes it clear in their 10-Qs and 10-Ks that they no longer designate any of their derivatives as hedges any longer. So, all changes in fair value of their hedges is required to be reported in earnings in the current period. However, because these hedging transactions have not been settled yet, they are all "unrealized" gains or losses.
The strategy in using hedges is to protect against or mitigate the impact of market risk upon company assets or revenues. As a result, the hedge is designed to react in the opposite direction to market risk, versus the hedged item. But, under these circumstances, when the derivative is not designated as a hedge for accounting purposes, a timing difference occurs for when the changes in fair value of the hedge and the underlying exposure being hedged (hedged item) impact earnings. The impact of the timing difference results in an accounting mismatch and in distorting GAAP earnings. To the degree the hedge is effective, the unrealized gains/losses resulting from the hedging transaction will never be realized.
What that means is that the GAAP number is materially wrong in most cases, unless the unrealized gains or losses are not material to Net Income/loss.
The ($655) million in unrealized losses on derivatives for 2nd qtr, which reduced Net Income must be added back to GAAP Net Income to get a reliable number. So, the reported ($.88)/share loss for 2nd qtr turns into a $1.30/share Net Income when those losses are added back.
AGNC wasn't trying to fool anyone. The GAAP number was just wrong.
Footnote, from Page 2 of link below: "The accounting for derivative instruments at fair value creates a common issue for organizations that hedge risks using such instruments. Specifically, such organizations may face an accounting mismatch between the derivative instrument which is measured at fair value, and the underlying exposure being hedged, as typically underlying exposures are recognized assets or liabilities that are accounted for on a cost or an amortized cost basis, or future transactions that have yet to be recognized. This accounting mismatch results in volatility in the financial statements as there is no offset to the change in the fair value of the derivative instrument."
A long and detailed, but fairly easy to understand, example of derivative accounting, and its impact on earnings is included in link below for anyone interested. Note in this example, how the $800,000 in derivative losses recorded on the Natural Gas futures contract, before the futures contract is settled, never materialized (to the degree the hedge was effective) once the contract was settled, when the contract was not designated as a hedge.
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
See Page 68 of the 2012 10-K. Note the consolidated statements of comprehensive income show $1.597 billion of Net Interest Income and $1.196 billion of gain on sale of agency securities, net.
Now look in the 2011 column, the Net Interest Income is $824 million and the gain on sales of agency securities, net is $473 million. Then look at 2010, Net Interest Income is $177 million and gain on sales of agency securities, net is $92 million.
How you determine that AGNC has made "most of their income" "from selling off their portfolio", and that "it is fact", escapes me.
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
"now here is the important part, most of their income was from SELLING OFF THEIR PORTFOLIO.. or to be specific capital gains.
this is not conjecture, it is fact. "
Not true. For 2011, AGNC had $824.297 million in revenues from Net Interest Income, while the Income from gains on MBS was $472.975 million. That is definitely not "most of their income" from selling off their portfolio.
For 2012, they had one quarter, the 2nd, where gains on MBS was more than the Net Interest Income, but not that much greater. For all of 2012, AGNC had $1.597 billion from Net Interest Income and $1.196 billion from gains on sales of MBS. Again, the gains on sales of MBS was not "most of their income".
AGNC had realized a significant portion of their income from sales of their MBS, true, but not half, and not "most of their income". You need to get your facts straight, Jonk.
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
2012 was an excellent year for AGNC, on an adjusted Net Income basis, $6.06/share, and even better on a Comprehensive Income basis, $6.39, or a tax basis, $6.87 or about. I have no clue what you are talking about, nor any interest in looking up YOUR POSTS.
the ASUS I mentioned is an i7 3610QM 2.3ghz Quad chip with 8 gigs ram and 2meg video card, WIN7 $700 Good enough for now. Will look at Haswell 2 or 3 years down the road when the showroom price has dropped.
Don't want anything but a desktop replacement laptop, but without Win8. Prefer Win7. My laptop is 4.5 years old. Looking at an ASUS N56VM, used on Ebay. Then upgrade to the newer stuff 2 or 3 years from now. A lot cheaper to buy it used but in good condition.
Use Linn Energy To Build Income Now [View article]
And the DCF calculated far exceeds GAAP Net Income, adjusted for distortions such as unrealized gains/losses on derivatives, and oil/gas reserve impairments. So, the distributions that have been paid through 2012 far exceed the actual earnings of LINE. That means the shortfall has to be made up through new equity being issued or through obtaining debt. I call that leveraging. If you are comfortable with that, cool. I am not.
You as an individual, may make money on LINE by buying low and selling after a period of time, collecting the distributions. But anything you receive that didn't come from earnings is coming either from other unitholders' contributions or through the issuance of debt. In the end, all owners, as a whole, can not get anymore out of LINE than its real earnings. That's it. That's how the accounting equation works. But, not one is paying attention to earnings, at all. Cool, I am getting out as soon as I can get $40 for my shares.
Use Linn Energy To Build Income Now [View article]
What Will $2 Million Get You In Retirement? [View article]
I think the reason most people don't achieve this level of monetary wealth is due to a host of factors, some health related, some family related, some job related, some intelligence related. Not everyone makes wealth their goal in life. A lot of people grow up in less than ideal environments and it takes them a large part of their adult life to figure out their strengths.
MLPs And Interest Rates, How Right Is Mr. Gundlach? [View article]
MLPs And Interest Rates, How Right Is Mr. Gundlach? [View article]
Seems to me it could eat away at DCF available for distributions.
MLPs And Interest Rates, How Right Is Mr. Gundlach? [View article]
Are we looking at the right chart? What is an MLP's interest rate on debt based upon, treasury rates or the prime rate or some index linked to the prime rate? The prime rate had been declining since 9-18-2007 and was at its low of 3.25% on 12-16-2008. I'm thinking banks base their loans on the prime, not treasuries?
Prime Rate
"The term originally indicated the rate of interest at which banks lent to favored customers, i.e., those with good credit,"
"The Federal funds rate plus a much smaller increment is frequently used for lending to the most creditworthy borrowers today, as is LIBOR, the London Interbank Offered Rate. The Federal Open Market Committee (FOMC) meets eight times per year wherein they set a target for the federal funds rate. Other rates, including the prime rate, derive from this base rate."
What do treasuries have to do with how much a bank charges to an MLP for debt? It's the prime rate or LIBOR, not treasuries, as best I know.
http://bit.ly/YPn4BX
http://bit.ly/NVGpgp
My guess is that lending rates were at all time lows then and now. Very advantageous for an MLP, I would think.
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
"AGNC's losses that quarter were related to its derivatives (hedges which go out years
-------------------------
AGNC's losses for the quarter were for REALIZED ACTUAL UNDILUTED losses...
when they first reported that loss, before the filings, I assumed the losses were "unrealized" losses on their hedges for the future... they were not... they were REALIZED losses... in otherwords the kind of earnings you look for from a company. now everyone in this business takes Realized and unrealized losses on hedges, that is what they are for... but NO ONE in this business takes that sort of REAL losses, far more than they earned for 6 months, possibly 9 months.
that is the kind of thing that you check for... I was blown away when they filed, and it turned out to be REAL losses... something by the way they didn't mention in their "earnings" release... gee.. sort of par for the course with AGNC...
an investor should be taking away from this a pattern AGNC does when reporting earnings... (mostly an investor shouldn't be investing in a management that would constantly pull this sort of shindig when they report) "
----------------------...
You have misinterpreted what is happening here. This is referring to 2nd qtr, 2012 for AGNC. Let's look at that 10-Q, link below. Page 4 shows the consolidated statements of comprehensive income. Under the category of: "Other (loss) income, net" is the line, "Loss on derivative instruments and other securities, net" showing a loss of ($1.029) billion. I think you have interpreted this as being all "realized" losses. That is not correct.
Go to page 35 of the 10-Q. Under "Gain (Loss) on Derivative Instruments and Other Securities, Net", is a table showing all "Realized" and "Unrealized" gains and losses on derivatives for the quarter and for the first six months of 2012 and 2011. Referring to 2012's numbers, the ($1.029) billion at the bottom is the sum of "realized" and "unrealized" gains and losses. Note the caption near the bottom of the page, "Total unrealized gain (loss) on derivative instruments and other securities, net " of ($655) million. This number is included in the ($1.029) billion of losses, but the ($655) million in losses are "unrealized", as the caption states.
http://1.usa.gov/12Qleyz
So these are not realized losses. They are unrealized. They have been included in AGNC's earnings for 2nd qtr. because under GAAP, for any derivatives used as hedges but not designated as hedges for accounting purposes, the changes in fair value of those derivatives must be included in net income for the period.
FAS 133 states: "For a derivative not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change."
http://bit.ly/1323CEO
AGNC makes it clear in their 10-Qs and 10-Ks that they no longer designate any of their derivatives as hedges any longer. So, all changes in fair value of their hedges is required to be reported in earnings in the current period. However, because these hedging transactions have not been settled yet, they are all "unrealized" gains or losses.
The strategy in using hedges is to protect against or mitigate the impact of market risk upon company assets or revenues. As a result, the hedge is designed to react in the opposite direction to market risk, versus the hedged item. But, under these circumstances, when the derivative is not designated as a hedge for accounting purposes, a timing difference occurs for when the changes in fair value of the hedge and the underlying exposure being hedged (hedged item) impact earnings. The impact of the timing difference results in an accounting mismatch and in distorting GAAP earnings. To the degree the hedge is effective, the unrealized gains/losses resulting from the hedging transaction will never be realized.
What that means is that the GAAP number is materially wrong in most cases, unless the unrealized gains or losses are not material to Net Income/loss.
The ($655) million in unrealized losses on derivatives for 2nd qtr, which reduced Net Income must be added back to GAAP Net Income to get a reliable number. So, the reported ($.88)/share loss for 2nd qtr turns into a $1.30/share Net Income when those losses are added back.
AGNC wasn't trying to fool anyone. The GAAP number was just wrong.
Footnote, from Page 2 of link below: "The accounting for derivative instruments at fair value creates a common issue for organizations that hedge risks using such instruments. Specifically, such organizations may face an accounting mismatch
between the derivative instrument which is measured at fair value, and the underlying exposure being hedged, as typically underlying exposures are recognized assets or liabilities that are accounted for on a cost or an amortized cost basis, or future transactions that have yet to be recognized. This accounting mismatch results in volatility in the financial statements as there is no offset to the change in the fair value of the derivative instrument."
http://bit.ly/VsWvjX
A long and detailed, but fairly easy to understand, example of derivative accounting, and its impact on earnings is included in link below for anyone interested. Note in this example, how the $800,000 in derivative losses recorded on the Natural Gas futures contract, before the futures contract is settled, never materialized (to the degree the hedge was effective) once the contract was settled, when the contract was not designated as a hedge.
http://bit.ly/ZH3fKU
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
"now here is the important part, most of their income was from SELLING OFF THEIR PORTFOLIO.. or to be specific capital gains."
That is a distortion of reality.
I don't view the management of AGNC as "the Evil Empire" as you do.
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
http://1.usa.gov/13zgz7T
Now look in the 2011 column, the Net Interest Income is $824 million and the gain on sales of agency securities, net is $473 million. Then look at 2010, Net Interest Income is $177 million and gain on sales of agency securities, net is $92 million.
How you determine that AGNC has made "most of their income" "from selling off their portfolio", and that "it is fact", escapes me.
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
this is not conjecture, it is fact. "
Not true. For 2011, AGNC had $824.297 million in revenues from Net Interest Income, while the Income from gains on MBS was $472.975 million. That is definitely not "most of their income" from selling off their portfolio.
For 2012, they had one quarter, the 2nd, where gains on MBS was more than the Net Interest Income, but not that much greater. For all of 2012, AGNC had $1.597 billion from Net Interest Income and $1.196 billion from gains on sales of MBS. Again, the gains on sales of MBS was not "most of their income".
AGNC had realized a significant portion of their income from sales of their MBS, true, but not half, and not "most of their income". You need to get your facts straight, Jonk.
American Capital Agency Corp.'s Updated Dividend Sustainability Analysis (Through Q1 2013) [View article]
Will The Sleeping Hare Win? [View article]
Current laptop is an Asus and it's been a jewel.
Will The Sleeping Hare Win? [View article]
Annaly Capital Faces Continued Pressure On Its Net Spread [View article]