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Brucejfern

Brucejfern
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  • What Is Next For Annaly? A Better Stock To Own Now [View article]
    Business model? They own paper that at all times is redeemed for par and sells for premiums and discounts depending on market conditions, interest rate environment, and most importantly, where we are at in the interest rate cycle.

    Owning paper that at all times redeems at par is not a business model.

    The late Marty Zweig became famous for saying "Don't fight the FED" on an episode of the old Wall Street Week many years ago. Along with that should be a reference to don't fight the interest rate cycle when you are at the beginning of being on the wrong side of the cycle.

    My proof. Pimco which looked like freaking geniuses for the last 30 years of a net downward trend in interest rates. Now for the last two years Pimco has underperformed and seeing net redemptions for a record number of months. Moral of the story is yesterday's genius can become tomorrow's goat.
    Jul 9 09:39 PM | Likes Like |Link to Comment
  • Pengrowth Energy: There Is No Need To Worry [View article]
    Lindberg? You have so many moving parts using the words "underestimation" also requires the possibility of overestimation.

    Take the LINE/Berry deal. It was supposed to fuel years of sustainable dcf and distribution growth. The SEC investigation, hedgeye, and the renegotiation by Berry has resulted in an unsuccessful deal that will offer more muted growth and is requiring LINE to scramble around doing other deals and some balance sheet engineering in order to try to close the gap that was opened in terms of hoped for dcf and distribution growth.

    Pengrowth has been a multi-year disaster while LINE was living off the fat of some of the best long term hedging strategies ever that have since fully run off. I think PGH is going to disappoint. While PGH is not up against the issues LINE was the simple fact of the matter is PGH has been a serial underperformer for years and I do not believe in this management team to do the right thing or get it right for shareholders. There are better E&P opportunities if you must own an E&P for higher distribution/dividend income.
    Jul 9 01:17 PM | 1 Like Like |Link to Comment
  • Institutional Investors And Kinder Morgan: Following The Money Flows [View article]
    And just as important you have a new generation of GPs offering far superior dividend growth from their associated MLPs that are also offering far superior distribution growth than the Kinder complex.

    I think Kinder complex had its era as the dominating GP/MLP group but the law of large numbers clearly makes smaller GP/MLP complexes show better. For example, one billion of capex at KMP cannot generate as much accretive distribution growth as that same one billion at Targa's MLP. That is why Targa's GP is forecasting dividend growth over twice the rate of KMI's estimated growth.

    While GPs are always in a better position to offer their MLP changes, waivers, extensions, etc. of incentive payments to make an acquisition appear IMMEDIATELY accretive KMI has had to do this more than other GPs of late. As interest rates rise and KMP starts into debt rollovers I expect more and more GP concessions in order for KMP to continue to justify its large capex agenda. Even then, I suspect one or more projects loses its investment viability in a higher interest rate world down the road.
    Jul 7 05:30 PM | 1 Like Like |Link to Comment
  • Prospect Capital: With The SEC Issue Resolved, The Stock Has 50% Potential Return [View article]
    A BDC cannot grow on debt alone. It is PSEC's cost of capital that is its Achilles heal. The only way you get a 50% total return is if PSEC becomes the answer to too many yield starving investors that are buying up this BDC without recognizing the extraordinary risks in it as compared to the peer group.

    I remember years ago in our local newspaper there was an ad that ran every day in the business section: "Earn 12% and sleep at night". That business didn't end very well and anyone believing you can earn 13% in PSEC and sleep at night is not recognizing that most of the time, mega-high yield reflects more risks of ownership than lower yielding equivalents.
    Jul 7 05:05 PM | 8 Likes Like |Link to Comment
  • What Happened To 'Peak Oil'? [View article]
    Ted Danson said the oceans would be emptied of all fish.... ten or fifteen years ago. Someone wrote a book about the population bomb and the inability for earth to generate enough resources to support a population level we surpassed long ago.

    Green environmentalists tell us climate change is manmade which may or may not be true to some degree or another. Last time I checked storms on Jupiter and Saturn alter the winds and hurricanes on those planets by factors of hundreds of miles without a stick of humanity on either planet.
    Jul 7 03:42 PM | 18 Likes Like |Link to Comment
  • Enterprise Products Partners Will Continue To Rise [View article]
    I own EPD as a core rock solid holding. I see MMP as having more bang for the buck with their just finished big pipeline joint venture with OXY. MMP being smaller gets more accretion bang on similar projects compared to the so much larger EPD.
    Jul 7 12:16 PM | 2 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments!! Chapter 70......  [View instapost]
    Insider buying is not a very reliable indicator. You have no way of knowing whether there is an agenda behind the buying.... in PSEC's circumstances they ABSOLUTELY have to get that cost of capital down or they are going to be in deep trouble. The recent loan that blew up. All I read was it was this percentage of the portfolio and that percentage of total NAV loss.

    What was lost in the debate was that loan was only a few months old when it went bad. I don't know why anyone would lend to a New Jersey business in transportation related activities if you understand the New Jersey transportation dynamic.

    What was also lost is the yield on the loan and then a renegotiation to include more DIF financing. It is always trouble when you have to renegotiate and increase the portion of DIF financing.

    Long and short. PSEC has to take much larger portfolio loan risks to deliver that dividend yield. Inasmuch as many cannot afford to risk their capital in retirement better to dial down 200 basis points and look at MCC or go 400 basis points lower and look at a lot of BDCs with a much more reasonable loan approach.

    I call PSEC a guillotine stock. Anyone remember when PSEC changed their dividend policy to monthly and simultaneously cut the dividend but didn't articulate it in the press release. You had to do you own calculation initially to see indeed they had cut the dividend coincident with the change from quarterly to monthly payout. The drop in the stock that came hurt a lot of investors.

    PSEC hasn't really effectively covered their dividend with NOI. I am more comfortable with noi covering dividends and fee and other income become the source of extra dividends.
    Jul 7 10:26 AM | 1 Like Like |Link to Comment
  • Business Development Companies: The Next Risky Wall Street Cash Cow? [View article]
    I think in the post crisis atmosphere we are seeing a lot more discipline. Although PSEC should worry everyone simply because the yields they must generate in order to deliver dividends is so much higher than the peer group you are possibly in a BDC that is truly a lender of last resort for so much lower quality companies that perhaps cannot get loans from better of breed BDCs.
    Jul 7 09:15 AM | 1 Like Like |Link to Comment
  • Linn Energy: Intriguing 5-Year Investment If You Want Lots Of Income [View article]
    The bigger story is that Berry Petroleum in and of itself was supposed to be the game changer. Now LINE has had to go out and do some financial engineering transactions that tells this investor the forced overpayment for Berry after the SEC situation means Berry can no longer deliver as originally planned and additional transactions had to take place in an effort to get on that track. Failure to get on that track would be devastating to a stock like LINE which is in the crosshairs of Barron's and Hedgeye.

    I think E&P MLPs have had their day. From the 2009 bottom a lot of money was made by total return. I see nothing that will create the circumstances where E&P MLPs return much more than their distribution income.

    Given all the moving parts an E&P MLP must deal with in terms of drilling costs, reserve calculations, etc. too much risk for too little reward now. LINE's only claim to fame was extraordinary timing of hedges back in 2008/9. You can see it in LINE's stock performance but as those incredible once-in-a-lifetime hedges started their runoff and are now fully runoff you see it in the more recent stock performance regardless of Barron's and Hedgeye.

    I think these recent financial engineering transactions by LINE may paper over the fact that Berry will never be what LINE had hoped it would be and traders have done very well playing the trade from the point LINE's stock was busted to now. I see zero upside from here and my preference is owning the toll gate and G&P MLPs where there are a few less moving parts.
    Jul 6 12:25 PM | 1 Like Like |Link to Comment
  • Dividend Yield Vs. Dividend Growth Revisited - Does It Matter? [View article]
    After five plus years of owning MLPs I can say that my yield to original cost is in the double-digits for every MLP bought in early 2009 and of course that also translates into huge growth of capital. And for those of us that did not let Wall Street run their con game tricking investors into believing MLPs in retirement plans was a big no no..... we have the same incredible total returns with most of us NEVER receiving a single K-1 with positive UBTI.

    I blame wall street for their trickery. The trickery being convincing investors they had to own an alternative MLP product and pay enormous and never ending fees rather than owning MLPs directly in the account meaning a one-time commission only.
    Jul 5 06:17 PM | Likes Like |Link to Comment
  • Is It A Good Time To Buy MLPs? [View article]
    From the history section. Many of the GPs of MLPs were owned for years by private equity investors who then sold out. In other words, the smart money liked the long term dividend growth of GPs levered to the right MLPs.

    I note this because Warburg Pincus owned a big piece of TRGP before eventually selling out when TRGP went public. I also note that last quarter Warburg Pincus got back into TRGP in terms of a couple of their funds.

    History has shown that rising interest rates will force adjustments to interest sensitive stocks as investors have more choices. In this market it may be more violent of a correction because an unprecedented number of investors have been forced into the market because they could not survive on CD yields any longer.

    May 2013 is instructive because we saw violent reactions in the most incendiary of interest rate sensitive stocks; the ones most levered to interest rates, Mreits which have not recovered to any of their previous highs whereas MLPs offering real secular growth took their hit and the best of breed MLPs have since moved on to new all time highs.

    The lesson may be that best of breed MLPs having a REAL long term secular growth story will come out of a net rising interest rate environment much better than any other interest rate sensitive sector. Reits are not a secular growth story.... they are more about trading around real estate between parties and cap rate valuations. I am old enough to remember when Reits functioning as developers adding to the reit's portfolio and acquiring real estate were a real secular growth story. Mreits are about paper that at any given time is only worth par value... premiums and discounts are created as a subset of the interest rate environment but ultimate payoff of underlying securities is always at par.

    I think the hedge funds and other money pros that sold out of GPs sold out too soon. They made enormous sums of money but as you can see with a TRGP we little investors have made an enormous sum of money too.

    Longer term, Factoids may find the 5% dividend growth much easier to achieve in those best of breed GP MLPs but the trick is to get in at the right time.

    WMB has become strangely interesting in the sense its GP yield is very high compared to the peer group and if the merger of WPZ into ACMP creates the kind of MLP I am hoping for then investors may really like the initial yield entering WMB now and if they can grow their dividend as much as they say they can will very much like their yield to original cost several years from now even more. But do your own dd.
    Jul 5 09:47 AM | 7 Likes Like |Link to Comment
  • Weekly Intelligence For MLP Investors [View article]
    Ferrell Gas Partners has been paying the same $2.00 distribution for well over a decade. They have been dead money for over a decade.

    Therefore, I am left to assume the recent acquisitions do nothing to grow the retail propane business or shareholder distributions. All the acquisitions do is allow FGP to maintain the same distribution level.

    ETP and the old NRGY learned the hard way that being an industry consolidator in retail propane was getting them nowhere. It took too many years and so many lost opportunities to invest in more traditional MLP assets before finally ridding themselves of retail propane.

    Retail propane is a fine business model for the company's managers who earn their living. It is also a fine business model for the wall street money machine generating significant fee income from these industry consolidation M&A transactions. It is a horrible business model for shareholders to invest in.

    BTW S&P cut FGP from "sell" to "strong sell". FGP should be taken private but the problem is it would have to be done at a significant TAKE UNDER price to make any sense at all.

    FGP pays you that higher distribution yield but what do you have to show for it after well over a decade on the capital side.... NADA! In a world where Medicare is cutting back on hip and knee replacements and over time we will all see a death by 1,000 cuts in medicare: All of us better be doing a much better job lining up our capital growth stock ducks and cannot own the FGPs of the MLP space. Our capital must grow in order to meet our growing healthcare and other living costs if we are in retirement.
    Jul 5 08:47 AM | 6 Likes Like |Link to Comment
  • Resource Capital: 14% Dividend Yield Is Nice, But I'm Putting This One On Ice [View article]
    All I have to hear is "14%" and I'm done.

    The most important metric is cost of capital. Kinder Morgan's cost of capital is 9.3% on a 6.9% distribution yield. What is RSO's cost of capital? Who do you make loans to that covers your cost of capital? End of story.

    My hope for my fellow investors is you do not arrive at retirement's doorstep addicted to mega-high yield because it is the only alternative to generate the income; desired or needed. The goal is to arrive at retirement needing a much lower yield allowing for a safer income mix in retirement than this mega-yield junk.
    Jul 4 01:40 PM | Likes Like |Link to Comment
  • American Capital - An Attractive Stock In The Agency Mortgage REIT Space [View article]
    Ask the people who were sucked under in May 2013 and watched the equivalent of several years' of future dividend evaporate along with their capital. Then ask them how they felt as dividends were cut meaning it would take a few more years to recover (as if that is really possible) the lost capital.

    If signs (FINALLY) start pointing to a more robust recovery Mr. Market will start demanding higher interest rates based on the portion of the interest rate curve not under FED control. Will it be like May 2013; no because the order of magnitude lessens with each uptick in interest rates much like an initial earthquake followed by aftershocks and tremors.

    You get periods of rest in between these broader moves in interest rates and when investors look back five years from today their total return prospects will be very disappointing. For the traders.... they are enjoying the volatility. It is the long term investor in interest rate sensitive stocks that upon looking back finally understands the true meaning of the wall street term- getting your head torn off.
    Jul 4 10:11 AM | 4 Likes Like |Link to Comment
  • New research links surge in Oklahoma earthquakes to drilling activity [View news story]
    First, there are liberal scientists acting on a no more fossil fuels agenda meaning we have to question every scientist's motivations from this day forward. Scientists may get into a huff and say they are impartial but the climate change debate has been hijacked to the point where liberal scientists call anyone disagreeing with them luddites. That is no way to carry on an honest debate therefore the debate on climate change has become dishonest.

    I would like someone to explain why climate change on Saturn and Jupiter causes winds to pickup by hundreds of miles an hour and there are no human beings there to screw up those planets. An honest debate must establish a baseline between climate change that would be within a normal range and then attempt to determine just how far (if any) manmade effects are throwing climate change outside the norms.

    Liberals don't want to do that because it would most likely result in an immaterial difference thus losing the debate. We all know this is about government power over the individual. Can't liberals accept the destruction of the healthcare system as quite enough for one liberal presidency?
    Jul 3 05:09 PM | 13 Likes Like |Link to Comment
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