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laterre

laterre
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  • Is Farmland Partners The Best Set And Forget Opportunity Ever? [View article]
    No arguments there, and well-said! Buying at a realistic price is key--and long-term a good inflation hedge (for when we actually get some inflation). As for FPI, we know what they paid (though not the current value) but the attraction for many is the possibility of a dividend and earnings--which are going to be a lot less lucrative once those related-party, above-market leases roll off. I think people who see this as a divvy play are going to be disappointed in the future.
    Oct 2, 2014. 10:00 PM | Likes Like |Link to Comment
  • Is Farmland Partners The Best Set And Forget Opportunity Ever? [View article]
    Haha, LOL, buying opps from the commodity bust!

    Seriously, though, all the hot money "inflationistas" who piled in at the top of the market paying $12-15K for prime Midwestern farmland aren't going to like these new grain prices and what the commodity sell-off does to their expected ROE.

    Problem with this stock/thesis is that it can't be both ways: EITHER there's a rosy future for commodities and farmland, and healthy divvies to be paid out from all these great (above-market) triple-net leases at $400+ per acre, OR they're well-positioned to take advantage of the shake-out when land prices hit the skids. But it CAN'T be both ways.

    This thing reeks in terms of conflicts of interest, and gimmicky IPOs like this always mark tops in bubbles. Insiders seeking to cash out by dumping their problems and debt onto starry-eyed retail investors late to the party.
    Oct 2, 2014. 03:13 PM | 1 Like Like |Link to Comment
  • Is Farmland Partners The Best Set And Forget Opportunity Ever? [View article]
    Any thoughts on this now that corn is headed for a 2 handle, and soybeans an 8 handle per bushel....? Those initial above-market leases look even more improbable in light of a 30-50% +/- drop in grain prices. Absolutely no way they get those kind of rents when the original leases roll off to market rates with third parties.

    Disclosure: currently considering a small short position.
    Oct 1, 2014. 10:29 AM | Likes Like |Link to Comment
  • CEF Strategies: The PIMCO CEFs - Opportunity Or Warning Shot? [View article]
    Agreed--one of the great things about the CEF structure, as you say, is that they don't need to carry cash to meet redemptions, and many of them are already fully levered (with further implicit leverage through cmo derivatives). But the great thing about the barbell strategy in PDI, PCI, or PKO (not sure about the extent to which Gross CEFs used this) is that when one end is going down, the other tends to go up--or at least hold constant. So you sell a little of the very liquid GNMA equivalent cmos or agency pass thrus and use some of the proceeds to pick up the juicy stuff getting dumped from the other funds, which presumably you get to see first.

    For every disadvantaged seller there's a happy buyer right now licking his chops. I'm sure they've got bigger things on their minds at Pimco right now, but I see this as a trading opportunity.
    Sep 30, 2014. 08:00 PM | 1 Like Like |Link to Comment
  • CEF Strategies: The PIMCO CEFs - Opportunity Or Warning Shot? [View article]
    Or, to the extent that it's appropriate, the CEFs can scoop up some of the choicest higher yielding assets that are being forcibly dumped by the OEFs. There are SEC rules about arranged sales from one fund to another, I think, but this can be accommodated without jumping through too many hoops.

    Having more non-agency mbs dumped into the market at more reasonable prices/ yields is far from a bad thing, although you're correct that it may show up temporarily as hits in the daily NAVs of the CEFs.
    Sep 30, 2014. 05:38 PM | Likes Like |Link to Comment
  • CEF Strategies: The PIMCO CEFs - Opportunity Or Warning Shot? [View article]
    I can kind of understand (but not really) focusing on the yield, rather than the premium to the book value. You are indeed paying 1.37 for assets worth 1.00, which runs against my instincts (and the whole opportunity of CEFs) which is to buy things for a discount to their underlying value.

    But what makes no sense whatsoever (at least to me) is paying more than NAV for a yield of 13% which is actually, at least partially, a return of capital. You realize that PHK isn't fully earning the 13% they're paying out, and that part of the distribution is a return of your own money (for which you've paid a premium)?

    In fairness, some of the Pimco funds can be wonky in terms of breaking down the income from coupons, derivatives, and capital gains trading, which may be at work here, but it also seems like PHK is a fairly clear case of a fund that's not earning its distribution and hasn't been for some time. It has negative UNII.

    I'm happy to be corrected on this, as this one isn't one I've looked at carefully. But regardless of the details of this fund, if you're paying over book for an eye-popping yield, you'd better be darn sure that it's actually earning the extra yield to merit the premium...
    Sep 29, 2014. 10:21 PM | 1 Like Like |Link to Comment
  • Bill Gross PIMCO Exit Creates Unprecedented Value In CEFs [View article]
    No, we're not kidding you, and the effective leverage of PDI is actually well more than 47%. FWIW, PDI is also overearning its divvy with +/- 12% ROC, sells at a discount to NAV, and if you follow its chart of NAV, hardly missed a beat (indeed has continually increased NAV) throughout the "taper tantrum" last summer, showing negative empirical duration. Yes, it carries a lot of leverage, and some of the credits are dicey (my main concern), but it also has a healthy dose of agency CMOs and other ends of the "barbell" that would do well in a credit sell off. Other than maybe BOI or DMO, you won't find a more steadily growing NAV in the cef space.
    Sep 27, 2014. 10:10 PM | 2 Likes Like |Link to Comment
  • Bill Gross PIMCO Exit Creates Unprecedented Value In CEFs [View article]
    Random thoughts, none of which are probitive:

    (a) if he wants to hurt PIMCO, then selling off a bunch of CEFs en masse does absolutely nothing to PIMCO's bottom line. Whether he own a CEF at X or dumps into a bidless market where someone else buys it at .8X means zilch to PIMCO. CEFs are fixed pools of capital. if he really wants to cause them problems, it's by urging redemptions from their OEFs.

    (b) Guy is probably pissed but not stupid. He can't get out of these $50-60M positions (most of which are in family trusts) without moving the market and selling at significant losses. The only people who'd lose from him dumping shares in a temper tantrum are his family and kids (and those who'd gain are the buyers). Any rational liquidation is likely to be slow and measured.

    (c) somebody is going to have to seed the new Janus fund. One assumes that someone worth $3B can find some free money to pony up for this without worrying about a lousy $200-300M stuck in family trusts. Plus, given the cult he's inspired over the years, plenty of money will follow him (wisely or stupidly) to this new Janus vehicle.
    Sep 27, 2014. 09:54 PM | 2 Likes Like |Link to Comment
  • Bill Gross PIMCO Exit Creates Unprecedented Value In CEFs [View article]
    Guard,

    Your logic would suggest that any time a dividend or "taxable event" is on the horizon, one oughtn't to buy, regardless of the order of magnitude of the newfound discounts relative to the potential special dividends. But one has to weigh the opportunity to buy some of these funds at 3-10% (or more) off the "regular" price versus the tax-adjusted cost of getting .25-1.00 (or whatever you think the special might be) of the current NAV back at the end of the year. There's no categorical right or wrong answer to this, other than to say that in most tax brackets, you're looking at the temporary discount as being worth a factor of 2.5 to 3 times the tax-adjusted cost of the special.

    Agree that one should never deliberately buy into a dividend in a taxable account, but (a) presumably the potential for a special distribution at year end was already priced into these funds before the Gross bombshell, and thus the new "sale prices" are true discounts to the fund value ex-ante; (b) many CEFs exhibit irrational price moves at year end as the special dividend triggers chasing as well as making it clear (as in the case of PDI or PCI) that the fund is currently overearning the monthly "yield," on which uniformed retail investors tend to fixate); and (c) as a de facto return of UNII from the course of the year, specials mark one way in which CEFs trading at discounts to NAV move closer to par.

    In sum, if these become significantly cheaper, I don;t see the potential for a special as a deterrent to buying. But what makes tax sense for one person may be completely a waste of time for another....
    Sep 27, 2014. 09:43 PM | Likes Like |Link to Comment
  • Bill Gross PIMCO Exit Creates Unprecedented Value In CEFs [View article]
    Jensen I,

    Interesting comments, most of which I agree with. I, too, think Gross is somewhat overrated--and likely to flub badly in the new enterprise at Janus. He's always generated outsized returns by making aggressive unidirectional bets on IR moves. When these bets have been correct, he's done really well. Lately, however, when he's been off (i.e. dead wrong) on the effects of QE, his returns have been dismal. Still, you have to give the guy props for being able to move the needle consistently on a $250B bond fund. We'll shortly learn who the real Bill Gross is when he's managing what's likely to be a much smaller and nimbler fund with a more aggressive mandate and a chip on his shoulder. I won't be investing in it but watching closely from the sidelines.

    Where I disagree is that it's by no means empirically clear that the "bull trend has broken down."
    Sep 26, 2014. 06:04 PM | 7 Likes Like |Link to Comment
  • Bill Gross PIMCO Exit Creates Unprecedented Value In CEFs [View article]
    Added to PDI, PCI, and PKO today (all Ivascyn-managed funds). In contrast to OEFs like PTTRX, which could indeed suffer some forced-selling due to redemptions, the CEFs (especially the Ivascyn vehicles, which have outperformed Gross) are bullet-proof in terms of their underlying NAVs.

    But the main worry about these funds is that Gross himself owns hundreds of millions in Pimco CEFS, and one would assume--given the acrimony--that he'll eventually want to exit these positions. He's got upwards of $50-60M each in PDI and PCI, for example. That's a lot of shares potentially headed for a very small door.

    You have to assume that while he's difficult to work with, he's not stupid, and I can't imagine he'd dump these all at once. But even assuming a slow and measured exit, that's a big overhang of shares that may be put back onto the market in the next 12-24 months (or whatever time frame).
    Sep 26, 2014. 05:00 PM | 4 Likes Like |Link to Comment
  • Walter Energy: Dramatic Price Decline Appears Overdone [View article]
    Truly ugly selling action, but with a market cap of $150M through to the equity, the stock is still overpriced given their capital structure. I now fear the bonds will also be a zero, but if you want to play hot potato on this one, the bonds are a better bet at 15-20 on the $.

    And I wouldn't be at all surprised if they file ch. 11 well in advance of exhausting the cash, so these kinds of liquidity calculations aren't especially helpful in terms of guessing the timing.
    Sep 24, 2014. 02:39 PM | Likes Like |Link to Comment
  • Yield Is Over 18%, Western Asset Mortgage Capital Increased The Dividend [View article]
    Glad that helped. It's a good company--my fave mreit--but at some price everything becomes disposable. My largest single name exposure, and I'd like to get it down a little and pivot into some of the mortgage Cefs that are beginning to open up nice discounts.
    Sep 24, 2014. 11:12 AM | Likes Like |Link to Comment
  • Yield Is Over 18%, Western Asset Mortgage Capital Increased The Dividend [View article]
    Well, if it came straight from Schwab, then it's gotta be solid... :)

    Tips: only take data from the official SEC filings, and like RLP says above, don't invest in something you don't understand.

    If I had to *guess* where they're getting the numbers you cite, I'd imagine that it's probably a blended annualized earnings number which reflects the 1-Q headline disaster. But those "earnings" numbers from 1-Q reflect realized as well as mainly unrealized mark-to-market losses on their portfolio. Losses are losses, you might say, but for mreit purposes the relevant number is core income--which was $1 last quarter, as the article correctly points out. They earned .75 core with .25 in drop income. Unclear whether the drop income will be replicable on a going forward basis.

    If none of that means anything to you, then by all means do not buy this mreit or invest in mreits more generally.

    PS: the other relevant number people should be paying attention to is NAV. They are probably very close to current NAV (inclusive of the unpaid .70). In what now looks like the increasingly unlikely event that this should run up much higher before ex-div date (say, a very high 15 or low 16 handle), you run the risk of an SPO after it goes ex-div.

    Disclosure: long WMC, but looking to trim in the mid to upper 15s.
    Sep 24, 2014. 10:52 AM | 1 Like Like |Link to Comment
  • 20% Yielding Western Asset Mortgage Shifts Holdings To Support The Yield And Book Value [View article]
    You're missing something: total shareholders equity/ shares outstanding at the date. It's divided out for you in the earnings 8-k, for the mathematically challenged.
    Sep 21, 2014. 02:09 PM | Likes Like |Link to Comment
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