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FrankEllis

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  • ETN Showdown: Why Now Is The Time To Consider MORL [View article]
    No guarantees in the short term. However, in the long term, there must be the guarantee.

    What if rates and spreads and yield curves did not correct? There would be no mREITs to buy mortgages. Banks and mortgage companies would run out of funds, therefore could not lend any more. Home buyers could not get mortgages. Home builders could not sell homes. Construction supply, appliance companies, and labor would all go out of business. No one would be left to pay taxes. The country would go out of business.

    Yes, everything changes, fluctuates, falls out of equilibrium from time to time, but the whole, huge picture, all the components of the mortgage/housing industry and all of the labor from mortgage lenders to Home Depot workers, to lumber jacks, to brick layers and carpenters and appliance production line workers and nurseries growing plants that are sold to home owners are all affected. The picture is much too large for narrow focused stock buyers to see, but a long term state of inverted yield curves and narrowed spreads is an ultimate impossibility. Therefore, a long term guarantee is always in place, merely unseen by the short sighted.

    As you stated, with high yield investments, one is paid to wait until the price cycle rotates, but the economy, population growth, and the natural order of disequilibriums correcting themselves is a certainty. The only uncertainty is when. There is no if, but merely when.

    An individual unwilling to wait on a correction and recovery should not be in the game because they cannot see the forest for the trees, the big picture for a few insignificant elements of current news which block their focus of attention. I believe that, in general, income investors invest for long term income, retirement which can last for twenty, thirty, forty, fifty years, and look at that time frame rather than the short, limited, narrow, infinitesimal view of current news events. The long term income investor knows that every market crash has evolved into a new market high, no exception. He knows that the economy has been growing for thousands of years, and will continue to grow. He knows that for every trough there is a wave, so change and fluctuation is the constant, but population grow causes increase in demand, and supply is determined by the supplier's ability to make an acceptable profit. Rates, curves, and spreads will work out in the long run to afford the suppliers -- mREIT's and all others -- to make a profit for themselves and their stock/trust holders. Everything else is just static, illusion, clouds obscuring the guarantee that all business, the economy, will work toward and find an equilibrium of the Law of supply and demand.

    Investors should also have a little willingness to understand that yield is income divided by price. When demand for mortgages causes mREITS to have a steady stream of income, but panicky stock buyers sell off stocks causing a decrease in demand, thus an increase in supply of shares and a decrease in price, it is not the loss of income, but the decrease in price that causes yields to look inflated, the signal that the contrarian loves. The fact that RIC's do not pay income tax, therefore must pass through their steady stream of taxable income, is another factor that seems beyond the understanding of the short sighted, but attracts long term income investors. The negative comments on articles like this serve only to show that the commenter has not made the effort to understand the investment. Those who do understand can help the open-minded, but not the ones who obstruct their understanding with biased, poorly thought out opinions expressing lack of understanding.

    I am long on the American economy, long on the ETN's, long on MORL, and automatically reinvesting all yield into more shares. Thus, down cycles in prices are very beneficial to my long term goal of increasing long term retirement income. The downward pressure on price that some fear, I view as a wonderful opportunity because I look at a larger picture of the economy and a longer time frame.
    Jun 30, 2015. 03:51 PM | 14 Likes Like |Link to Comment
  • BDCL Still Attractive With A 19.2% Yield [View article]
    Do you understand what a RIC is?
    Jun 26, 2015. 03:28 PM | Likes Like |Link to Comment
  • MORL's Still Attractive Dividend Yield May Exceed 30% [View article]
    That is a GOOD thing. Means reinvested yield is buying at a discount, therefore buying more shares than if the price was higher, therefore buying more yield, more income. Purchasing at a discount, a lower price, is good.
    Income investors are buying for long term income, so lower prices mean higher retirement income. If a short sighted speculator is buying the ETN for price speculation, they simply have not figured out that High yield, income producing ETN's are not there for price appreciation, but for income appreciation. They should be investing in SPXL, TQQQ, or TNA for price appreciation, not interest sensitive, income paying, high yield instruments. They should not even be in this message board. And certainly, no one should invest in these if they think that they will need to withdraw the capital in the short term, like a year. This is for the long term, ten years, twenty years, retirement years. Short term ROI is gladly, happily, joyfully sacrificed for long term increased income.
    Jun 23, 2015. 03:21 PM | 6 Likes Like |Link to Comment
  • X-Raying CEFL (Part 2): Geographical Distribution [View article]
    no
    Jun 23, 2015. 02:31 PM | Likes Like |Link to Comment
  • X-Raying CEFL (Part 2): Geographical Distribution [View article]
    Greatly appreciate all the work you've put into research. YES, a January analysis will be very beneficial. Thanks for all you do.
    Jun 20, 2015. 05:14 PM | 1 Like Like |Link to Comment
  • Oxford Lane Capital Sell-Off Is Irrational [View article]
    I'm unaware of any accessible research on line. I have done my own through a wide range of REIT's, BDC's, CEF's, and MLP's. Yes, I agree that there is a recognizable price cycle with high yield quarterly payers. Many times the price will drop two to two and one half times the amount of the distribution on ex-date to ex plus a week. Often price will drop through the lower Bollinger band in the days following ex-date.
    Price should drop the amount of the distribution because on ex-date, the share of the company is worth exactly that much less, because the value is taken out of the share as a distribution, a fact that seems often overlooked. That is compounded by the dividend buyers who bid up the price prior to ex-date, and sell right after, or, as you mentioned, some sell the day before. Selling in a rising price is a good thing, especially when one knows the schedule, the actual day of when the price will drop, and the demand will drop.
    I worked with that scenario for several years, looking at the charts, seeing the lows on ex or ex+1, or ex+2 and so on for the history on each, then bought at that low, and sold a day or two or three before the next ex-date. If the price increases 2-1/2 times the amount of distribution from the ex+ low to a high prior to the next ex-date, theoretically one is better off following that quarterly buy/sell plan instead of a long term hold and reinvest dividend plan. One can sell on the pre ex-date high, reinvest at the post ex-date low, buying many more shares, quarter after quarter, and grow a portfolio.
    However, one can get stuck with market swings, Fed announcements, Congress antics, terrorist attacks, Greece non-payments, or the company doing something unusual. I lost that OXLC extra distribution because I was out of it at the wrong time. So it is not a perfect plan, and not recommended in the last quarter when special distributions are subject to be announced.

    Thus, a relatively flat price, cycling from the share being worth less on ex-date, to the share including another quarter's worth of income just before the next ex-date, is a recognizable price cycle. The emotions of the unknowing cause problems in the cycle, and the Fed govenors playing with the market, making false statements throughout the cycle, causes temporal havoc with the price as compared to what the company is actually doing for the value of the stock.

    The volatility of the market makes timing the market more uncertain, so I converted to a simple buy, hold, and reinvest the distribution strategy, owning virtually only high yielders, three individual companies and four 2X index notes of high yielders, plus a 3X S&P. I recompute my income after each automatic reinvestment, and watch it steadily climb quarter after quarter, year after year. I feel that the high yield offers a better rate of return/growing income stream than trying to figure out which stock would offer the equivalent rate of price appreciation.

    So, anyone willing to do the work of looking at the multiple year charts for high yielders, super imposing the ex-dates, moving averages, and Bollinger bands, and recognizing the generally gentle ebb and flow of the price cycles, can understand RIC's, high yield pass through companies. Understanding these are high yield BECAUSE they do not pay income tax but must distribute the taxable income on a regular time schedule is a step in the right direction. Understanding that the distribution is an actual piece of the share, and reinvesting the distributed piece into more shares, is a painless way to grow wealth, as well as grow income for whenever it is needed. And even when it is needed, or must be taken for RMD's and taxes, leaving any of it, even a small percentage, to be reinvested, is inflation protection. One must trust management, ignore the price swings, and focus on the income, reinvesting it when possible. Price will swing, and the individual investor has little control over price. But the individual investor does have control over emotions, selling/buying at the wrong time, and what is done with the income. I have faith in the long term ability of management to make and distribute profit on a regular schedule for years into the future. I have faith in the American way of life, the U.S. economy, and the capitalist system, but in the long term, not in the inevitable gyrations caused by manipulation of news, information, and emotions. Changes in price due to the ignorance of the market panics and euphoria have absolutely nothing to do with what the company and management is doing to make the profit that is being distributed. There is complete disconnect between the two, the perceptual and the actual. Learning to ignore the ever gyrating perceptions IS what the individual investor has control over.
    Happy investing!
    Jun 8, 2015. 11:08 AM | 2 Likes Like |Link to Comment
  • Oxford Lane Capital Sell-Off Is Irrational [View article]
    Given the lack of understanding by commenters in this thread, will some price focused individuals be surprized when the price drops $.60 on June 12, the ex-date, more if dividend buyers run the price up and then sell off on ex-date or the next day?
    Jun 5, 2015. 04:07 PM | 4 Likes Like |Link to Comment
  • Oxford Lane Capital Sell-Off Is Irrational [View article]
    What are they going to use for business growth, given they are required to distribute all income and cannot retain income for growth?
    Jun 5, 2015. 03:45 PM | 2 Likes Like |Link to Comment
  • Oxford Lane Capital Sell-Off Is Irrational [View article]
    I'm guessing that your figures are from the in-house information, establishing a DRIP at OXLC. But there are other reinvestments made in brokerage accounts, IRA's, etc. The difference is that either OXLC or the brokerage house holds the shares for the investor. That said, more reinvesting is going on than is transparently visible.
    Jun 5, 2015. 03:41 PM | 2 Likes Like |Link to Comment
  • Oxford Lane Capital Sell-Off Is Irrational [View article]
    If you are looking for price appreciation, RIC's are not likely to provide it. The company has no choice in the distribution. Pass through entities are required to pass through the vast majority of taxable income and capital gains, therefore cannot keep income for capital expansion. This is the reason for secondaries, one of the three means for raising capital when opportunity knocks. If taxable income exceeds distributions in a year, it must still be distributed in that year, which is what happened at the end of last year, the extra distribution. So the distribution did actually increase from $2.40 to $2.50 for the year.

    The way to reduce actual cost per share, and increase income from a RIC, is to reinvest distributions in additional shares. This simulates stock dividends instead of cash dividends, and is offered by OXLC as a way of receiving distributions. Fidelity and other brokerage firms also offer this alternative. In this way, original cost is spread over more shares, and more shares increases total income, thus serving to increase yield -- income as a percent of original cost. Current yield, reinvested, would double your number of shares in about four and a half years, effectively doubling the distribution income, and halving the share cost. High yield RIC's are completely different from corporate stocks on which income is taxed at 40%, a small dividend is shared with stockholders, and the rest is retained capital held within the company. An investor must choose which is most desirable, but they are wholly different investments, mutually exclusive, opposing choices, and cannot be expected to act like each other. RIC's yield high pass through income, not price appreciation. Corporations pay income tax, yield little income, and may or may not appreciate in price.OXLC virtually guarantees nearly a 16% return per year, but the choice to keep it within the investment or separate and forget that it is a return on investment, is the choice of the investor. How many taxed companies guarantee a 16% stock price increase every year?
    Jun 5, 2015. 03:26 PM | 1 Like Like |Link to Comment
  • Stocks poised for lower open as higher rates take toll [View news story]
    Really? for a gain of 3 bps, if I invested a million dollars I'd increase my income $300/year. I'm hard pressed to sell stocks yielding 15% in exchange for 3 bps. Increasing/decreasing bps can hardly be a consideration causing the stock market to sell off one day, and rise the next.
    Jun 4, 2015. 01:08 PM | Likes Like |Link to Comment
  • Oxford Lane Capital Sell-Off Is Irrational [View article]
    By nature, humans and the market are irrational, hence the contrarian buys when there is blood in the streets, sells when euphoria smothers out the true picture. This is a knee jerk reaction that seems inevitable in all secondaries of high yielders, RIC's, including REIT's, BDC's, and CEF's.

    Consider what OXLC has just done for us. NAV on 3-31 was 14.08, secondary was 15.65. Accretive. Gotta love management. Management is free to buy back shares under 14.08, sell shares above, thereby increasing stockholder value in either situation.

    At $15.10, yield is 15.89%. At 16.05 yield was 14.95%.

    I applaud those of you who had cash available. If I had cash available, I might have jumped in last night when I noticed close was 16.05, offer was 15.50 and bid was 15.25 after hours. Alas, I am fully invested and OXLC is my second largest position, so I will continue to wait for future distributions to automatically reinvest in more shares. Too bad that this secondary was not timed right before the pay date, but maybe the fearful will keep the price here until 6-30. I am sure that management timed this for an already researched and agreed upon use, and only hope this is enough, or that debt can cover the remainder.

    Thank you, Sir, for a well written, factual, non-emotion driven article and your knowledge of secondary/block trades. I salute your clarity. I appreciate you educating us.

    I also believe that management knows how long it takes to collect the cash from the sale, and already has an investment waiting for the arrival of the proceeds. Will the secondary dilute EPS? Yes, temporarily, because income from investment of the cash will lag, so potentially negatively affect the current quarter, but increase future quarter's income as well as increase present NAV. Will the difference between the 15.65 sale and the 14.08 NAV cover investors who hold their shares? Absolutely. Good job, OXLC!

    Price seems to have stabilized at 15.10, but still a good opportunity, so let us save the opportunity until pay day on 6-30, buying more shares with the distribution than we would have at 16.05.
    Jun 4, 2015. 12:40 PM | 3 Likes Like |Link to Comment
  • NAREIT unveils new REIT industry tracker [View news story]
    I appreciate your thought, understand your desire to see an increase in distribution. I also understand that management of a RIC has very limited ability to choose the amount of distribution.
    In general, NYMT must pay out each fiscal year to unitholders 90% of income in distributions to qualify as a registered investment company, to avoid any normal federal income taxation. Failure to do so would result in losing their RIC status and paying up to 40% income tax.
    NYMT must pay out 98.2% of ordinary income (fees and interest income plus realized short-term capital gains minus long-term capital losses) and 98% of capital gains (from realized long-term capital gains minus realized short-term losses) to investors.
    Failing to meet these requirements results in a 4% excise tax on the retained earnings. If NYMT pays out 90% of its income, it can maintain its RIC status. However, if it fails to meet requirements for ordinary income and capital gains, the remaining 10% of earnings are taxed at 4%. The 4% can be significantly less than the cost of raising capital through a secondary offering, not to mention the 13+% paid out in distributions.
    Now, according to your comment that management is doing well for itself, I suppose that management could be skimming otherwise distributable taxable income as expenses, management fees, but those are determined by the management agreement stipulating the basis for all such fees. So if the lack of increase is a real concern, and you have the legal and accounting ability to compare the management agreement with the quarterly and annual tax reporting documents, there may be a case to decide whether NYMT can, in fact, raise the distribution and still be whole.
    I invest under the assumption that many are watching this for me, that accounting firms, IRS, and SEC are making sure that all the "i's" are dotted, all the "t's" are crossed, all the income and deductible expenses are proper and accounted for, and that the distributions meet the RIC standards mentioned above. We know assumptions are not the best due diligence, but trust and faith is a choice I have make unless I am willing to exhaust myself in research.
    I also understand that NYMT is not a stock paying dividends out of what is left over after income tax, after capital retained for growth of the company, but a Trust highly regulated in the distribution it has no choice but to pay out to unit holders. I understand that NYMT can pay out too much, but cannot legally pay out too little, and that management seems to do a good job of keeping a level, dependable distribution even when they must anticipate as yet unreceived income in one quarter and paying the Trust back in a future quarter. When income is not level, it is very much to the advantage of the investor when the Trust deliberately decides to maintain a level distribution. Some REIT's have had increases in distributions, then decreases because they did not plan well. That NYMT has maintained the same level distribution for years actually increases my trust and faith more than if the distribution varied, increasing and decreasing. Even in a simple example like MORL, one can recognize that no two months, no two quarters, are level, because the REIT's in MORT/MORL are constantly changing distributions, and not all in increases as NAREIT would lead us to believe by stating the increase in distributions. There are too many variables to compare NAREIT numbers to NYMT numbers, too many variations of what REIT's do, what they invest in, where they borrow, how poorly they did then improved and increased their pass through income.
    Yes, it is a wonderful feeling idea to think about NYMT increasing the pass through distribution, but there is also much to be said for the peace of equilibrium that NYMT seems to have found.
    One seeking increasing dividends might look at SDYL, NOBL, REGL, SMDV and other "aristocrat" investments in companies that that have increased their dividend every year for at least 25 years.
    May 30, 2015. 03:23 PM | 1 Like Like |Link to Comment
  • NAREIT unveils new REIT industry tracker [View news story]
    If you are reinvesting your distributions, you ARE receiving a nice 10+% divi increase every year. If not, it is the investor's choice, not the fault of NYMT. The more they give you, the less they reinvest for you. Look at the large REIT's that are cutting distributions and yields, not the fact that more folks are buying more mortgages encouraging more REIT's to be formed so that the recovering housing market is the cause of the increase in payouts, not increases in individual REIT's.
    If you are kind of upset, who is making the choice to be upset? Why not relax and be happy with a rock solid steady stream of dependable income. Why not enjoy the happy outcome and keep peace of mind, letting NYMT management do the worrying and work. Why not consider how many REIT's are distributing less yield, and flow gently with the stream of reliable income. Just a thought, a different way of perceiving -- being grateful for what is occurring. I am just a whole lot happy that NYMT is consistent for years, thus giving me a dependable distribution to buy more share to increase my own yield every quarter for years.Of course, there is MORL if you want the basket of ever changing REIT distributions.
    May 29, 2015. 08:19 PM | 3 Likes Like |Link to Comment
  • Individual Quarter Results May Vary But Medium-To-Long Term Looks Good For New York Mortgage [View article]
    Thanks for your interest and research. I fully agree, am happily and substantially long NYMT. By reinvesting all distributions, I have increased my yield on original investment to 19.15% in 19 months of ownership. Steady as she goes, every distribution adds to my number of shares, increases income, and increases yield. Not drama, but solid wealth building.
    At the current yield of 13.9%, a conscientious income investor reinvesting all distributions will double income, yield, shares, and wealth in about 5.2 years. Not many growth stocks can guarantee 100% return on investment in that same five year period, and not many stocks can offer to double the 13.9% income yield in that time frame. Just consider the possibility of making 27.8% income on an investment held for five years. Or receiving in annual income perpetually, the same amount as invested, by reinvesting all distributions for about ten years before beginning to take the income instead of reinvesting it.
    If I could only own two investments, NYMT and OXLC would fill my portfolio. Rock solid, consistent, and high yielding.
    Thanks for sharing your findings.
    May 29, 2015. 11:41 AM | 5 Likes Like |Link to Comment
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