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Linn Energy, LLC (LINE) Message Board

  • angelreborn000 angelreborn000 Sep 9, 2012 2:37 PM Flag

    If we head toward a Massive "Deflation" .........

    and LINE is "Hedged" with their Oil & NG through 2016 (or 2017). How would LINE perform, compared to the rest of the market? I own a few thousand dollars of LINE & I Love the stable dividend.

    Sentiment: Strong Buy

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    • LINE will fall no matter how well hedged they are. Deflation doesn't take sides.

      It won't matter who is elected.

    • Obama has unleashed a dangerous confluence of Obama made higher food prices, higher gasoline and crashing real wages which has depressed the aggregate demand for everything else. That is feeding back into very poor employment in America and China.
      Oil alone of the basic commodities is higher right now. Saudi Arabia is cutting their production enough to offset our gains and crashing gasoline demand, as Americans cut back in amounts not thought possible.
      The new American oil production comes with great amounts of gas. Gas which could go away if SA either cannot or does not wish to keep world oil prices at $100+. So natural gas is selling well below the cost of production for a very extended time even as new drilling production is well below consumption and capacity is shut in.
      So interestingly for LINE if oil comes down it would accelerate the process of natural gas moving at least to the real marginal cost of production. But it could get bumpy as lower oil prices would put even more pressure on ngls which are not hedged and like natural gas very dependent on the performance of the American economy.
      I believe LINE remains a superior selection for income seeking investors on a specific and market condition aspects.
      Defensive companies like drugs, utilities and package food are richly but not insanely valued. High BETA over leveraged economically sensitive; of which SFL is the poster child, are very extremely valued. Preferred shares are very richly valued with all most no spread to bonds even when they are far less secure. MREITs are on a real tear and selling at fairly rich premiums to book. MLPs in business which are not stable toll models with years of growth ahead of them are selling at premium prices.
      LINE is selling at a deserved premium to the EP peer group; deservedly so given the stability of the business model, but very cheaply compared to most other dividend payers.
      I guess another point to keep in mind is that if Obama get re-elected B will just keep debasing the American dollar to offset his massive deflationary no growth and living standard destroying agenda.
      But B would not mind at all keep real interest rates well below the cost of inflation to scare the $2.5 trillion on corporate balance sheets into capital investment. So with a Romney win we could go to worries of inflation in almost an instant due to pro-growth economic policies. Cutting the Progressive corn corruption would release pressure on incomes and this would drive aggregate demand for other value added products.

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