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San Juan Basin Royalty Trust Message Board

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  • hotpanera2 hotpanera2 Aug 22, 2004 6:56 PM Flag

    NG trend is up....

    Over the past 2 weeks I twice sold 40% of my position in the 28s and bought back in the 26s. However, I have now decided to retain my entire position, even though we're back in the 28s. There are 2 main reasons: First, the combination of the strong distribution which I expect to continue for the foreseeable future, coupled with the need to recapture the depletion deductions in addition to paying capital gains tax on a sale in a taxable account, make SJT much more likely to not decline significantly, so long as NG prices don't fall apart. There are just too many holders who are here for the distributions with price secondary (within limits), and who particularly don't want to pay tax on all their prior distributions, putting alot of stock in "strong hands." The large distribution also discourages shorts who have to pay same each month.

    Second, while the price of NG hasn't risen lately, given the very high crude price (even with a moderate correction) NG will start being substituted for crude much more. In my building, for example, we can just flick a switch when either commodity becomes cheaper. I'm sure we'll be doing that for NG this winter. While I don't know the extent of the substitution potential and would welcome any info from anyone who does, I have to think that at the margin this will make NG rise come winter, and certainly not fall much even if crude declines some.

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    • Very good point about the "strong hands" and the depletion/recapture issue. I have not touched any of my position in my non-retirement account. I have only sold (and my current sell order is only for) my 401K tax deferred position.

      If this board is at all representative of who owns SJT, your strong hands thesis makes sense. Perhaps I will readjust my sell order to 33...

      thanks for your comments (and thanks to the others who responded in this thread, too.)

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