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San Juan Basin Royalty Trust Message Board

  • lca13 lca13 Dec 17, 2010 11:48 AM Flag

    Selloff Surprisingly Hard

    I am watching the order book and there is no bid support. There was a while ago but it got sliced through.

    Dividends coming will be less then 10 cents per month, maybe for a long long time. There will be some exceptions, but a $1 yearly is what is coming, as the underlying natural gas market is failing to break much above $4 this winter. This bear market in NG is going to be a year or two in getting fixed, and even then prices may eventually stabilize in the sub-$4 range for most of every year.

    This is a position longs may be able to average down using covered calls however. Or holding some put protection would be a good idea.

    Monday's action will be telling, at least at the open.

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    • just bought a thousand...and already making $..what s 2mmorow...and on down dow

    • Marc Faber point out a long time ago and I agree with this completely that it is weak economies that generate inflation. In strong economies you will have some underlying inflationary element, but growth, jobs, and revenues always more than make up for the spending. It is when economies are weak and ridden with debt that the situation turn dire.

      Think in the 1980's of Mexico, Argentina, Brazil, Israel for a time. They were all weak economies with large debts. Attempts to inflate themselves out of their debts only led to more debts and so on. It was only when they put in severe austerity measures and had world growth like we experience in the 1990s that inflation was brought to reasonable levels.


    • And one other point then I'll shut up for the day.

      Lets do a thought experiment.

      A thousand shares of SJT goes for $23,450 based on todays price. Which would you rather have over the next 9 to 10 years (the estimated life SJT (always on the low side SBR was suppose run out of resources 30 years ago)).

      So lets look at the next 9 to 10 years. In America we will have about 51 million new Americans based on conservative population growth figures. That is a lot of people a lot of buildings and lot of natural gas.

      What could you do with the $23,450?

      You could buy fuel efficient car with the $23,450 dollars which will be worth close to $2000.

      You could buy a bond. Lets say it yields 3.5%. With the deficit in America growing at 10% of GDP by even the most conservative estimates of the Congressional Budget Office you will be losing 6.5% to the printing of money.

      I for one would rather have something where they sell off the product slowly like SJT and the product is priced dirt cheap right now. Then as money is minted to make up for the endless deficit your capital will be conserved.


      • 2 Replies to m5_research
      • However those aren't the only choices for your money. I would rather buy units in an oily MLP.

        I do hold some SJT and other trusts but am more realistic about NG prices over the next couple of years.

      • I understand your argument and appreciate your time frame. If you got into these RT's at lower prices, terrific.

        But starting here is not so smart, because the odds are high that NG will stay depressed for many years, and that the yearly profit of an SJT will be more like $1 and that is not supportive of a $23.50 price range.

        So while you have a good handle on your side of things, many readers here do not. And a price in the teens may very well be in their near future.

        The worst case is starting your position here and having SJT trade back into the mid-teens and "stay" there for years. Look at the chart. Go back a while. Think about $2-$4 gas for a decade. You can say that is not gonna happen. But all you have to do is look at the major capital movements in the industry to see that players are re-positioning for lower prices to come and for a while. The big players are not scooping up assets like those under SJT...

        Lastly, and longer term... these new pipelines in play like REX... don't be surprised if gas moves from east to west in the future, because the big shale reserves are in the east. There are scenarios that would have assets like SJT owns shut-in due to cost prohibitive production. That is not a prediction, just a possibility over the coming years and that would have a devastating affect on pricing, obviously.

    • Are you paid to panic?

      Sounds like a huge contrarian buying oppurtunity based on the level of panic you are posting.

      Natural Gas is on the only commodity that hasn't corrected for the underlying 3 trillion in Federal Reserve purchases and the annual 1.5 Trillion Federal Deficit additions to the money supply.

      It astounds me that suppliers who must have great difficulty finding good uses for their money (i.e. the profits). Please tell me what you can buy these days that besides Natural Gas that is cheap. I'm talking anything on the planet.


      • 1 Reply to m5_research
      • Are you completely unaware of what has happened in the NG industry in the last few years?

        Disruptive technology introductions have led to the ability to harvest gas at much lower costs over wide and known regions. NG pricing is resetting to a much lower and more stable level. The price of traditional NG sources such as SJT will reflect the new pricing.

        What appears happening is that it is "happening" even fast than most predicted. NOw with SJT about to post sub-10 cent dividends, do not be surprised if the mid-twenty dollar run is finally over... and finally over for good.

        Understand what you own.

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