We used to believe such twaddle back in college, wrote scholarly papers on it, chock full of math and graphs. One would think that with the wealth of information available to anyone on the net that security prices should have become more efficient, but the opposite seems to be the case. Which may mean that someone (funds) have found out how to manipulate the market, or at least they try, not always to their profit it seems.
Case in point, VNR. All the MLP's recently underwent a mini-crash, some say out of a fear of tax changes after BHO inexplicably was given a second term to be utterly incompetent. But I was watching the press over that time, and the only articles that mentioned the issue downplayed the chances of changes, and wondered why the reaction. Why indeed?
VNR seemed to finally be ready to push over $30 and stay there, only to quickly lose $5. Did something happen to the company to put its value into question? Not at all, any news during that period was neutral at worse. And here we are today, a brief time later, getting close to $28. Because their debt was given a rating increase? Did anyone investing in VNR really care about their debt rating from some thoroughly discredited agency? Surely, all information about their financial position was known, by at least a few investors, and . . . here's that efficient market hypothesis again . . . that should have been enough to "properly" price the security. It should flop around like a landed fish.
So, what goes on these days? Why should an asset class as rock stable as a well-hedged MLP undergo such violent swings? Has something gone amiss, other than the seemingly routine failures of judgment among financiers (like HP paying over $10 billion for a business now valued around $2?). Or is the market so thinly traded among actual investors, so dominated by traders, even for a relatively difficult security to trade (don't forget those K-1's)?
Fortunately, for cooler heads, this regular irrational behavior does present the opportunity to profit, if one can stand to sell, not an easy thing to do when you're holding for cash flow. If VNR tops $30 again in the near term, should you convert to cash, deal with all the tax nonsense involved, hoping to buy back again at $25? We certainly should have this last time, and I did, but with a legacy position in EROC, a badly managed MLP (at least in the past) I ended up owning a lot of given how cheap it got. But I didn't have the guts to sell any of my precious VNR. Will I sell some over $30 next time? Will you?
however unless tax laws change im not selling mwe,ngls,gel,or vnr in these panic situations.
in fact i added to all.
truth be told my fav has been and looking forward is gel.
]however the others all have great management and imho a excellent future.
if they panic again ande if everything is as it is now then ill add.
i have been around these mlps and others sincev 2000.
my finger stopped itching years ago.
enjoy your posts