Talk about revisionist history. Chegerar,you are the king of revising history. Let's rewind the tape. First, as is clearly set out in the proxy of the APL merger with NGLS, the Cohens were first approached by Kinder. Then they were approached by several other midstreams MLPs. There was a feeding frenzy for acquisitions and the sector was hot. Yes, they got a pretty good deal from TRGP/NGLS, who themselves were a potential target from ETE/ETP. But you are also forgetting that the merger price was off of the highs that APL had earlier reached. And you are also conveniently forgetting that (1) the Cohens' overpaid for at least one of the acquisitions in South Texas and (2) the distribution growth at APL had flattened out, contrary to previous projections by the Cohens.
Second, you are completely wrong about the sale to Chevron. In that case, the Cohen's had messed up their hedging at APL and ended up in a situation where they had to sell the most profitable part of the old APL to Chevron in order to pay down their bank debt (sound familiar). They also had to suspended APL's distribution which caused the price to collapse into the single digits. That was a good thing for me because I was able to buy some APL when they finally paid down the debt enough to reinstate the distribution.
If Cohen had the best crystal ball, he would have sold ARP and ATLS at the top of the market to some other e&p MLP, but he ran it into the ground. He also wouldn't have bought the properties they did at the top of the cycle. The cycle will eventually turn and the remnants of ARP/ATLS may return in some form or another with the Cohen's at the helm and no doubt you will be back to say they were geniuses with more revisionist history of how ARP survived due to the Cohen's.
Are you related to them or are you an i.r. mole?
Ed, I have a bunch, but several in the Invesco family, which used to be Van Kampen. Blackrock, Putnam, Nuveen and PIMCO also sponsor many. I've avoided the PIMCO ones because they tended to trade at a premium to NAV and why pay $1.10 for $1 worth of assets when you can buy that at 0.90 or 0.95. The CEF connect website has a bunch of info as far as historical discount/premium to NAV and the amount of UNII and ratings etc. I have VCV, VGM, VMO, NPV, NTC, VKI, PMO, VKQ, IIM PMM FMN and MUH. Some have higher discounts to NAV, and some have slightly higher yields. Don't trust the yahee info on the yields -- you have to calculate it yourself.
They have rallied tremendously over the last year or two, but if you believe the economy will continue to weaken, they should continue to perform well, but may be vulnerable to a correction especially if the Fed raises rates. VGM took a tumble the other day under its 50 dma and is now fighting to retake it.
Hedgeye is issuing a negative report on TEP/TEGP arguing that their distributions will go to zero in 2020. They issued the announcement yesterday, which caused a selloff, and are issuing their "report" and conference call on the 26th.
Bob, my comment is not on this deal in particular as I don't follow ARCC. It's just that I have seen this type of m&a action before, particularly leading up to the financial crisis. As I said, it can go on for some time before the sector becomes overvalued.
Ed, on the muni retreat, yes many of the muni CEFs have pulled back from their earlier highs from the first week of May. Many of the names that I own have pulled back and sometimes pierced their 50 dma. Some are attempting to retake those levels. A lot of this retreat accelerated when the Fed governors started talking about a June rate hike. If rates are actually raised, I would expect a further decline, but that's a very big if. However, if rates are not raised in June, I think the sector will rally, especially if there is further evidence that the economy continues to slow. Many of these muni CEFs are up 15-20% SINCE December, with their 6% annual divies not included in the price increase. They were well overdue for a correction. There are still a few that are still selling at good discounts to NAV, but many are approaching par.
Typically when we start to see mergers and acquisitions in a sector that usually marks the beginning of the end of the bull market. The reason is understandable. The companies can't keep increasing their returns through the normal process of getting business so they try to "buy" it by acquiring competitors and sometimes using their (sometimes overvalued) stock as currency. We have already seen this in some of the mREIT names. This trend can continue for awhile and will probably put a floor under some of the names in each sector as if they trade too far under book, they will be forced to consider selling out.
Bayman, the book I mentioned has a chapter on the history of the big bank versus small bank problem. Part of the reason why the Fed was created and why the New York Fed in particular seized power from the other Federal reserve banks, was because of this big versus small battle.
William, I agree with your point. They have been rolling up the industry for years. It's what happens in many industries where a large firm, which can use the capital markets to supply lower cost financing, to buy up smaller players who don't have the heft to compete. There was a TV show on Showtime several years ago called six feet under which had that as a minor theme. But it would seem that they have a long way to go before they have completely consolidated the industry amongst a small number of players. There has been plenty of disagreement among those who are long the stock versus the doubters.
Tried to post this last night but it didn't take. I know some here own STON. After declining from a high of 29, it is now 23 ish. They did an spo back in April and recently missed their quarter estimates dues to a decline in the death rate. However, the stock looks like it stabilized on a two-year uptrend line. I owned it a long time ago and it has been controversial. Now that the yielld is close to 12%, it could be a good entry point. Not sure how it will hold up if the whole market declines.
Not sure about that with how the accounting works with credit cards. Typically, the receivables of a credit card transaction are sold through securitization transactions
stagg, you have it almost right. The Fed doesn't create money until it purchases assets from its member reserve banks, either outright or through repo. The banks are the ones that actually create the money. When a bank makes a loan, the loan becomes an asset on the bank's balance sheet which it can then lend out 9 more times because the Fed only requires that the bank keep 10% of the loan as a reserve. When a bank makes a loan, that loan also becomes a deposit -- if it is a working capital loan, the funds are placed in the borrower's account, or if it is a loan used to finance the purchase of an asset, the proceeds become a deposit in the seller's bank account, which are then turned into another loan.
The Fed has been a failure. It was created to lessen the number of depressions and stabilize the value of money, but we had the Great Depression in 1929, the market crash of 1987, the savings and loan crisis in the late 1980's and the financial crisis of 2007-8. The value of the dollar has depreciated over 95% since the Fed was created. While asset prices (including stocks) have increased in nominal terms, but measured in inflation, the gains have been much less.
I highly recommend the book "The Creature from Jekyll Island" for a complete history of monetary policy throughout time, and the creation of the Fed.
Most of us probably won't be around to see it, but the current system will probably end as it always has for any country that had a fractional reserve money system and who destroyed their currency through printing. The Romans, the Spanish and the Britains (and many others in between) all had that fate. In the future, the Chinese will probably develop a gold-backed currency and then they predictably will abuse it and destroy that currency too.
I'm told that the Fed does not have legal authority to buy equities. However, other central banks do have the authority (the Swiss central bank owns a ton of Apple stock and the Japanese central bank owns a ton of Japanese ETFs and stocks). While the Fed does not have authority to buy stocks, it does have authority to engage in swaps, so they could have their proxies buy stocks and then enter into a total return swap. The Treasury also maintains an Exchange Stabilization fund and I don't know if there is any requirement to report the activities of that fund.
seed, I haven't been in WMC since gracie advised to exit at $15 and I agree they have been terrible. All of the retail yield chasers are probably out of the stock after the combo of divy cuts and book value declines. But I seriously doubt that there's a risk of going under because they are trading at close to a 23% discount to book value. The book was $10.90 at quarter end and they said on the call that it had increased 3-5% since then. The stock could fall further because of the Fed talk, which I think is just a bluff, but the stock is now oversold with an RSI at 21. It could go lower, but that would widen the discount to book. At some point, that is going to attract someone.
Stagg, I can't figure FRO other than to think the market is overly concerned about their debt and/or relationship with SFL. But that creates an opportunity if the market is misunderstanding it. I think you are correct on NYMT, but because they did not cut the divy last quarter, investors are ignoring the risk. As I have said many times, most investors don't understand mREITs and NYMT is complicated. Many investors just chase yield, which is why when NYMT was trading over $8, many did not see the last divy cut coming. I think ETN's like CEFL and BDCL are just momentum plays. When it's "risk on" people chase them and pick up a nice monthly yield. When it switches to "risk off" people start to peel out of them, with some staying longer than others to pick up an extra divy or two. With such high yields, you would think that people would be content to buy and hold, but the movement suggests that people are trading them, probably on margin to boost returns even higher.
stagg, I don't think it is "mispricing" as much as it is price adjusting for what seems like a more hawkish Fed. If and when the Fed returns to its doveishness, all stocks will bounce. The question is how far must stocks fall before the Fed is forced to resume their doveishness.
FRO has held the 7.50 level 5 times in the past, but it did dip to $6 split adjusted last Fall. They say support is only good if it holds (which is why many people disdain technical analysis).
BDCL also probably continues to go south until the Fed flips. Looks like that one topped out at $16.5. That is the problem with stocks with such high yields when the sentiment flips as you have to decide whether to hold and keep getting the divy or how much the stock will fall and when you can safely reenter. By my calculation, BDCL has given back 6 months of divies in the last 3 weeks.
I have to hand it to you though, you played it very well buying the dip in Feb and riding it up.
Now that the 50 dma is busted in the S&P, next up is the 200 dma at 2011. There might be support somewhere between 1975 and 2000, but it's hard to see. The Russell 2000 has already snapped its 200 dma and failed a retest, and the next support level there is at 1075 which is only 1.5% away. The NYSE bounced off of its 200 dma and looks to have further support at 10000, or about 1.5% away. So it looks like 1.5% is the magic number to hold. If the averages don't hold after that decline, the next support level could be some 8% away. In truth, that doesn't appear to be too bad of a correction. By that time, the Fed will have stopped talking about raising rates and there will be some slight references to "being ready with additional monetary support" if things deteriorate further.
I'm not a professional technician, but I bet many of the technicians will be out in force over the next few days, so it will be interesting to see what levels they point to. Of course, we also have to watch the RSI levels to see whether the market gets to oversold levels quickly during a decline or whether it grinds lower.
They are first in line. They get a lower interest rate on their loans because of that. Why would they allow a junior creditor to get paid first even if it benefits the debtor? The banks view is likely to be let the junior unsecured creditors write down their loans and lower their interest rates if they want to improve the prospects of the debtor. The junior creditors are most at risk in a bk so let them negotiate down.
So here we go again with the Fed talking tough on raising rates and the market predictably dropping. With all the headlines reading that June is back in play for a rate hike, none of the media outlets reported what the actual Fed minutes said -- they left themselves so many outs to not raise rates that it would be equivalent to rolling snake eyes 100 times before the conditions were such that they raised rates. Today, unemployment claims rose for the third week in a row, plus the Philadelphia Fed outlook dropped again. Who really thinks US economic conditions are going to be stronger, nevermind global conditions. But the computer algorithms will take the market down to the "next level" whatever that is, or at least until the programs start reading the headlines that the Fed is starting to change their mind again.
Now who was it that said that the market is tethered to corporate earnings and not the chatter out of the Fed?
tom, if you have been following along, you would know that ARP continued to pay their distribution in part to support their parent, ATLS, who owned the GP interest and about 20% of the LP units in ARP. The majority of the Cohens ownership was in ATLS units, not ARP units.
As to the so-called "purchase" of ATLS units by the Cohens, you were fooled again by one of the pumpers on this board because if you reviewed the actual filings, you would have seen that that wasn't a real purchase, but a mandatory conversion of preferred units into common, and no additional consideration was paid by the Cohens. So it wasn't the same as shelling out fresh money.
As I stated more than once, the Cohens holdings are already sunk, but since they are management and since ATLS owns the GP interest in ARP, in a restructuring of either or both of ATLS or ARP, they will most like stay in the driver seat and benefit from an award of new equity as other comp to help ARP and ATLS navigate through the restructuring. The banks don't care as long as they get repaid, and they don't care that the unsecured creditors are going to get shafted. The banks will no doubt get more comp from a new DIP line plus the underwriting fees for new debt and new equity when the companies come out of bk.
As to your comment that management did not know oil and gas would tank, while no one knew what the Saudis were going to do, these companies had all of the best info on market supply and how many wells were being drilled and all the production numbers, plus all the analysts in the world at their disposal. They were pigs and they got slaughtered.