JR, that's about the third time I've read you make that statement about their debt and I have corrected you several times. Suggest you read the 10k and look at the year-end earnings release to see where they stand. They have over $1.5b in debt and EBITDA at 261. That ratio is much bigger than the 3 you keep quoting, and so I conclude that you are deliberately trying to mislead people.
And if you have followed their history, don't expect to receive a warning from management that they are all of a sudden in violation of their covenant. Just like in early 2015 when they cut the divy by 50% and then in Nov when it was reduced to 1 cent.
Why would anyone buy the LP units and let the Cohens continue to run the GP? That's asking to be hosed. Oh, that's right they ran the GP into the ground too and it has negative EBITDA. At least they did sell the midstream unit APL at the right time before they had a chance to run that into the ground.
Someone tell DH that he may have this wrong. According to quantumonline, the ALLYpA is paying 3mth LIBOR plus 5.785% which brings the coupon to about 6.4% and because it is a trust preferred it is NOT eligible for the 15% tax rate. The ALLYpB was eligible for the 15% rate.
ALLYpA refers to GMAC Capital Trust series 2, while ALLYpB referred to Ally Series A preferred. No one someone could get confused. Thank god for quantumonline as info on preferreds is really lacking on most of the other sites.
For those that read my posts (not DH) there was a good article in s.a. about different preferreds issued by BAC. They just came public with another series.
Wow, that 50 dma stood no chance. The first fibonnaci retracement is around $67 so it should hold there. I had noticed that the 10 year Treasury had inextricably bounced up to 1.87% and has room to run to 2.07 where the 200 dma lies, but I just can't believe that this represents the economy getting stronger. I think Sarge had it right that we may be starting to see some rotation out of the sectors that had been leading.
Anyone see the action in this? They entered a jv with ConEd that allows them to pay down a chunk of debt. While they cut their divy to 60 per quarter ($2.40 annually) that removes the uncertainty.
This is the old Crestwood MLP which was formed by merging the MLP into the GP. Originally this grew out of the propane MLP Inergy which itself bought out its gp. Crestwood was the midstream part of Quicksilver that was bought out by private equity shop First Reserve. They never seemed to get their act together and the stock got creamed and even did a reverse split. I had owned the gp Inergy but luckily ended up dumping Crestwood before the bottom dropped out. While this deal has the stock jumping right to the 200 dma, after some digestion, this might be a strong long-term play.
Looking at the technicals, the spider is sitting just above the 50 but the MACD still has room to fall. If the rate hike talk gets stronger and earnings miss, there could be further selling but once the GDP comes in close to 0 (the next report is 4/28) that should end the rate hike talk for the rest of the year.
Yes, there was some chatter that predictions for a June rate hike were growing but also the ute sector has been on a tear for months and is due to correct or go sideways.
Ed, on PER be careful as the subordinated units have now converted to common meaning there are now 52.5mm units. Total royalty income was $7mm last quarter so the per unit amount would be about 14 cents if they maintain the same amount of production, but that is unlikely given the normal depletion.
I don't think you have this correct. The ratio is based on Total Debt to 12 months trailing EBITDA which was 261mm for 2015. Another quarter's ebitda will roll off when they report their Q1.
Vin, I agree about DOHA being counterintuitive. I was ready to buy some DWTI to participate was sure to be the start of a decline in oil but I've learned my lesson about thinking something is a sure thing with inverse funds. Then today I read that part of the explanation for why DOHA did not result in an oil decline was that Kuwait oil workers had declared a strike over the weekend which has now ended. Who knows? I think you are right about being careful investing now.
How's that buy at $3.18 working out for you. You really are in no position to be criticizing anyone after that disasterous call that you made.
There's a reason why they have come up with the saying that "the market can stay irrational longer than you can stay solvent." While that adage was used to describe a market selloff that was greater than fundamentals would suggest, I guess it works in both directions.
I mentioned in a response to JK that Jeremy Grantham thought that stocks were not in a bubble until we reached S&P 2300, which is about 10% away. Even though I have been bearish, I have read that bull markets typically don't end until there is a "blow-off top" and this is getting to look more and more like that. I think this is what happened in 2007 when, just like today, there were already signs that the market was at extreme levels, but then the justification was that growth in China was providing the liquidity to keep rates low. Granted back then the Fed raised the Fed funds rate from 1% to 5% and so one may argue that that is not going to happen this time. I agree with DH (twice in one week) that it will take a trigger to bring about a decline, but no one is ever able to predict the trigger and when it will occur. And it's usually a culmination of events, not just one thing. As for DH's assertion that there's no place for money to go for a real return, that may be the point of view for individuals, but hedge funds and the like have many more options. The reports from BAC/Merrill Lynch say that the "smart" money has been net sellers for 12 straight weeks. Are they wrong or just early?
We are starting to see a resurgence in commodity stocks. JK mentioned MSB yesterday and Ed has mentioned silver. We have talked about gold. One of the market historians that I read has said that this is what happened in the late 50's and 60's when a previous Fed tried to keep rates artificially low.
JK, I know these are cliches, but I am reminded of the saying by Bill Murray from the movie "Meatballs" -- "it just doesn't matter." The market is fixed by the central banks and by the computer algos. They can't let it go down and will rescue it if there is a correction of any kind. Greenspan admitted it in a speech the other day. So the computers keep buying. Occasionally they will sell something like a Netflix or IBM that misses earnings but then the money is recycled into something that has not run up and for which the fundamentals are not terrible. JNJ just reported a good quarter and there will be others. But gold and silver are also catching bids so someone is hedging their bets a little in case the Fed has to begin more QE when the economic stats come in weak again.
I re-read one of Jeremy Gratham's pieces on market bubbles and he said at the end of 2015 that he thought the S&P could go to 2300 before it was in bubble territory and he also said that we could have a regular bear market (20% loss) without having the bubble really pop. Maybe the selloff over Jan and Feb is setting it up for a later decline in the Fall after we reach new highs through the summer. It's always easier to find the reasons for the action after they occur.
I continue to watch HYG for any signs that the market is finally ready to turn south because they say credit always leads stocks, but so far it is holding in there around 82ish.
Vin, I took a look at one of my holdings VKI to see. They have some bonds that don't mature until 2050 with 5% coupons. The muni bond space has many different issuers and I noticed several low income housing and other types of bonds that probably are issued with greater coupons than the typical general obligation bond. One thing I noticed is that VKI's average price was 112% of par.
As long as the Fed remains on hold, this rally in muni CEFs should hold up. Ok think a few years ago they had a similar rally and then gave a lot back when the economy finally started to post better numbers it I don't think that is a risk now.
I actually agree with DH for once. The closed end munis have been on an absolute tear. For many, the discounts are now less than 6%, but that doesn't mean they can't move to 0 or to a premium, since the Fed appears to be on hold for any further rate increases. If the economy is actually weakening like I believe, that should put the Fed off for good and give further support for these funds, whereas that might not be the case for other high yield stocks where their divies are dependent on the company actually making a profit and growing.
I have stated before why this stock is a bad bet. They will end up cutting their divy by probably 50% this quarter if not more. You could easily see on their website the severe decline in the spot index for their ships. Last quarter, their average rate was over $61k per day if I remember correctly (it's in their last earnings report). Their website shows that the spot rate has fallen off of a cliff and is now less than $14k per day (it was no higher than 48k at any time during the quarter). They did add some ships in Q4 so their revenues might be higher and they may not have as many costs that they incurred due to their deals in Q4, but they will likely show a huge decline from last year and from last quarter with no upturn in sight. Because the deterioration is actually getting worse into Q2, they could suspend the divy altogether to conserve cash.
I think some investors may have chased this stock because of the high yield without understanding that the spot rate drives the revenue that makes the divy possible. They added in their earnings presentation last quarter that they will change the dividend policy based on conditions which I think is "code" for "we are going to cut the divy to shreds." The stock price has been declining since the last divy was paid. I could be wrong and they could try to maintain the Q1 divy to cushion the blow of bad future guidance, but the market should see through that.
JK, the market has a way of frustrating the most people. The only way it turns south is if we get capitulation and everyone starts to think that the Fed will never raise rates and will never let the market decline more than 5%. Remember back in 2007, despite the failure of some firms due to sub prime, the market kept going up, until it didn#$%$ hard predicting which straw will break the camel's back.
Ok, not to be argumentative, but as long as we are speaking of trite adages, let's consider this:
1. You only make more in principal if you actually sell and book a gain. Paper gains are the same as paper losses, although it sure feels better to have paper gains. Rising stock prices do however give one the opportunity to make money from selling covered calls at higher strike prices. The real difficulty in a rising stock market comes from having to decide whether to chase the prices higher if there is evidence that there is overvaluation.
2. If stocks go down, they are only bargains if the decline is overdone or not supported by deteriorating fundamentals. Sometimes a decline in a stock is actually connected to deteriorating fundamentals. And sometimes this deterioration leads to a cut in the divy, which then leads to more declines. We have seen plenty of stocks eliminate or cut their divies. If it was so easy to determine which is which, then many people wouldn't have huge losses on things like NMM, AWLCF, SDRL KMI etc.
3. The market can go sideways for a while, but that doesn't mean that it will turn up automatically from there. They still have not outlawed bear markets. It is true that the central banks will try all of the tricks to keep the market up, but sometimes recessionary forces are greater. Buffett is fond of saying "wait for a fat pitch" and sometimes the waiting can be excrutiatingly long, but sometimes it is the better course of action, especially if you can park your money in something like muni funds while you wait. Again, you don't have to swing for the fences all of the time. Sometimes hitting single after single gets the job done.