This got a write-up in the WSJ. The underlying MLP is TEP and they are set to grow. They own parts of the REX pipeline and the Pony Express pipeline and their sponsor will likely drop down greater percentages. No K-1 for this one.
Their Net interest income was less than they paid out. But their NAV is over $10. The question is why doesn't anyone believe their marks? Is this like the banks back in the financial crisis where no one believed their book values because they were part fiction?
With such a big discount to book value, you would think they would sell their investments and buy back their stock, but that would reduce their equity and then reduce their management fees.
I don't really know what is going on here but I trusted that the chart was saying something was wrong. I guess we will see tomorrow, but the stock is probably due for a bounce since it is so oversold.
You would think their divy declaration for the next 3 months would have stopped the bleeding, but I guess not. Either something is wrong or this selling is just technically driven, or people no longer care about the yield because return of capital means more than return on capital. All I can say is that I am glad I got out last year.
On a side note, you can blame me for getting excited about the upcoming IPOs of TEGP and EQGP. Last time I got excited by an IPO of AM, that marked the top of the market.
Stagg, you might want to wait just a bit before jumping in. I could be wrong (and have been very often) but this decline or correction or whatever may have a little legs to go. Something is not right in the market and even companies that reported good earnings are declining or giving up gains. The leaders in the market, like Apple are selling off. This even when oil has rebounded. It may be sell in May or maybe we are just finally due for a correction. A Barron's story said that the selling was both in the safety trade and in the higher risks sectors (like high yields). I may even delay my purchase of the IPOs of TEGP and EQGP if I sense the market is due for a selloff.
Nationstar (NSM) the mortgage servicer that NRZ invests with, is getting killed. Down 25% as a result of a GAAP writedown on their servicing book. I just looked briefly at their report and they said their cashflow increased for the quarter. This could be a big overreaction, but I'll want to take a longer look.
Something doesn't feel right about the market (even though I have been saying that for a few weeks).
Ed, I'm not liking the looks of the chart on WNR. Looks like O is coming back into range -- maybe under $45 and I reload. Interest rates back up to the downtrend line. Should head south again as Q2 should be slow again.
This one is the GP of EQM. It was just announced, but I'm not sure if it is coming this week or next. The IPO of another GP, TEGP,is this week on the 7th. The yields on these will not be large, but they should grow with the growth in the underlying MLPs.
I don't know Stagg, SDRL made a similar run up to $14 in early Feb after bottoming in the 9's, only to give it all back and more in March. The RSI is now over 70 on this last move. There is one analyst with a buy recommendation but analysts from Citi and Wells still see downside. SDRL has a lot of contracts coming due in 2016 which will be here in no time. No doubt the recent move up was connected with the rebound in oil prices. Oil is staying up for now, but what if this move up is merely a 50% retracement of the decline? I'm curious to see what happens in June when the North Dakota tax incentives kick in.
PSEC is getting hit 3% today on no news. They report in 2 days. While it could always rebound if they have a good report, this stock has been a dud, losing about $1.50 off the share price since last Nov. Yes, it has paid a monthly div totalling around 60 cents. Holders got lucky when the stock fought back to fill the large gap down at $8.60, but then the stock was not able to continue up. Chalk it up to yet another high yield casualty.
I'm sure some BDCs may be doing better. For the record, I own HTGC, and it hasn't been doing much either.
This week's Barron's has a column on how the Fed may try to raise rates. Not the usually stuff in the media that says they will magically raise the Fed funds rate and it will magically stick (because no one knows how monetary policy works, so no sense trying to explain it). The article proposes that the Fed will increase the rate it pays on reserves and then increase the amount of its reverse repos to expand to nonbanks and these actions will "pull" rates up. The article notes this has never been done before.
This should be an interesting discussion. The problem is how to get the price of something (money) measured in interest rates to increase by effecting the two components -- supply and demand. Right now there is too much supply of money (and not enough demand) so the price (rates) stay low. To increase the price,you can reduce supply. If the Fed gets banks and nonbanks to move some of their supply to the Fed in reverse repos, then theoretically there is less available supply to be lent out and the demand for that lower supply will pull rates up. But that assumes that that relationship is linear. What happens if instead of staying the same, demand reacts to the lower supply and decreases instead and rates stay the same? The Fed might then react by trying to reduce more supply. Isn't this the same exercise (in reverse) that they did with QE in which they kept printing money trying to increase demand for money? That didn't seem to work in increasing demand, but it did increase asset prices. So in theory is one of the possible results that instead of raising rates, the thing that winds up being undone is asset prices?
Gracie please weigh in.
FB is now under 20 on the slow stochastics. I've played this once before on the turn up over the 20 level and might do it again. I think this technique works best if the stock is still above the 50 dma, which FB is not.
A real shocker there. I've been saying this for several weeks. Q1 GDP was weak and would have been negative but for the inventory build. The Fed is on hold and the runup in oil will likely get reversed. Even the reaction to Apple's earnings were meh. Yes, it is still relatively cheap, but it is overowned, and the watch is not going to be a blockbuster at this point. The only difference is that the market did not interpret the Fed's dovishness with a run higher, which may mean that yes, it is a tired market. With margin usage at all-time highs, does anyone really think the market must go higher or that money is to afraid to go to some overseas markets.
They had an exec from TD Ameritrade on CNBC and he said that individuals have low balances of cash, meaning that the individual is all in on stocks. Recipe for a correction.
You also must understand how these companies came about in the first place. Most were created by a sponsor, either a C-corp company that wanted to bring about better value of its assets by putting them in this type of structure, or by a private equity company that bought assets and then put them in this type of structure.
Is it the recent spike in interest rates or the lukewarm earnings or the fact that Apple's blowout earnings can't lift the stock to more than a nominal high, nevermind the problems with their watch or their little "material" tax problem, or maybe it's just the record amount of margin. Probably nothing that a 7-10% correction can't cure.
marv, don't forget the GP of EQM which should IPO soon. Same law firms working on the IPO of TEGP.
The rate on the 10 yr has jumped to 2.05% today after Q1 GDP was reported to be almost flat. I don't get it unless the market had already priced in a slow Q1 and is now expecting growth to pick up. The Fed meets today and should put off any interest rate hike until Sept or later. Maybe that causes rates to go back down and possibly a rally in stocks.
Bob, this makes you think if this can happen to AGNC then what about all of the other stocks that pay high yields and depend on spreads? Are they all destined to revert to the mean?
I haven't looked to see what caused the recent blowup at AI but people could be missing something because they are focusing on GAAP earnings and fundamental metrics that are used to judge operating companies. AI is like an mREIT in that they own a portfolio of mortgage bonds (but the are taxed as a c corp). It attracted many investors because of the high dividend and maybe also because the GAAP financials showed that it was trading at a discount to book value. But book value is a GAAP concept and the importance of that discount may have been overweighed.