Vin, I don't think much of the dividend increase -- was it 1/1000th of a penny? Someone once said that if the CFO can't find 1 penny per share, then they should be fired. On the positive, their report has some of the best disclosure of what they are doing in all of the different investments and financing strategies. As for adding shares if one already owns some, while these occasional panics can be a good buying opportunity to amass a large position, you have to ask yourself whether it is prudent to have that much exposure to any one stock, especially if the stock price is not growing. PSEC has bounced back from at least 2 prior selloffs, but it has not cracked the $11 range from earlier in the year. I know you are more disciplined in this regard than others.
The Fed saved the banks and their banker friends. It certainly wasn't any of the political parties.
Fixed it for you.
SC4, NRZ is an mREIT, but the price over book doesn't seem to matter as much because they have to wait for MSRs to be offered for sale before they can buy, and they don't use as much leverage.
Jack, I think you give the Fed too much credit. Past history has shown that they don't always know what they are doing. When they released the Fed minutes from 2007, it showed that many members didn't know the extent of the subprime mortgage problem. Their forecasts have been notoriously bad. The reasons for not raising rates are just canards. That doesn't mean that they won't keep rates low, but it shows their reasons are just smoke screens.
First, back in 2007, the debt was already huge (over 10T) and that didn't stop the Fed from raising rates to 5 1/4%. Consumer debt levels were at historic highs back then too and we were running $400b deficits because of the wars. Second, most of the debt is in the mid-range maturity of 5-10 years. Only 1.8T is in bills. While raising rates would increase debt service, the greater risk is if inflationary expectations were to resurface and cause longer rates to rise. In fact, as long as the Fed keeps rates ultra low, the politicians don't have to make any tough choices on spending or taxes and they know it.. Long rates don't seem to be increasing anywhere in the world even though deficits are exploding, so there is a disconnect at this point between debt levels and interest rates, and that's because of deflationary pressures. Finally, as you said, the Fed can't do anything to solve the demographic and structural problems. Their remedy -- low rates -- only causes higher asset prices and more malinvestment and more debt. They complain about high leverage, but they never raise margin rates, something that is in their control.
Kee, looks like the target stocks (EPB, KMP and KMR) will trade in line with the movements in KMI with a little arbitrage spread. There's a possibility that they might pay one more distribution (which are at rates higher than KMI's rate) before the deal is complete, but I'm thinking the Alerian index will have to sell shares of KMP and EPB before the exchange which could keep the spread in tact. One could always sell some covered calls to gain a little more premium. I had to cover my Sept calls (which I had sold a few months ago before the deal was announced and moved out to March calls for extra premium).
SC4, let me add a couple of points to Bob's review. Reverse splits have a bad connotation because they are usually employed when a stock declines below exchange listing standards and so are viewed as a desperation move. Plus, after the split, shorts are attracted to keep shorting the shares. This is not the case here with NRZ. The fundamental reason to own NRZ was because the capital rules for banks for holding mortgage servicing were change and the big banks were dumping these assets and only a few entities were in a position to do this line of business. I think many of us are surprised that NRZ has not priced at a 8-9% yield instead of the 11% yield. Maybe it's because rates have not risen yet and investors are staying with mREITs that invest in mortgages instead of servicing.
Gambler, the market is anticipating the news out of Jackson Hole in which Yellen is expected to be doveish. There is a little gamesmanship going on with all of the Fed talk. Some members kept talking about raising rates and then Yellen follows with talk about slack in employment, etc. It's the old "do as I do, not what I say" argument..
The market likes round numbers so S&P 2000 is the path of least resistance. But we have rallied 100 points in a relatively short time, and the upper bound of the channel is around 2010. As we get into September, there are two forces in play: those funds who want to nail down their profits and book their bonuses for their year -end in October versus those funds that are lagging and need to catch up by buying those stocks with the most beta (i.e. Apple, etc.).
Marv, I appreciate your posts. From what I can tell, many have not yet pulled the trigger on selling EPB or KMP, so maybe those dollars have not yet been reinvested. The Alerian will have to rebalance and EPB/KMP make up over 10%. The smaller components might get a bigger lift out of the rebalancing.
Williams raised their dividend again and again gave guidance as to further increases. Wells mentioned in one of their reports on MLPs that there is an anomaly in the market that WMB is still priced at a 3% yield when other GPs with comparable dividend growth are priced at much lower yields. This should be over $100 in a couple of years. I should stop writing about it and just buy it.
I think the play in gold is a much longer term play based on history. I think if you look at the long term chart plus consider the long term history, there is a place for it, but maybe not at this time. The main reason for gold is a hedge against currency debasement. History is on the side of currency debasement. It has always occurred whoever has had the reserve currency.
We will see if QE is really winding down. You may be forgetting that it was supposed to wind down after QE1, then QE2, then Twist and now QE3. As for "relative" stability in the global economy, I guess it depends on your definition of relative. Much of Europe is headed back into recession and the trade sanctions against Russia are not helping. China is a bubble ready to blow, unless of course, they keep printing. Japan never stopped printing. Meanwhile China and Russia keep buying gold and have expressed a desire to move away from the dollar. Obviously, they have to do this over time as they dribble out their US Treasury sales and invest in gold without trying to move the price of either.
There are analogies to consider. While there are many factors that effected the price of oil over the years, for many years, oil was contained in a trading range and then the 70's came and the price level moved up. Notwithstanding the occassional declines (including to $10 at one point) it has stayed high. The point is that something very foreseeable changed (the countries with oil decided they could get a higher price for it, possibly in response to the fact that the dollar was no longer convertible into gold). Currency is not being destroyed but continues to be printed because that seems to be the answer to keep financial assets up.
For the record, there are some compelling arguments that the first move will be a stronger dollar and a lower gold price, before the big move in gold occurs
If someone ever finds a platform that doesn't have as many problems as this one, please let us all know and we can make the jump together. Between the frequent breakdowns, error messages, bad yield calculations and #$%$ feeds from useless providers like Zacks, cramer, wall st cheat sheet etc., it's a wonder that we stay with this.
Vin, I'm not sure the ROC is going to have an effect on your new basis. As I understand it, your KMP is going to be treated as being sold whether you get cash or shares and cash. You will have recapture taxed at the ordinary income rates plus capital gain. You will be able to apply your passive losses against the recapture amounts. But since you are taxed on these different amounts, that should mean that your new basis in the KMI shares would be the full value of the amount taxed.
Stagg, to continue our discussion, the real question about any leverage vehicle or any investment is when or whether it makes sense to sell and book a profit and what to reinvest in. In a bear market, most stocks will decline. Rebalancing usually involves selling off something that has grown over its allocated % and reinvesting into something that is underweighted. Rebalancing takes the timing (and emotion) out of the decision, but it doesn't account for the strengh/weaknesses of the underlying sector. In other words, while we can't always pick the exact top or bottom of a stock/sector, winners can continue to run and losers can continue to fall before the optimum time to sell or buy (which is usually measured in retrospect).
Stagg, it is true that many of the double-leverage instruments are structured as notes in which a sponsor (usually a big bank like UBS or Wells) is the obligor. In order to deliver 2 x the movement in the index, the sponsor is usually investing in futures or options in order to magnify the movement of the index. There is also a "tracking error," i.e. the movement may not be as great as 2 times the index because of how it is measured and because of the sponsor's fees. All of these risks are disclosed in the prospectus.
There are real fundamental reasons why MLPs have been doing well over the last couple of years. The investing public is no longer afraid of them and is attracted to their yield and their growth prospects are well documented. There are more funds dedicated to this sector. But anytime Wall Street invents a product for the retail trade, there is risk. I'm sure the same thing happened when they came out with the first sector fund.
The TD Ameritrade rep was probably speaking from the same manual that most reps are coached on. Unless you have a very big account or are frequent trader, the brokerage houses try to categorize their clients into 5 different "types" based on perceived risk tolerances and age, and then sell them mutual funds based on this category. Being fully invested and diversifying seems to be their rule. The bottomline is it is a business and their business depends on them keeping your money invested in their products.
More in another post.
Rogere, the LNG story is certainly one theme that keeps retail investors in these trusts. I have heard that from several posters. Others have tried to sum the dividends without taking net present values into account, even though several people have done the math for them based on the production curves etc.
In June, the stock broke above the 200 dma which had been the upperbound for several quarters. This probably caused it to rally (the 50 day did a bullish cross of the 200). But even those technicals couldn't keep the rally up. At some point, the selling will be overdone and the price will stabilize. Neither the Feb nor the May post ex-date declines were as sever as previous declines and I think that was because of the rise in nat gas and oil prices that carried over from the bad winter. Nat gas has since retreated. The Nov post ex-date decline could be bad as tax-selling should add to the disappointment on production and selling prices that always seems to come.
Since I sold these a while back, I have been mainly playing puts and have yet to try to time the upswing. Might take a crack at that this time. Not sure if I will try it with options or which of the trusts I will try to play.
CMLP is up a little today but the options volume for October is big. Does someone know something? They have been underperforming and since the KMI deal for KMP and EPB there was some speculation that CMLP could get bought. I own it and am not inclined to add on rumors. All of the MLPs seem to be heading up again. Maybe on the basis of good news from Jackson Hole.
Anybody seeing the action in the SD trusts? They are falling off a cliff even though they went under RSI 20 a couple of days ago. CHKR starting to plunge. Geez, I wish I had played puts this time. I thought it was holding up. I guess the dreams of higher nat gas prices due to future LNG is not holding this up. Technically, $9.80 is the line in the sand. If it breaks that, watch out below.