Agree that everything LNG appears a little frothy. But wait to late Fall when Russia turns off the gas to Ukraine and everything LNG will get another push.
The dividend news is already old and the book value and earnings have probably already (or should have) been priced into the stock. With the next dividend still a long ways off, I think WMC moves inversely with the perception of the economic news. If it looks like rates are going up, then the stock will decline. Jack is probably right about what's really going on with the economy, but the trading robots don't do analysis, they just trade the headlines and the headlines don't delve into the numbers, and don't separate the model-based from actual.
Bob, this is a difficult question because there is real actual impressive growth going on in the shale areas that is leading to increased profits and increased distributions. But there is also yield chasing in the entire stock market. As long as the distribution growth can continue, then I think those MLPs will continue to perform at least as well as the market because there aren't any other sectors with outsized growth potential to attract investment dollars away.
The only thing that I can say is to keep an eye on the charts to see if certain names go parabolic or if they start to roll over.
goldman downgraded EPB to sell and a $33 price target. I have owned it for several years but sold covered calls on it because I didn't think it could increase much without distribution growth. Distribution growth wins over yield.
Bayman, rates have ticked up a bit since their earlier low of 2.45% (now 2.56%). That and some comments from Fed governor Bullard that the market is ignoring that the Fed might raise rates sooner rather than later, plus hopes that the economy may be stronger in Q2 are impacting WMC. Any good jobs report news will keep the pressure on rates moving up, but I don't really think the economy is strong enough to push rates past 2.85%.
I think the best way to play WMC is to wait until rates reach a short-term peak. We seem to be trapped in a range of 2.40% to 2.85% but I think there's more chance that the lower bound breaks before the higher bound.. The 50 dma for WMC is at $13.74. Of course, global events could also put downward pressure on rates.
I think WMC put in a good quarter and the 67 cent divy was a surprise. I would buy more if it continues to drop, assuming that the economy doesn't get stronger.
Rates are up a little bit and that could be the reason for the small selloff in WMC. There is risk that we could get a headline number that makes the economy appear to be strengthening. If the robots that are in control of trading read the headline as meaning there is a stronger economy, the 10 yr rate will increase and money will flow out of mREITs like WMC and into nonagencies. We will see when the Q2 GDP estimate comes out on July 30. No doubt it will be spun that the economy has rebounded from the Q1 weather-infected downturn. However, I don't think the 10 yr can go much over 2.85%. But that is 30 bps and a rise of that amount would take its toll on WMC. It may be best to be opportunistic when playing WMC.
Sarge, I already own it at $36. It came public at $26, but I refused to buy because I thought the yield was too small. Lesson learned. When a GP comes public, you buy. End of story. Finally picked up some of Ed's PAGP today which is the GP of PAA. Again, this came public around $22 or 23. I mentioned it a few weeks back at $27 after listening to the investor call for PAA. Ladenburg just put a target on it at $36.
As for the blow off top, we won't know until it comes. GoPro is up 100% since its IPO in 3 days. So there are many signs that things are in a bubble.
Stagg, the only thing that I can think of is that CEFL is based on the return of closed-end funds (CEFs) and that is a particularly nuanced asset type that probably does not attract as many investors as the investments on which DVHL is based. Just judging by the discussion on message boards, there is a lot more interest in BDCs, mREITs, and MLPs than there is on CEFs. Also, as we have discussed, even comparing stocks in the same sector, the highest yielder does not necessarily produce the highest total return. For example, many of the agency mREITs started to lag behind the nonagency mREITs because investors thought that rates would rise and hurt agency MBS, but help nonagency MBS ( because nonagency MBS are viewed as a credit play). In the MLP sector, those MLPs with growing distributions have performed better than those that have stagnant or smaller increasing distributions.
WGP announced an offering by its sponsor Western Gas Resources. These are shares being sold by Western Gas Resources (owned by Anadarko) so there is no dilution. Those looking for a GP to invest in may want to consider this after the offering settles. t has been a rocket, going from $36 to $62 (before the offering). Stock was overbought, but if it dips to $58 it will be right back on its trendline.
Could not stand it any longer and had to buy HCLP, a frac sand MLP. I've been watching it since May but refused to buy because it violated my rule for not buying when the RSI is over 70. There were a few times when it corrected, but I didn't buy. EMES, another frac sand company, went from $45 in March to $105.
Fish, "doing the same thing the others are doing." That statement really needs to be checked. Yes, all the mREITs invest in MBS and hedge and use leverage, but that's where the similarities end. Of course with the Fed weighing in with both hands and feet on the scale, who knows how this is going to work out.
SC4, you raise two points. One is the fear-thing about buying a stock back at a higher price. This fear has kept me out of some stocks that I sold too soon. Many will average down when a stock goes lower, but not average up when it is clear that a stock has very long legs.
Second, in mREITs, it's not just the leverage of repo debt that counts. The investments themselves can be intrinsicly leveraged. Subordinated CMBS and mezz loans (two current NYMT investments) are very leveraged. Recent yields of 33% on subordinated CMBS in NYMT's portfolio tells one that they are very leveraged instruments. Know what your mREIT owns. Not all 13% yields are created equal.
Sarge, as a contrast to my sale of NYMT, I decided to hold my WMC through the ex-date because 1) WMC is still trading below book value so there's little risk of an spo, and 2) WMC is yielding between 17-18% and is primarily in agencies, so not only are you getting paid more, but they have a less riskier product than subordinated CMBS and mezz loans. Also, it looks to me like the economy is slowing somewhat which will put pressure on rates downward. Of course with mREITs we have to constantly be aware of the Fed's action on short-term rates. Bullard said yesterday that the market is not understanding that rate hikes are coming sooner rather than later, but he may just be trying to talk the market down. The Fed is like the boy who cried wolf.
SC4, welcome back. I do not want to be a long-term holder of any mREITs. I view them as opportunistic trades. Very few of them have continued upward in price without any type of correction. Last year, we saw the dislocation in the agency mREITs (AGNC etc.) when the taper hit and their book values got hit. I am still underwater on a piece of MTGE.
My past experience is that mREITs buying subordinated CMBS and mezzine loans are risky (look what happened to a little company named CRIIMI MAE back in the Russian crisis of 1998 and to Gramercy Capital and Anthracite Mortgage). Investors have become complacent when it comes to the Fed almost guaranteeing that rates will remain low.
My rationale is this: NYMT is yielding 13% annually. So if I can make the equivalent of 13% by trading out of the stock (and reduce my risk), then I have achieved a greater risk-adjusted return. Most investors are only focusing on yield/return without any regard for risk.
As it turns out, I would have done better yesterday by holding NYMT and collecting the divy, but we didn't know that that's how it was going to turn out. Earlier in the day, NYMT had declined greater than the divy. Today could be a different story.
Finally, I probably could have made more if I executed my entry point better. I bought on the spo date thinking that the stock would bounce up immediately after the initial decline when in fact it traded down another 30 cents or some 4% lower. If I play this next time, I will be more patient.
A blow off top occurs near the end of a bull market advance in which stocks increase at an even greater rate than what they had been increasing. The magnitude of the advance is greater and the time in which it occurs is much shorter.. On a chart, the prices almost go vertical.
This is why I think this could be early signs of a blow-off top. Too many stocks are having moves that aren't connected and that are outsized. Calling the exact top or the event that pricks the bubble is impossible.
Kee, here are the percentage increases since Jan 1 (without divs) for some of the GPs that I have mentioned.
ETE: 44% (18 points since Jan)
WGP: 34% (20 points)
TRGP: 51% (45 points)
Correction, I was told by another poster and verified with Fidelity that ordinary stock orders are adjusted for divy payments (i.e. reduced). This does not happen with option strike prices for regular divies.
"Why is it you folks distrust ALL the GOOD numbers and believe ALL the BAD?"
First, the post was in response to your post in which you said "you don't prove your point by saying the economy is worse than it really is." So then an economic number is given as proof that the economy is not as good as maybe you say (remember you gave the job stat as evidence that the economy was strong), and that is dismissed as caused solely by the weather. Really, the weather caused all of that damage?
Second, numbers are always massaged and the headlines rarely explain the full picture. That's why we can have a lower unemployment number, but also a lower participation rate. That's why we can have increasing food and energy and asset prices, but deflation in other areas. . That's why we can have "job growth" of 200,000 jobs, but made up of lower paying, less than full time jobs.
The historical evidence is that the Fed has an awful prediction record (no matter which political party is in power).