It's not scare tactics to remind the board, especially newcomers, to the risk of the debt covenants and the fact that that it what caused the company to cut the distribution 50% in March. It is not scare tactics to remind those who have no experience with Cohen's management that he promised ATLS would pay $1.35 per year in distributions, then revised it to $1.10, then suspended it for Q1 and promised to resume in Q2, but then had to revise it again to 2016. If we are using scare tactics, then you are just a pumper with no analytics.
It is true the many mostly gas MLPs are tracking with the price of oil, but that may be better explained by the algo traders who do the majority of trading. who have linked the two. There are plenty of retail holders who were selling "oil" heavy stocks, but holding nat gas ones because of the promise that LNG exports would fix the problem of low gas prices. But if you look at their last income statement, their nat gas revenues went down by more than their oil revenues. At the end of the day, the decline in nat gas is going to cause their EBITDA to decline which will cause their debt covenants to be violated.
Perhaps you should sell on these false moves up that correspond with oil.
I see support at $9.5 and then at $8.5. The high yield Index (HYG)s getting creamed and taking all of the high yield dependent stocks down with it. BDCs will trade north of 15% yields when this is over. My technical side is telling me to sell on any uptick.
There are times when bad economic news leads to good performance in the mREIT and REIT sectors because bad economic news in recent times has meant no interest rate hikes and possibly more QE. However, bad economic news also can mean a recession and a recession is not good for credit assets or increased rents or property values.
HYG is a good signal for high yield stocks who derive a return based on credit assets. Many mREITs made the switch away from agencies to credit. Names like NYMT getting killed. The BDCs have been getting killed. Credit always leads stocks. But most of the retail trade doesn't see the connection. They just see a tremendous run up in credit before this year and assume that the dip will be bought.
I sold ARI today after the bad news on payrolls. ARI is a commercial REIT that I bought back in March after they did an spo. The company reported good numbers and even increased their divy, so it was easy to put it on autopilot and forget about it. Except then I read a transcript from an earnings presentation and the words "condo loans" and North Dakota jumped out at me. I held through the end of Sept to collect the divy, which may not have been the best choice since the divy came out of the stock price. In addition, the chart has been slowly but surely rolling over. This is how many investors miss the inflection point because they don't want to give up a good divy. The stock has started to make lower lows and lower highs. Seeing what happened to NYMT and WMC (although they are mREITs), it was time to bail. Return of Capital before Return on Capital.
Ed, MLPL bounced right to a resistance level. I think it head's back down if oil turns south again. Big payroll miss means the rate hike is over, which is bad for financials., like banks and BDCs. May have to find the inverse BDC index. Apple is completing a head and shoulders which projects down to 90. Most of the mREITs had shifted into credit sensitive mortgages which are getting creamed as spreads blow out. Will see if WMC stabilizes, but I think they are going to report a bad quarter, so there could be further downside, maybe to $10. May take a look at AGNC.
Downward revision for August. Kiss the rate hike goodbye.
Watching the financial ETF, XLF as it is sitting on support and about to break lower now that the rate hike is toast. Also watching $wtic to see where oil is going. It has been steady right at the 50 dma, but if $44 cracks, it's another trip down. I want to play the triple inverse DWTI on the break.
I guess you didn't see today's payroll number. I huge miss and downward revisions to August. If you are right about the "what goes down will go up," the reverse also is true and that means that we are in the "what goes up must go down" part of the cycle.
No, that is not my assumption and I didn't say that. My point is that the bottom is not here in MLPs (notice many of the e&p names are still selling off even though oil was up earlier). But all the permabull yield chasers on this board have not acknowledged the debt problems that ARP has and fail to understand that continuing the distribution at the current rate is in direct conflict with their debt. They can't do both without the cooperation of their bankers and the bank regulators are all over the bankers on energy loans.
There are people on this board who have argued the numbers and the value of the hedge book. If you think the hedge book is so great, then argue the numbers with them instead of just parroting permabulls or management. Show how they maintain the distribution and stay inside their debt covenants.
What are you smoking to put that kind of valuation on NYMT? You lose all credibility in these discussions if you can't even make a real comparison.
Ed, I owned MIC before the financial crisis and rode it all the way down, doubled down and sold when I broke even. I should have held on. But your point is correct -- Kenny Rogers. When things are recovering and the Fed is printing, it makes sense to hold. When it flips, you must change your thinking. Chasing high yield usually ends up being a loser in the long run because people won't let go.
You have to understand what they own and what is happening in the credit markets that is spilling over into all sectors that price their assets off the action in credit markets. NYMT owns subordinated CMBS securities and preferred equity (not to be confused with preferred stocks, preferred equity is a preferred ownership interest in the single purpose entities that are the borrowers on the properties that NYMT finances). When the credit markets were booming, these securities were improving in price which enabled NYMT to perform. But in the last several months, high yield securities have turned south bigtime. Part of this was due to the implosion in the energy sector, many of the companies of which were using junk bonds to finance their growth. But it has spread to all high yield sectors. Look at the HYG index.
The events credit markets are not widely spoken about by companies or even in the mainstream financial media, but some articles have been describing the deterioration in high yield for months. The most common mistake that retail investors make is to think that a high dividend yield will protect a stock's price, without understanding how credit markets impact the price of assets that determine whether the risk of continuing to receive that high dividend has increased substantially.
There won't be a special divy, so I don't know why you are expecting one. There are two parts of return: dividend and cap gain/loss. By focusing only on the divy, you expose yourself to capital loss.
Apple now down $2. Doesn't look like Icahn was able to talk the stock up. Technically it looks like the downtrend is re-established.
Stagg, that is exactly how to play it. Not only is there a real threat from the hurricane, but also the stock was bumping up against the top of their trend. You will get a chance to re-enter this trade again.
The message boards of dozens of falling stocks are littered with stories about how someone bought shares of X stock during the 2009 financial crisis and made money so that's why you should buy stock of Y. There are many differences between those experiences and ARP. First, I am sure there are several people who also bought Lehman and Bear Stearns when their stocks dropped, yet they aren't here to boast how they picked a bottom and how everything turned out alright. Second, BAC and many of the other financial stocks became "too big to fail." The govt's TARP program specifically rescued the top 20 big banks, and in fact, BAC used it twice. Then the mark-to-market rules were altered so that the banks wouldn't have to mark down their most illiquid assets. Finally, the Fed bought every piece of junk security that these banks could offer and bailed out Fannie, Freddie and AIG to make sure that all of the big banks' counterparties would survive so that the banks would not have to set reserves against these positions.
It is true that the price of oil has fluctuated wildly over the years, but nat gas has been on a steady downslide for years as there is just too much supply.
ARP is not a "too big to fail" entity. The Fed or the govt is not going to set up a program to bail out any energy companies, nevermind something as small as ARP. They are at the mercy of their bankers.
You make the comment that "the price of ARP is crazy", but provide no metrics to judge why the current valuation based on the current commodity prices is wrong. And don't use yield, because yield is not a reliable metric especially when ARP's debt covenants provide doubts whether they can continue to pay the distribution at this level.
Finally, you may be the best investor in the world and have never had a loss, but I doubt it. Has there ever been a time when some trade did not work out for you and you lost money because you were so sure you were right?
Ed, EQM is on my list, but I think it could fall all the way back to 50 or even the high 40's from where it started a great run back in Dec 13.
Sarge, I remind you that not even icahn has a perfect record and is most likely talking his book. I do recall he took a bath in CHK. I saw a note from Wells that said that only the iphone sales from Sept 27 will be counted in their last quarter and the 28-30 sales will be in the next quarter. As always, you have to be guided by the charts, not by anyone pumping a stock on TV. Yesterday, with the market up big, you would have thought that Apple would be leading the way.
I agree. The normal pattern for stocks whose charts have turned down has been to rally up to a trend line, which is sometimes the 50 dma. Sometimes they overshoot by just a bit.