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About Me
- joewxman
- a meteorologist with a knack for trading and investing in MLPS! I also like horse racing, enjoy cigars and a good port wine.
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8 comments:
Did you guys ever hear the old adage, "never fall in love with a stock"?
How about, "dont try to catch a falling knife"
" dont fight the trend"?
Willing to take a 20-30% loss in nav for 7-8% yield?
Thats exactly what is going on. MLP's seemed like a no-brainer: fat yields, fed cutting rates, distribution increases, etc, etc, etc. If the above is true we would see buyers, no a constant deluge of sellers. I have said it before its an orphan asset class. Not enough real institutional interest. It has become a graveyard for guys who have loaded up on them.
In previous posts, people mentioned that levered MLP-focused players blowing up must be the cause behind this never-ending catastrophe in the MLP space. One of the reasons is undoubtedly found in this article: http://www.businessweek.com/magazine/content/08_11/b4075000870869.htm?dlbk. The article talks about funds blowing up - one such fund prominently featured in the article is an MLP-focused fund based in California. Who knows how much longer they have to go before their portfolio is unwound...
You can pick up on that there are quite a few "newby" investors here in MLP's vis a vis the discussion the other day whereby some just couldn't understand that because the AMZ was UP, that that wasn't just marvelous. Untill several posters pointed out that, at the exact same time, the S&P was up almost 4% and MLP's[the AMZ]was up less than 1/2%.
the end of all this mess will come one day and when it does prices will rebound very quickly. We just don't know when that will happen and at what price level.
And remember as bad as things are in this space...it could be far worse. Just ask anyone who bought a safe bank stock..the monoline insurers..healthcare stocks (cut in half in 3 days) etc etc etc. There are no safe havens in this bear market except for cash where you get 1.5% on a money market in a 4% inflation enviornment. So even there you lose.
I think one major issue that we don't discuss much here is that MLP's are a "relatively" new asset class and thus have not experienced many cycles. We really don't know what to expect of them as a result. This lack of understanding is probably leading to overtrading and overanalyzing the sector.
I do believe there are too many levered players at work destroying one asset class after another as their margin gets called.
I read an article in the WSJ regading the dislocation in the muni market and some guy who said in his 25 YEARS of managing muni's he has NEVER seen volatility like this, nor spreads as wide as they currently are. Now a guy doing the same thing for 25 years telling you there is something wrong deserves to be heard. He is not alone.
Time will heal this mess we are in, the question for investors is can they take the pain between now and then?
As an MLP investor I feel I get paid to wait. 8% in the avg midstream MLP and 10% or more in E&P does provide some cushion. It doesn't mean risk free, but it beats alot of the other alternatives I see out there.
As an aside we have had 3 secondaries (KMP, EEP and SGLP)priced in the last few weeks and it seems that there is still capital available in our sector.
A bit long winded...
DS
add Oneok (OKS) and DCP Midstream (DPM) to that list.
"You can pick up on that there are quite a few "newby" investors here in MLP's vis a vis the discussion the other day whereby some just couldn't understand that because the AMZ was UP, that that wasn't just marvelous. Untill several posters pointed out that, at the exact same time, the S&P was up almost 4% and MLP's[the AMZ]was up less than 1/2%."
I don't know of any poster who said things were "marvelous" except those that were implying that things were marvelous beacuse of the relative underperformance. I also haven't seen any posts from "newby"s except perhaps some of the bashers.
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