Risk/Reward Vol. 181
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"How can you leave me standing/Alone in a world so cold?
This is what is sounds like/When doves cry."---lyrics from "When Doves Cry" by Prince
"Just wishin' and hopin'and thinkin' and prayin'
Plannin' and dreamin'/His kiss is the start."---lyrics from "Wishing and Hoping" sung by Dusty Springfield
What do you get when you fall in love?
You only get lies and pain and sorrow
So for at least until tomorrow
I'll never fall in love again."---lyrics from "I'll Never Fall In Love Again" by Burt Bacharach
As reported here and elsewhere (See, e.g. Vol.175 www.riskrewardblog.blogspot.com ), the Federal Reserve has sent mixed signals on the timing of any QE3 tapering: hawks advocating that it begin in September; doves not wanting it to begin for several months. As of late, the hawks have held sway. On Wednesday, no longer wishing to be "left standing/Alone in a world so cold", two dovish Fed officials, Sandra Pianalto and Charles Evans, independently acknowledged that the recent improvement in employment numbers may justify tapering sooner rather than later. So "what does it sound like/When doves cry" uncle? It's deafeningly quiet. The 10Year Treasury Bond didn't move at all on the news. Its yield has held steady at 2.6% or so for several days, possibly signalling that the market already has priced-in tapering commencing this fall. If tapering were already priced-in, it would be very good news for fixed income investors such as yours truly. It would mean a period of price/yield stability not only for the 10Year but for other income producers such as real estate investment trusts, preferred stocks and business development companies, all of which lose value as the 10Year yield increases. Stability is all I need.
And speaking of good news, as part of its second quarter reporting, ETP, the large oil and natural gas storage/pipeline company, announced the completion of the much anticipated corporate restructuring occasioned by its acquistion of Sunoco Logisitics. This restructuring will result in increased dividends in the next two quarters. Unitholders won't "Just be wishin' and hopin' and thinkin' and prayin'/Plannin' and dreamin'" about unlocking the promised synergies from the Sunoco deal. Moreover, it is anticipated that this "kiss is just the start" of several additional quarterly dividend increases as more good news was reported this week. ETP announced that it received a license (only the third one issued by the U.S. government) to export liquid natural gas, an enterprise which should prove to be a highly profitable.
The quarterly report from another of my oil/gas investments was not so encouraging. As loyal readers know, I have had a love affair with Linn Energy (LINE and LNCO) for several years. On Thursday, Linn reported that it missed its numbers for the quarter, will miss them for the remainder of the year and still has not completed its acquisition of Berry Petroleum, a purchase that is supposed to be significantly accretive. The market punished Linn such that my loss limits were triggered. "What do you get when you fall in love with a stock?/You only get lies and pain and sorrow/So for at least until tomorrow/I'll never fall in love with an investment idea again." But wait, have you heard about....
The Linn saga is a lesson re-learned. Linn may recover and may even prosper (especially if the oil rich Berry deal happens), but without me as a shareholder. As Burt Bacharach knows only too well, even rigorous due diligence cannot overcome the combination of an attack by short sellers and empty "Promises, Promises" made by a less than candid management team.
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