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d_teller
100 Comments
Is Hyperinflation on the Horizon?
Secondly, all of the media and lobbyists, (who, if rendered into biodiesel would certainly ameliorate global fuel needs for many years), in every country mentioned, will do all they can to keep their particular ox from being gored.
Thirdly, a law should be passed that those who are elected or appointed to governmental positions must not be allowed to lobby for "x"-years...... ethical non-compete arrangement.
Fourthly, a sincere transition to a consumption-based tax system (NOT a flat tax) such as the one described at fairtax.org, will slowly replace consumerism with capital production, because income won't be taxed, only retail expenditures will be...all savings and dividends and investments will grow...tax-free! No more 66000 pp of Treasury regs on subsidies, shelters, etc. No more corporate income taxes, no more payroll taxes...no more audits, and all the IRS agents will be employed collecting taxes remitted at the point-of-sale. It might take years, but eventually, economies driven by "wants" will be driven by "needs"
One can hope..
LatAm Mining Crash Effects: Losers and Bigger Losers
This is a nice overview of the valuation reduction for many commodity producers in Latin America (could be as well for Canada and Australia), but it misses some fundamental issues across the countries: incredibly increased infrastructural costs (water, electric, tailing controls and waste abatement); decreased availability of credit for all but a few very strong or partly nationalized companies; political analysis, with provincials wanting more revenue, while revenue is decreasing + local irritation with companies that despoil the agrarian or subsistence farming.
These were all problems that simmered BEFORE the 'demand destruction' brought commodity prices (except for basic food-stuffs) down by 50-75%. There were also some company-specific currency trades that went wrong (SDA is an example), and other problems with, e.g. PCU (Asarco lawsuit) and a number of other large companies, in various countries.
Climate change is another long-term component affecting the Southern-most areas of the world...it's getting DRIER. So orchards, farms and mining mills that require water, and cattle and fisheries are affected, in Argentina, Chile, S.Africa, and Australia.
Dividend Investing: Eight Companies with Positive Feedback
The latest from Linn Energy (LINE) is that its costs and loans are secure through 2013-2014. It's a very good buy for a taxable account, IMHO.
Dividend Investing: Eight Companies with Positive Feedback
Paragon has fallen considerably in the past month, as both a shipper vulnerable to spot prices and a tanker company. I'd look at Eagle (EGLE) and Diana (DSX) which have crumbled with the demand destruction hypothesis, but they have little debt and forward hedged rates through the next two years...IMHO, way undervalued.
FRO and other tanker companies have also been hit by the perception that oil shipments will decrease by > 50% (as the price of oil falls 50 %)...Unlkely, and maybe a good entry time.
PCU and Freeport-McMoran, are interesting, because Dr. Copper has fallen below $2.40/lb...an indication that this commodity won't be needed in the upcoming (according to the spot pricing) depression, anyplace in the world. At these prices for PCU and Freeport, and for TX, or SID, if you don't have them, they might be good entry points, put in a small bid at 10% below the latest cost, and leave it for a week..
By the way. for OldTrader, the shipping cycle can be 4 years or longer...and you need to look at the debt costs for the companies, (it's gone up astronomically, as the credit crunch continues) + look at how the contracts for the services are priced...spot = depressed and subject to the shipping index (which says we're headed to a 2001-2 recession) or hedged, as though the costs to ship will stay the same for another two-three years (and with decreasing marine diesel costs, the costs are actually DECREASING), and the company's debt load and marketing process.
Those that rapidly cycle (GENCO= GNK), can vary 25% in a month, and are great for taxable accounts yo-yo-ing btween 15 and 70.
I do hold GMR, DSX, EGLE, AOD, AGD, PRGN, PYGYF, PCU, and others in tax-sheltered accounts. GNK and others are in a taxable account.
How Low Can Mining Stocks Go?
The Baltic Dry index drop not only reflects earlier fuel costs, but also the deleveraging of bets on commodities' prices by SWF's and Hedge funds.
However, many sound shippers (who've contracted lease rates through 2010-2011) have seen their valuations cut to half of book value :EGLE & GNK (Eagle and Genco) are examples, and may represent reasonable entry points.
On this site a comparison of Freeport_McMoran to Southern Copper, indicated a relative advantage for FCX, but if PCU can resolve the Asarco problem, it will have similar valuations. I like to look at long-term (5-10 yrs) of the charts to see the cycles, and I buy when the dividends seem secure.
The spot price of copper below $2.40, earlier this past week, was a cautionary note concerning the increasing slowdown worldwide ...some call it "Dr.Copper" as a measure of the worlds's healty commerce and growth.
The Real Reasons Fertilizer Stocks Are In the Dirt
And, recently, there was an article here on SA about the decreases of arable and agricultural land, coupled with a relatively obscure note: it takes about 2 bushels of soil (lost to farmers, because of erosion and contamination) each year per bushel of wheat produced.
The UN World Food price index has risen from <100, in Jan. 2000 to above 210, in April, 2008.
Regardless of the equity pricing of fertilizer producers (why Terra Nitrogen's vault and fall wasn't included, is a mystery), the world is entering a period of increasing needs for basic neccessities: food, irrigation and drinking water, and the infrastructure to provide them.
The current world-wide credit seizure will make this much worse.
here is the link
www.theatlantic.com/do...
China Milk Crisis: Quality Is Everybody's Problem
Quality control is only as good as the tests on the intermediates...and the old AAOAC indirect tests for "protein nitrogen" are duped by addition of melamine. Since the time the pet food recall occurred, it now seems obvious that the test should have been updated.
There are a lot of clever chemists, who can almost duplicate mined diamonds, etc. But Deceitful manufactureres should be executed..as were some who used ditethylene glycol to sweeten what was labeled as Pepsodent toothpaste in the Latin American "bargain" markets , as were some who used the hypersulphonated chondroitin to mimic the essential acetyl-glucosamine test in qualifying intermediates for intravenous Heparin...and poisoned thousands of kidney dialysis patients.
There are many creative minds, and subterfuges. There are, fortunately, somewhat fewer executives at manufacturing plants who wilfully endanger others. Creative minds are not necessarily evil; criminal CEO's and QC certifiers are evil, and should face the death penalty, even if they are related to the highest members of govt.!
A First Look At How the SEC's Rules Are Working
A number of other securities, including some that are represented by pink sheet listings, which are their U.S. equivalents of Cdn (Toronto) listings, have been and are under naked short pressure, to attempt to drive the price down, and create a "fire-sale".
They aren't financials, or investment types, but ATP/UN.TO (ATPWF) is one example. At one point this Spring, it had short positions over 12-fold its total shares available...It's a CanRoy Ute of U.S. power plants. So the company decided to use some of its large cash holdings to buy back some shares at depressed prices.
Until the SEC and their Cdn counterparts get sufficient data, staff and gov't support, this "naked shorting", by which large capitalized groups, such as hedge funds and other private equity groups, as well as Turquoise and other systems set up to avoid scrutiny,...this illegal activity...will continue. The naked shorting actually causes significant problems for those smaller traders, that follow the rules to borrow shares to sell short.
Another issue that comes to my naive mind, is the shorting of ETFs and other large funds...that actually hold the commodities...Such as GLD, IAU, SLV, etc. Not the ones that are futures-based. How could the government regulators be blind to the massive shorting, when physical delivery of the assets has been very difficult...there's been a lot of blogging about central bank or SWF manipulation of these ETFs,
but at some point the inverse Ponzi scheme will detonate.
Closed End Fund Fire Sale
Stocks Potentially Impacted by SEC's Enforcement of Regulation SHO
High Yield Stocks for Those Who Need Income Now
Most of our family's stocks are in sheltered accounts, wherein the yrly MRD's are based upon age and prior yr-end balance..so declining principals (over a short = 2-5 yr period) is not too terrible, if the company's are reasonably sound. As long as the deferred "dividends" are greater/yr than the MRD required, there's no need to sell at a irrecoverable loss. And there have been some total wipeouts...but we don't commit more than 2-4% of any portfolio to a single security...and most pay out >8%. This also is true for closed-end funds.
However, for a youngster like yourself, I really congratulate you on your prudence. I remember some years ago, purchasing AYE (Allegheny Energy) when it was recommended by Kiplinger's retirement newsletter as a good dividend-paying ute. It was a disaster.
On the other hand, HCP, SNH and HRP have been great dividend payers...they are >15 years in our portfolio. Others, such as SO and ERF, have also been reasonable for us over the last 20 years.
Some of the CanRoys, such as ATP/UN.TO (ATPWF) have been naked short-selling targets, because of their cash flow, U.S. holdings (unaffected by the proposed Cdn tax hike) and small enough to be seriously affected in a thinly-traded market. Perhaps the new ban on naked shorting will stop this nonsense for these smaller securities, as it may stop the credit-seizure in the larger financials.
So, from the other side of the age divide, good luck and I wish you well.
(P.S. For the years leading up to normalization in the world's GDP...perhaps 2009... the infrastructure funds originated, but not indebted to Macquarie Bank, such as MGU, MIC, MFD and MCQPF, which lease roads and income generating infrastructural businesses, may recover a reasonable price...they're so cheap now because few govt.'s and investors can afford to deploy income to much-needed infrastructure.) An interesting example of the decline can be seen with Veolia (VE) whose price has declined from the mid 50's to mid-forties, pays a now hefty 4+% dividend, and is in water infrastructure...and isn't a weenie.
Financial Crisis Hits REITs ETFs Hard
Why Dividend Investors View Stocks Differently
Unrelated Business Taxable Income Item 20 Code V.
If this exceeds 1K , across all the taxpayer's shelters, the Fiduciary has to file a 920t Federal income tax form and the Fiduciary has to take that tax from the sheltered account...The beneficial owner, the taxpayer can't pay it for reasons:
It's after the fiscal year...and would be considered a late and excessive contribution;
It's not permitted to pay tax from a sheltered account directly...etc.
The costs of having the fiduciary file the 920t (the bank or brokerage who reports the ?4978? form to the IRS) can be high. This fiduciary doesn't issue the K-1, it comes from the settlement, index-maker or accountants from the MLP, or commodity futures trading ETF, etc.
If not paid, the IRS accumulates the amounts across all the taxpayer's accounts by taxpayer number and can disqualify the tax shelters and render them taxable.
NEVER HOLD ANY SECURITY THAT ISSUES A K-1 in any tax-sheltered account.
Unrelated Business Taxable Income is income received by the Partnership from e.g., a sale of assets (a pipeline MLP selling off a line to an oil company) that is Unrelated to the Business of the MLP's Tax Shelter Registration (e.g., for a MLP of a pipeline Co., that would be the income derived from royalty payments based upon the charges it makes to move the oil...not the income from the sale of an asset.)
Each MLP that trades here or in Canada, has a Tax-Shelter Registration number that relates to the filings of the kind of businesss it expects to do, the kinds of icome and expenses it expects, and the agreement to pass the bulk of these proportionally to the Publicly Traded Partnership-limited partners, to avoid paying income tax at the MLP level.
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To "notsosmart" and others reveling in FRO's dividends...I hope the shares aren't in a shelter, because back in FRO's prospectus, in boldface and italics;
"...may hypothecate the shares held ...by shareholders... " or words to that effect.
Hypothecate means use as collateral for loans, which means that in the shelter, your shares are being used to secure a company's loans.
I'd check with FRO's legal team, because that would invalidate your shelter...you can't hypothecate or lend your interests in the shelter to any one else under any circumstances.
Since Frontline is headquartered outside the U.S., they may not care, but I sold mine as soon as I saw that in the 2006-07 Ann Report and prospectus, and similarly for the SFL (Ship Finance International) spinoff. I'd hold them in a taxable account.
Yes, Virginia, There are High Dividend ETNs
Thank you for redirecting my attention to the 1099-filers.
The reason I get carried away on the subjects of commodities and UBTI, is because there are a lot of people who hold these grenades in sheltered accounts.
And as an example: {and also to the commenter "onetaste", and to your statement about accumulating >1k from large blocks of MLP's/ account) the UBTI limitation is per taxpayer I.D., not per account.
The IRS gets the account #'s on the K-1 forms, and it tabulates all the sections and codes PER TAXPAYER NUMBER.
If a CanRoy converts to a MLP, a lot of people will have all their shelters placed at tax-hazard, unless they periodically check the SEC applications for conversion: PGH is one CanRoy that had, early this year, filed to convert to an MLP.
Again, many thanks for the MLP's in chapter C format; If one holds a few MLP's in several sheltered accounts, the sum of $ assigned to Section 20, Code V on all the K-1's can easily exceed the UBTI limit.
And then, one has to arrange for one's fiduciary (ies) to file the Federal Income Taxes from the sheltered accounts, in order to keep the tax-shelters intact. That can be a real costly pain in the ...
Yes, Virginia, There are High Dividend ETNs
When you file the regular taxable 1040, the K-1 info in the taxable account is easily handled by the mid-tier tax prep software...the items go into the proper places on the worksheets for the Schedules A, B and D, and even the tax-shelter Registration Number -which must be filed for the taxable accounts - is properly filled in for you. So it's not so tedious or intimidating as some have written - even for taxable holdings. But you should delay filing until the 10th of April, to be sure that all the tardy K-1's have been received (they must be sent out before March 30, by the business' compliance office).