Weekend 11/28
The Gift by Emerson I have reprinted this 1844 essay on my ProfessorElam blog the last few years before Black Friday. Or as Waldo put it in 1844
But it is a cold, lifeless business when you go to the shops to buy me something, which does not represent your life and talent, but a goldsmith’s. This is fit for kings, and rich men who represent kings, and a false state of property, to make presents of gold and silver stuffs, as a kind of symbolical sin-offering, or payment of black-mail.
Markets are little changed from last weekend with the shortened trading days and light volume of the holiday . As we suspected markets were mostly up into the Holiday.
Our theme for this week end issue is
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
Warren Buffet
I will post my weekly newspaper column tomorrow. My conclusion is that the divergence between the stronger energy and service stocks versus the still weak oil and gasoline prices, suggests the market thinks the worst is behind us or most in the business have now slimmed down to handle the what ever happens. I have not prepared an exhaustive research of al these companies but will mention them in the hopes many of you will aid in this undertaking. I recall reading a Jim Dines letter years ago when IT stocks were getting started. He suggested buying equal dollar amounts of various start ups, on the theory that the great success of a couple would pay off big time for the entire bet. I think that is where the energy sector is now.
Iron ore pellets and crude oil have real economic value. They are currently out of favor with companies trading at book or below book value.
I am suggesting that whatever risk money one feels comfortable risking, pooling that money among several beaten down issues is likely to pay off over the next couple of years.
Warning Most of the sectors discussed here are still in downtrends. This is not meant as advice but a suggestion to begin expecting some sort of low in the near future.
Pipelines
This sector is in trouble. There is too much supply of both liquid and gas products so there is less need to move them. Surely the best play is AMLP which is a mutual fund of master limited partnerships in the pipeline business.
It appears 60% of the holdings are spread across these ten firms. Sure some dividends could be cut but this diversification should allow for that even if the yield fell to six percent that's not bad in a zero yield world. Note the current dividend is 8.64%. Yes a 26 P/E is rich which is why, see below, one needs to dollar average over the next few months on purchases.
AMLP Monthly
I have no idea where THE LOW will be for AMLP. But given this entire history it appears we are getting close the previous lows. And at least the CCI at bottom is improving a bit.
AMLP Weekly
Sure AMLP could fall another couple of bucks but it looks like some support is building at the $12 level.
ZMLP is another ETF of MLPs and currently is paying over 12%
Wrong Strategy - put all your money down at one price for any of these suggestions.
Right Strategy - Dollar Average over the next few months into various sectors now trading at multi-year lows while collecting generous dividends for waiting.
Dollar averaging means that one buys the same dollar amount of a security at timed intervals. If the price goes up one buys less. If the prices goes down, one buys more. And this is the right strategy when there is still no evidence of a definite bottom But by that time I am betting the prices for all these issues will be much higher.
Iron Ore
Cliff Natural Resources
China's steel production cut back hurts iron ore miners. AS with US Natural Gas, supply has overwhelmed demand. We will wait in this one as well as other iron ore miners but it bears watching. Mesabi Trust obtains its earnings from CLF. There will be no dividend to MSB for November 2015.
Trust fixes a record date of October 30th, the Trustees are unable to consider the declaration of a distribution using anticipated royalty revenues earned during the quarter ended September 30, 2015. Accordingly, no distribution will be paid in November 2015.
Under the original written royalty agreement between Northshore and Mesabi Trust, the quarterly royalty reports, and related quarterly royalty payments, for shipments of iron ore products payable to Mesabi Trust are due on the 30th day of the month following each calendar quarter end. Cliffs, on behalf of Northshore, historically has provided Mesabi Trust with Northshore’s quarterly royalty reports prior to the 15th day of the month following each calendar quarter end.
My point is that should take MSB to the eventual low in short order. Then we watch and wait.
Energy Trusts
This looks like the best Energy Trust of the Bunch Notice the dividend is about half the EPS.
Mesa Royalty Trust
Both MTR and MVO look alike on weekly charts.
Daily MVO
That looks like the start of some base building.
Many of the other energy trusts have that train wreck sort of look to them.
Here is my partial list from stock charts. As you can see all but MOV fell on Friday.
Readers may want to print this list or create one in your charting program to start following some of these issues.
USO What about a pure play on oil itself?
This chart puts, well, what I am talking about in a market perspective. USO is trading well below the 2009 crash low.
USO Daily
All the MAs are still falling we do not have a single cross over, so don't bet the farm yet. Notice how the 50 day MA in blue failed right at the 87 day in purple. Still we have a slightly higher low, so far than at the August low. Again dollar averaging is the way to go. And at least so far one is buying at a nine year low.
The Natural Gas Sector looks so awful I am having a hard time just coming to grips with how far the charts have fallen.
Social Mood
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