Taking positions in Energy Trusts. (PWE, FDG)

I think FDG held up pretty well considering what has happened in the markets. A 11.57% dividend yield is also attractive. An Obama win will also have a positive effect on FDG as he is pushing clean coal energy solutions.

PWE also has an attractive dividend yield of 23.32%. They have been beat up by the recent downturn. If you picked some up in the $13 range you probably did well. My only concern is that we may see oil go down another $10-$15 from here. At which point the dividends may be reduced going into the next quarter.

I'd be very cautious on jumping into the market long term at this stage of the game. The MACD's on both of these companies haven't started to turn positive yet, although FDG is a little closer than PWE right now. I know it's tempting with the major bargains out there, but personally I am in right now for a short term bounce 2-3 days, then I expect that we will turn lower and test 7500.

We have never seen anything like this sustained dropped before. That's why I am trying to play it a little safe right now. We could easily drop another 20% from here if the markets aren't reassured soon.

I'm also liking the chinese materials aic, yzc among others.

I'd expect that if oil heads further south you will definitely see dividend cuts but to start averaging in is not bad. I also like RIO and SSL same reasons, though the yields aren't as significant.

If you want to look at the South African miners, since they sell in USD and pay in Rand, they'll make a ton of money as the USD strengthens.

Guliamo - you raise another issue - no one's going to use candles to read - so why are the utilities so ridiculously cheap? Where the expectation of price increases have been built in... this could be a nice event turnaround too.

Rojack,
I respect your style and you are probably right but I only invest long. If they drop 20% that's fine by me as long as they make the steady climb back up.
The way I understand it, both Penn West and FDG have contracts locked in for a long time, some for years ahead. I believe their cash flow is guaranteed for a few years. The dividend hasn't grown in dollar value - those trusts are paying out the usual amount, just the fund itself has been cut in value by 50% - so the dividend doubled. I don't see any country trying to get out of any contracts for future energy so I assume the dividend will stay put.. Thanks for the tech analysis, it is reassuring to some extent.
Beany,
What can I tell you, my view is that people went nuts. The media makes money by dramatizing everything. I think a chilled view is in order:
Yes, credit will be a problem for some time and financial companies are risky.
Yes, real estate is dangerous with the future uncertain.
Yes, discretionary spending will drop, even to recession levels. yes, people will replace their iPhone less frequently... will Apple sell 50% less product next Christmas? no way!
Is natural gas worth 1/3 of what it was only 2 months ago? never!
I think this might be a perfect storm working to our advantage. Financial institution sold their shares for liquidity, home brokers sold their shares for panic and I cautiously and hopefully suspect that that leaves us with big big opportunities..
btw, I have my hat right here ready to be chewed up next week as the collapse continues.. lol

Well, I happen to agree with you. Unfortunately I bought FDG and PWE at much higher prices but I still think that both are excellent. They royalties are very good and are tax free. This free ride will end in 2010 but I'll worry about it at that time.

Who knows with this market how much farther down they will go, no one knows. They could also go up but in time these two will go up.

FDg is being bought out by TCK , closing should be in Dec.- at a price of $92.50- that is gauranted, so what can be so bad?

If I had more schekels avail. right now , I might step up and buy some more. I'm just holding my FDG and PWE for now.

To Beancounter:

Reason some utilities are so low is that many are regulated and cannot raise their rates w/o govt approval. So when their basic costs increase , they can't pass this onto their customers and they lose money.

You have to research and find out which utilites are unregulated. I believe most of them are in Texas.

Verushka - thanks, but I guess my question is with nat gas etc coming back down why haven't they turned back up? or is that just too early?

Your analysis sounds correct. In fact, I'm sure lots of hedge funds are holding energy trusts as a hedge against their more speculative trades.

As such, I expect them to sink along with everything else as all the hedgies unwind their positions to make margin calls.

Cash is king and I think these will be great buys within a few months.

i REPLIED TO YOU IN AN EM. i'LL RESTATE WHAT I SAID AGAIN- NAT GAS PRICES DOWN BIG. MANY OF THE NAT GAS CO'S WERE CARRYING ALOT OF DEBT BECAUSE THEY ONLY SAW GOOD TIMES AHEAD.

CHK- IS IN DEEP TROUBLE. THEY ARE SELLING OFF ASSETS TO RAISE CAPITAL. THEY HAD NO CASH ON THEIR BALANCE BOOKS. THEY FEEL THAT WITH THE SALE OF ASSETS THEY WILL BE ABLE TO RAISE CASH.

NOT A GOOD TIME TO BE A SELLER- YOU WILL GET FIRE SALE PRICES. SO ALOT OF THESE CO'S INVESTED TOO MUCH IN DRILLING, EXPL., BUYING LEASES, BUILDING PIPELINES ETC., WHEN THE MARKET WAS HIGH , EXPECTING THE MARKET TO GO HIGHER.

WELL GUESS WHAT/ THEY WERE WRONG. tHERE STILL SHOULD BE SOME NAT GAS CO'S THAT WILL GO UP WHEN THIS DEBACLE BEGINS TO EVEN OUT. THOSE WILL ONLY BE THE CO'S THT HAVE STRONG BALANCE SHEETS.

FOR THOSE CO'S AND THEIR NAMES, YOU WILL HAVE TO DO YOUR OWN RESEARCH ASN I DO NOT HAVE THAT INFO AT MY FINGER TIIPS AND I TOO WOULD HAVE TO RESEARCH WHICH ONES ARE SOLID.

HOPE THIS ANSWERS YOUR QUESTION SOMEWHAT. I DO KNOW FOR A FACT THAT CHK AND HK ARE IN TROUBLE.

I agree that in the long term these are good solid investments. In the short term though they may go down more, so I'm holding to see what happens on Monday in the Asian market.

a good solid long that I really like is CME - it will be the only exchange to standardize all of these CDOs. They will make a killing and averaging into their stock now is not a bad deal.

I have to check this one out. I know the CME will make a killing but ICE WILL ALSO TRADE SOME OTHER TYPE OF PAPER THAT HAS BEEN ILLIQUID UP TILL NOW. I HAVE TO CHECK WHICH EXCHANGE WILL SELL WHAT.

GOOD IDEA. I THINK YOU ARE RIGHT.

Personally, I like NTRS.

I used to like CHK, but I wouldn't recommend it now. maybe WEL?

I'm a sad owner of CHK.. believe it or not I'm about 20% up since i bought them in 2005.
thanks for your analysis Verushka, I'm not sure in how much debt CHK are but their management team is considered top notch.
Even if they are selling off some properties, their market value is but a very small percentage of the gas reserves they own. As mentioned I like ETF's these days so if I see a good opportunity to ditch some CHK, I would definitely swap.

fof whatever it worth, here's a natgas price chart of the last 20 years

it is rather small...
blue rep the monthly prices
pink is the volatility, calculated as a 12 month trail.
green line is a simple linear trendline.
The previous decade was relatively flat; last decade is different. Hoever, if we eliminate the 2 spikes (Oct 2005 and June 2008) current price levels seems reasonable.

Obama and clean coal...never in a million years. The fact that it is "clean" does nothing for carbon emissions. Obama is pushing wind, solar and biomass. Every compromise on this is a political position driven by the absolute impossibility of moving to "altenative" sources as fast as he has promised. BTU up 20% today... a lot of investors saying that we are going to be using coal for a long time to come.

Also on XLE...up 16.5%. Again, these are not (by and large) alternative energy plays. This is good..old fashioned..oil and natural gas. I bought all the way down and I only wish I had had more to invest last week. The other alternative explanation is ...traders are jumping on while XLE is hot and will sell on the next down day. This is what makes investing so hard...it would be better if I checkd my portfolio bi-monthly. That would help avoid getting caught up in the drafts...both up and down.

Guliamo...you and I are soul brothers. I think the key observation is that the market will always over do...both up and down. The way I look at it...if the world comes apart at the seams my IRA ( and your $$) won't be worth anything anyway. If the world keeps turning and if people continue to seek a better life... the world economy will continue to grow.

I think the traders will give us another buying opportunity and I will keep putting new money to work. Will I win on Market Guru...probably not. Oh well.

Charts are backward looking, not forward looking. How can you predict the future from charts? You might be able to deduce something but it doesn't take into account such things as Lehman going bankrupt and the world credit markets seizing up. Nor does it take into account human emotion.

They are only good for the past and looking what happened in the past. Look at Java- was SUN = backward looking you would think it would bounce back- well it never has.

CHK was up nicely today but the CEO McClendon has been forced to sell most of his shares because he got a margin call. Now he hardly owns any stock in the co.- I don't know what this means for the future of chk.

Personally, I would look for a different nat gas co.- there are plenty of them to choose from. They all took terrible haircuts in the last month and a half. Even though they were up today- they are still way below what they were a few months ago.

verushka is completely right; charts certainly do not predict the future.
In fact, figuring out the past is challenging enough...

Charts are just anther way to show snapshots from the past.
Put in a sequence, these snapshots may generate a narrative.
This narrative is subjective, and it is open to interpretations.
These interpretations are food for thought.

We all live the present, without any real certainty about the future. By definition, anything we think and do, is the product of what we were exposed to in the past.

Verushka - for individual chartists, you can often tell what a stock will do by watching the big volume buyers - funds, etfs, etc. they do all behave in very specific ways, not a long lecture or anything, but I am a convert to the validity of technical analysis and swing trading (witness Guru, I'm not worthy Attilla) you absolutely can see when a stock is being sold, bought and supply and demand are out of balance. Fundamentals work only within clear trends.

Interesting quote from a WSJ column today....

""""The good news for VaR and similar models is that the free market alone would not have allowed the bubble of subsidized mortgages, but the bad news is that it's far from clear that Congress has learned from the current crisis to pursue policy goals in ways that don't distort the fundamentals of markets.""""

I agree with Verushka...if the pro's did not see this coming and they had all the models and computing power in the world...plus billions of $$ in incentive....how were the rest of us to see it. A certain amount of market action is emotion based...in other words "panic". Double peaks and double bottoms and moving averages and MACd do not predict panic.

This was a once in a life time crisis brought on by congressional meddling in mortgage markets in order to achieve social goals. The free market acting alone would never (never squared) have undertaken these risky loans without thinking they were protected from the consequences.

Contrary, I see things the same way.
We have institutions selling for liquidity, unsophisticated investors selling because they are panicking which leaves plenty of companies quite under valued..
As for the price of nat gas, I'm waiting for a good time to exit.. they are up again today and i will give them a chance to snap up some more.. a good few days in the market should do the trick.
That said, I'm not too worried.. long term demand will remain strong and prices will only rise long term. Verushka's news about the CEO is troubling.. I know he was buying aggressively CHK stock, getting hit like that isn't a good thing for stock holders.

McClendon the CEO of chk got hit with a huge margin call. I think he had to sell 33 mil.shs. and that is why the stock tanked and had such a low price. I don't know if this reflects on the company. It reflects on him personally.

He was an avid buyer of his company's stock because he really believed in CHK,

There couldn't be too much downside from here so maybe it is a buy. It's price just got killed for no underlying reason other than forced liquidation sales.

I understand Sumner Redstone also got hit terribly in a margin call.