I like Oil

Mulligan said:
I was thinking that, but no way am I betting on a "stock" that the underlying asset isn't even related to the price you are buying at. And messing with a K-1 over a 10k bet isnt worth it to me.


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Agree with that. No way I'm buying (or betting) on any stock, that I feel does not have the fundamentals/valuation to back it, even if it is for the short term. The last time I did that was with a company called Enron.
 
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hesperus said:
That's good sense. If you are uncomfortable with the risks of commodities, you should stay away. Always stay within one's limits.
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I was just dumb enough to think I could actually buy a true oil price equivalent "stock" without a K-1. Apparently doesn't exist. And I dont have an oil storage facility at my house to take physical possession. :)


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Car-Guy said:
Agree with that. No way I'm buying (or betting) on any stock, that I feel does not have the fundamentals/valuation to back it, even if it is for the short term. The last time I did that was with a company called Enron.
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And I guess it is good I am not. Vanguard site is down...This is the ultimate crap brokerage. My other brokerage is full of issues I wont sell. I swear if I wasn't so lazy and didn't want to mess with it I would close it down.


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Mulligan, I use vanguard too for brokerage. I agree they have issues. I use them only because my Roth IRA is there and I like to consolidate accounts.


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ESRwannabe said:
Mulligan, I use vanguard too for brokerage. I agree they have issues. I use them only because my Roth IRA is there and I like to consolidate accounts.


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They have benefited way too much from the "Boglehead Way". Certainly nothing wrong with the Boglehead philosophy, but it can be used just as easily at Schwab and Fido, too. Or they could at least issue a disclaimer about their subpar online brokerage services and say "just buy our mutual funds". :)


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Well at 8 AMLP is certainly not overpriced unless the MLP space is set to disappear, which while unlikely is possible. I would be more willing to buy if oil was at $20.00 but $26 is fairly close. I would also expect 50% dividend cuts but that would still leave 7.5% interest. overall a tepid not a terrible investment here...
 
Running_Man said:
Well at 8 AMLP is certainly not overpriced unless the MLP space is set to disappear, which while unlikely is possible. I would be more willing to buy if oil was at $20.00 but $26 is fairly close. I would also expect 50% dividend cuts but that would still leave 7.5% interest. overall a tepid not a terrible investment here...
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You and ESR are tempting me to throw 10 Bones on AMLP, since I couldnt find a true oil fund to bet on...


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This article has some good data on AMLP.

All Aboard! The Bottom In MLPs Is In | Seeking Alpha

"I looked at the holdings of AMLP to see which underlying companies have increased, maintained, or cut their dividends. As you can see in the table below, 10 of the 22 holdings increased their dividend compared to the fourth quarter of 2015. Those components that increased their dividend account for 52.50% AMLP's of assets. In addition, the only stock not to have declared its first-quarter dividend was Buckeye Partners (NYSE:BPL) -- if they increase their dividend, that will push that 52.50% up to 60.81% of AMLP's assets that have increased their dividend."

P.S. BPL did raise today. That means 60.81% raised, the others have stayed flat. No cuts for Q-1.
 
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ESRwannabe said:
"I looked at the holdings of AMLP to see which underlying companies have increased, maintained, or cut their dividends. As you can see in the table below, 10 of the 22 holdings increased their dividend compared to the fourth quarter of 2015. Those components that increased their dividend account for 52.50% AMLP's of assets.
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I'm also pleased to see that 5 of my 7 individual MLP holdings are on that list and have increased their dividends. Particularly pleased with EPD, my largest single holding at just over 6500 shares.
 
ESRwannabe said:
Who knows if this is true or not but supposedly OPEC is now ready to cooperate with each other and cut back on production slightly. From what I understand they would only need to cut back by 5% for the overproduction to go away and the price to spike up.

Oil futures bounce on report of OPEC cut

Here is another article about someone making a massive bet on the MLP sector today.

http://www.cnbc.com/2016/02/11/trader-makes-a-huge-bet-on-energy-rebound.html
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Massive incentive to cheat. Game theory had predicted decades ago that the cartel couldn't last. Game theory ad to be updated :). But current events are bringing the game into a situation where it may finally be breaking down into a prisoner's dilemma.


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dallas27 said:
Massive incentive to cheat. Game theory had predicted decades ago that the cartel couldn't last. Game theory ad to be updated :). But current events are bringing the game into a situation where it may finally be breaking down into a prisoner's dilemma.


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It's at the point in the oil business that all producers need the price to be higher and that may create a self policing atmosphere where cheating on producing quotas may not be desirable for anyone.
 
aja8888 said:
It's at the point in the oil business that all producers need the price to be higher and that may create a self policing atmosphere where cheating on producing quotas may not be desirable for anyone.
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Yes
But it's perfectly possible to cut a pizza into enough slices that everyone starves :).

I think the airline industry as a whole since inception is value destructive (I.e. all money invested by all airlines has returned below 0%).

I think auto is like that too.

I don't think oil is and I don't think it will be mostly because it's used up faster than it can be made. But until many companies go under I think we'll see a lot of up and down.

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petershk said:
Yes
But it's perfectly possible to cut a pizza into enough slices that everyone starves :).

I think the airline industry as a whole since inception is value destructive (I.e. all money invested by all airlines has returned below 0%).

I think auto is like that too.

I don't think oil is and I don't think it will be mostly because it's used up faster than it can be made. But until many companies go under I think we'll see a lot of up and down.

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Agree on most the above, but I am an optimist and have worked in the oil & gas industry for 35 years and have seen a lot. I also have been wrong about my predictions a lot.:facepalm:

We will see more production and service companies going under, and very soon at that. Lots of reasons for that (going all in at the end of the cycle, borrowed too much, etc).

But on this comment of yours:

I don't think oil is and I don't think it will be mostly because it's used up faster than it can be made.
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(emphasis mine)

I don't believe this is the case any longer. With the advent of horizontal and directional drilling and more efficient formation fraccing, oil production operations can produce more oil (collectively, worldwide) than can be used up at this point in time. Maybe in 50 years or so, that may not be the case.
 
Yeah but a lot of these companies which go under will come back if oil goes back up over say $70?

Banks will throw out money regardless of how much they lose this time around?
 
explanade said:
Yeah but a lot of these companies which go under will come back if oil goes back up over say $70?
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If by "going under"you mean bankruptcy, no they will not come back, at least not with the same capitalization. The production won't go away, but the current stockholders will no longer own it, or at least not much of it

Ha
 
Aja8888: yeah... you might he right :(.

I also think spinning up and spinning down oil operations is time and capital intensive but man... so far predictions have not played out well for me :)

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I'm talking about industry professionals who are being laid off now, the ones with a lot of experience.

Also entrepreneurs.

If smaller companies failed, maybe filed chapter 11, could they start new cos. for the next black gold rush?

Heard of one man operators hauling drilling or other equipment from TX to Dakota and making a mint leasing it.

Or there was the story of these brothers who sold their small contractor company because they were instrumental in developing the fracking method or fluid. Supposedly made a couple of billion in their 60s.

They became well known when they donated like $15 million to Ted Cruz last year, when Cruz was struggling to stay alive.
 
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ESRwannabe said:
More info:

Oil Freeze: Iraq Ready to Cap Output, Iran to Maintain Share - Bloomberg Business

Saudi Oil Minister Signals More Action May Follow Output Freeze
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From your second reference above:

“The reason we agreed to a potential freeze of production is simply the beginning of a process to to asses in the next few months and decide whether we need other steps to stabilize the market,” Ali Naimi said after meeting the Russian, Qatari and Venezuelan oil ministers in Doha. “We want a stable oil price.” This is the first time I have seen him refer to "stabilizing the oil price", other than to say no way were the Saudis going to do that, in any degree. There is always a reason for investors to keep on doing whatever seems to be the trend, but there are limits to all trends.

Jeremy Grantham who has had real-time documented out-performance over many years, said in his last letter that if the Saudi's were acting out of economic motivation when they elected to keep up production that he considered that they made a monumental miscalculation. He allowed that their motivation might have been political, which in any case we cannot talk about here. Also i don't have the understanding that would be necessary to intelligently discuss politics in the region.

Ha
 
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