Thank you very much for your informative help, Brewer.
I share your concern about M.L.P. fund leverage. After reading the fund SEC filings and reports, it looks like FEN, FMO and KYN use “traditional” leverage strategies that often employ the issuance of preferred shares which tend to be very interest-rate-sensitive which concerns me - especially as we may be approaching an inverted yield curve.
BGR and KYN apparently haven’t issued preferred shares but can write put or call options on securities held by the fund. I believe this is technically a form of leverage.
You aptly point out the loss of tax advantages by holding MLP funds while they offer the advantages of tax headache reduction. Based on your views, which I share, the MLP funds would probably be a better fit in an investor’s taxable accounts.
You offer wise counsel about fund discounts and expenses. The discounts and premiums have been moving around a lot and some funds’ expenses seem high to me as well.
Your experience with SGU blowing up confirms the importance of diversification.
Couldn’t agree more with your assessment about the dependence of the energy sector on oil and gas prices. I’m a firm believer that life and investments tend to go in cycles so another dip will probably happen sooner or later as long as (if?) supply catches up with world demand.
Your 14 percent yield on SPH sound awesome. From your perspective as an owner of a dry bulk shipping company I would be interested in your thoughts about what is causing the huge drop in the Baltic Dry Shipping rates…
http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm
I am trying to figure out if its drop is a leading indicator of a slowdown in Asia or, perhaps, the supply of ships increasing to meet the high demand.
Thanks again for your thoughtful comments.