Investing 102

[WSSix]

Originally Posted by GregWeld

#1 -- Thanks!

#2 -- MLP's and Royalty Trusts are "DISTRIBUTIONS" rather than "dividends" - and as such have tax consequences. That doesn't mean you have a tax problem - it just means that they are shown on tax forms and you'll get tax forms sent to you for the amounts you receive.

#3 -- This doesn't mean much if they're held in IRA/ROTH accounts etc.

#4 -- Unless you have pretty large holdings of this stuff - you're unlikely to get enough distribution that it's going to have a taxable influence on your overall earnings. I wish that weren't so! I wished you all were getting 50K a year from these bad boys!

Thanks Greg. As you've said, paying taxes means you've made money. I'm quite alright being taxed to an extent on an investment. I was mainly concerned with do I need to keep an eye out for these tax forms once a year.

[GregWeld]

Originally Posted by WSSix

Thanks Greg. As you've said, paying taxes means you've made money. I'm quite alright being taxed to an extent on an investment. I was mainly concerned with do I need to keep an eye out for these tax forms once a year.

A man after my own heart! I love to have to pay HUGE taxes! 'Cause that means I made a killing!

[GregWeld]

You might notice a "disjointed" quote for these today when comparing say Google Finance and Schwab... and or you look at your account and it's showing a big drop in these two - compared to the quote...

For example:

Schwab is showing a .30 drop in shares of JNK --- when the print is only a .07 drop.


Schwab is ADDING the dividend payout... so a .23 distribution gone "ex" today to the print price of down .07 - thus showing "down" .30

Not sure why they're doing it this way -- cause a trade price is a trade price so they shouldn't be arbitrarily showing something different. Oh well....

Both HYG and JNK went "ex" today. Oh how I love cash payments!

[GregWeld]

Okay --- so I'm always looking for something of "interest" to post... so I'll post up my moves today and WHY. This is just a "way of thinking" --- not a "what you should do" post. I'm still in the Investing 102 mindset when I post this stuff and I'm trying to get you guys to be "comfortable" THINKING about your investments -- not being robots - not being "me too's". Investing is about putting your thinking cap on and doing what's right for YOU.

I "park" money in several places -- especially with all the uncertainty etc with Europe and with our own economy - the coming election etc. So I carry pretty large positions in JNK - HYG - PFF - NLY.... These are YIELD PLAYS while sitting on cash... OKAY! That is completely different than an INVESTMENT in say Coke - or Con Ed - or Kinder Morgan.

I'm splitting on a nice road trip for a couple weeks.... While I'm GONE -- there are several MARKET MOVING events that have the ability to make large swings in the markets and particularly the interest rate markets.... So
I don't want to be caught - out on a nice road trip - having to sit on pins and needles wondering what the market is going to do. Thus -- I SOLD all my JNK - HYG - PFF. I'm holding NLY as that's a bit more of an investment than the others here.... Now --- here's the deal.... and this is the THINKING PART OF THIS POST. JNK and HYG just went "EX" --- so I have a gain in the shares AND I just picked up the monthly distribution. I can come back from my trip and I still have time to buy them back and pick up next months distribution!

I'm playing with some pretty large $$ here... so for ME... this way of "money management" is important. I want to maximize my cash flow... I like GAINS over losses.... and I can get both by just paying a little attention and looking and thinking BEFORE I just buy or sell.

If the market reacts favorably to the "news" - great! I can always buy back... and if it doesn't like what it hears -- I can buy back at lower prices and get a % wise better distribution! Either way -- it's a win.

Would I do this with long term investments? Heck no.... but doing this (raising cash) will allow me to buy more of those should the market take a powder while I'm gone -- or before I re-invest the cash.... REMEMBER we like it when things go "on sale"! If the market goes lower or spikes down - I'll back the truck up and buy more shares at lower prices and increase my dividend % --- what's not to like about that? If it goes higher -- since I'm just parking this cash -- I'll just buy at higher prices.... but I'll also be able to sleep well while I'm "away" playing.

[GregWeld]

Today looks like a good day.... and yet - when I look at what I own and what's "working" and what's not (lazy employees) I noticed that an energy play I have is the laziest. Enbridge Energy Partners (EEP) is down a $1.24 (4%) on a big up day....

That is the Investing 102 cue....

WHY? When everything is green is this one so red? Ya got to just poke around and see what's up.

Seems they offered up a "secondary". That's when a company issues (offers) MORE shares to the market. Usually these are priced at a discount to the current trading quote - so that big money buyers will soak them up and if the offering is below market -- the minute it gets back to "even" - they've got upside potential. They offered 14 million shares at a 3.6% discount to the market --- THUS --- the "price" for the common is now taken lower on the street since the company just valued (offered) to sell shares at a lower price. Makes sense I hope...

So.... is the company going south? No. Is the business bad? No Is there a fundamental change in the business? No Well then what changed? What changed is that they "went to the market to raise some more cash"... i.e., the "secondary offering" ---- they are sellers --- and they get the cash. Usually this is done when companies are making acquisitions... etc. Because if they just needed money to operate --- nobody would buy the stuff! It's kinda like needing a loan --- if you go to the bank because you desperately need money - they won't give it to you! But if you don't really need it - you can borrow all day long!

So with these facts in hand --- in other words --- I went out to find out why this is selling off 4% and found out --- and when I saw what I needed to know I doubled down.... WHY? Because a company I like that pays a pretty good dividend just went ON SALE.... and now all it needs to do is come back to where it was and I have a 4% gain on the new shares. OBVIOUSLY that's IF it comes back. But this isn't FACEBOOK (FB)...


Again -- this is not a recommendation to buy or sell this company. I'm just using it as an example to show the way I (BIG I) think and use the market.

[Rybar]

Greg how do you find out this information so quickly? I find simple google searches do not help. Is there a website you recommend?

[96z28ss]

Originally Posted by Rybar

Greg how do you find out this information so quickly? I find simple google searches do not help. Is there a website you recommend?

yeah been wondering the same thing.

[GregWeld]

I go to Google Finance ---- pull up a 'quote' for the stock I'm interested in and read the news that is listed down the right hand side. The "news" is shown in alphabetical order as related to the same alphabet shown in the time line on the chart... so you can relate news with a "move" or point in time.


If you use (EEP) for instance -- you'll see a big "gap down" with the alphabet starting at "C" --- and a bunch more stacked up behind it so D - E - F etc and the related "news" is about the secondary offering.

Then I'll read the "10K" for that offering info which comes along with news like this to see what the company says it will use the money for... OR in this case -- I clicked on news article "B" and that news article detailed the 10K filing and I got my info.

BRILLIANT HUH??

[GregWeld]

How sad..... but this thread aims to change that! Now that's hope and change you can understand!



http://marketday.nbcnews.com/_news/2...udy-finds?lite

[RECOVERY ROOM]

Thanks for the insight again always useful