| Still trying to get a grip on the future prospects for energy trusts. I was in trouble here a while ago for calling them slow running Ponzi schemes. I did not mean that they are frauds. Hell, a big chunk of my retirement money is in these things. However, the basic idea behind the Ponzi business plan is that early investors are over-rewarded and news of this draws in more investors. This goes on until it stops, at which point the later investors are SOL. I hold 16 energy trusts, some for 7 years, and I think I have a handle on past performance. I can easily gauge present yields, which are of course amazing. What worries me is the thought that reserves per unit are declining, and must go on declining, no matter how many acquisitions are made. Of course, that is not the whole story, as future cash flow per unit depends on other variables, such as commodity price and hedging. Nevertheless, I may have to rethink my plan to hold these trusts forever. Meanwhile I am looking forward to three events, limited liability which may bring in institutions, mergers among the twenty or so royalty trusts, and last but not least a run up in the NG price. |
