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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: George8 who wrote (98497)	4/1/2008 5:47:14 PM
From: Fugitive Pauper	Read Replies (1) \| Respond to of 206225

Regarding LINE's reported loss: this is a pure accounting loss due to hedging, to be expected in an up market. It is not actually a loss at all, just a statement of how much more the company could have earned had it not hedged its production at what is now below-market price. The foregone profits resulting from hedging can be large in a strong up market, but the MLP/LLC companies really do need to hedge quite a lot to protect their distributions. Insurance is never cheap, and the fact that upstream MLPs need to buy it can make them relatively unattractive to aggressive investors who value potential capital gains over relatively safe current income. I say, why not invest both ways? Current income pays the bills, capital gains fund the fun.

To: George8 who wrote (98497)	4/2/2008 4:39:20 PM
From: Ed Ajootian	Read Replies (2) \| Respond to of 206225

George, Linn Energy (LINE) -- Looks like fugitive gave you a pretty good answer to your question. I would turn your question around, it would seem to me that any MLP/LLC that did not record a huge loss for deriviatives in 4Q was being quite reckless and only through a phenomenal stroke of luck, didn't have to record a loss. Investors in these types of entities are not trying to be a hero, they are just looking for a predictable yield, one that would not be negatively impacted if commodity prices were to go down. If a company did not have a huge loss in 4Q, that meant they were exposed to commodity price swings. Being exposed to commodity prices means they would have risked having to reduce their distributions if there were an extended period of lower commodity prices. If you thought LINE's loss was big in 4Q, wait 'till they announce 1Q, I'm expecting their unrealized derivative loss to be in the neighborhood of $3/4 Billion.