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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Steve Felix who wrote (20873)	10/10/2014 12:34:33 PM
From: JimisJim	Respond to of 34328

<All going out of business, since we will always have an oil glut.> I like having the sector down, especially for my divvy reinvestments. And you are right, the "cure" for oil glut/low prices is low prices... as always in gas and oil, it is boom and bust, one follows the other like the sun and the moon... the old oilman's prayer: Please God let there be one more boom in oil and I promise I won't blow all of my money like I did the last time... and every time we go through these booms, followed by slumps/busts, the price of oil always rebounds and goes higher than it averaged the last time... not "if" but "when"...

To: Steve Felix who wrote (20873)	10/10/2014 12:37:05 PM
From: LTBH	Read Replies (1) \| Respond to of 34328

Well Steve, I see the current situation as quite serious and one with consequences similar to 2008, specifically for E&P MLPs and perhaps to a lesser extent, C Corps. Folks seems to focus on the fact these companies hedge their O&G while forgetting that credit lines are probably the more immediate as well as long term controlling consideration. As the price of oil goes down so does the value of reserves, so will their biannual/annual bank reassessments therefore so will their credit lines be decreased with the possible addition of very limiting covenants ... for example amount of distributions paid, debt ratios etc. This impacts all aspects of an E&P MLP .... acquisitions, capex, distributions. Unfortunately, this takes a long time to play out once pricing improves and usually will affect a company for a couple of years if they do fully recover. Remember, capex and acquisitions have, at a minimum, been slowed perhaps even put in neutral ... I still remember a CC of VNRs during 2008 which discussed this and those guys pretty much did just that (put everything on hold). Not meaning to be an alarmist but do suggest some caution .... so many things in the mix for the price of oil that have nothing to do with the "normal supply/demand and its speculation" ... low pricing hurts Russia big time with ~half their revenues from same ... could be a good reason why Saudis lowered their pricing. IMO, lot of different political moves from different countries are at play here, however these things often get a life of their own at which point no one is in control. I have at least half my portfolio in energy and MLPs, I believe in my holdings so have not sold any and although tempted, I have not purchased either as I believe there will be at least 2 more months of this and perhaps a year to 18 months. Luck LTBH