Sold Whiting Trust II (WHZ)

Earlier this month I sold Whiting Trust II (WHZ). I had been busy working with the folks over at Sharpe Trade that I didn't post it here and to be honest, I hadn't planned on mentioning it. However with its above average price drop I feel its important to address it now.

As with my ARCP sale, to prevent anyone thinking I am using hindsight bias here is the trade confirmation.

I ended up breaking even on this position. While I had a large loss when I sold, I had received 20% dividends for a couple years which ended up making these be a wash. This trade was certainly not one to brag about.

I sold for two reasons. The price of oil has plummeted from well above $100 down to $80. WHZ has costs they have to pay for the extraction of the oil and those costs do not go down with the price of oil. Their profit will take more than a 20% hit. I have seen many other oil companies take large hits in share price and WHZ seemed to not have been affected by it. However the history of WHZ is that it drops by a lot at ex-dividend date and then recovers over the quarter. This time due to the downward pressure of oil prices on the share price, I do not expect it to recover this time. This is a short term reason but an important one.

The second reason is more long term in scope and I expect it to last for the duration of the trust's life. Investors weren't pushing the share price up to a high level. Most trusts will have the share price rise as investors look at high yields and push it up. BPT, GNI, WHX are all examples of this and I had hoped that WHZ would follow suit. They did not. I had pressumed that would be the worst case scenario and that I would break even due to having a minimum amount paid out.

Royalty land trusts are fairly easy to estimate what they will pay out. They list the estimated amount of energy they expect to extra and you pick a reasonable price for the commodity it produces. Specifics will vary as these are estimates but you can come close. The bigger variable is how the market will react. You have a floor on your losses and gains because of the distributions paid out. Sometimes it works out like it did for me in BPT years ago, sometimes it doesn't like here with WHZ.

With WHZ losing about 8% of its production a year its best years are front loaded. The last years of a trust's life pay very little. With oil this low and who knows when it will recover I felt it best to move on.

As I post this, WHZ is traditionally at its point where it bottoms out and starts recovering for the quarter after its last distribution. If that happens this quarter or not I do not know. The odds are against it I think and that's what trading is to me. Only being in positions that have a high probability of being successful. I don't do the crap shoot investments.



Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

ARCP discussion in the Week in Review Podcast at Sharpe Trade

The first of many "Week in review" podcasts is now up on Sharpe Trade.

Some of you also follow Dan Shy from NoNonsenseTrading and might be familiar with his Week in Review podcast he puts out. That is something we wanted to continue on with Sharpe Trade and so far its been well received. I think we really did did a good job for our first podcast. But of course I am biased. What did you think of it?

I discussed quite a bit of my thoughts on ARCP but time restraints kept me from speaking everything I wanted to say. A lot of investors got into ARCP and are still in it. As I mentioned, I was it in it for awhile and sold on Oct 11. I didn't mention it at the time and don't want to be accused of making up history so here is the trade confirmation.

I see a lot of people discuss that out there that nobody could have seen the accounting scandal coming ahead of time and could have prevented avoiding the loss. I disagree strongly. While you could not know the accounting scandal specifically was going to happen, an investor could know that at some point something was going to happen due to management making poor decisions.

As I mention in the podcast, ARCP was a series of bad choices by management that were in their favor not shareholders. The board of directors is supposed to be looking out for us but they were along for the ride.

It isn't only retail that missed a lot of warning signs with ARCP. Goldman Sacs has a top 50 favorite stocks researched from 775 hedge funds and they looked at the top 10 holdings of these funds. ARCP is in the list as being a favorite.. of the professionals... who charge money for their picks and have teams of researches working for them. If you missed the warning signs then don't feel bad at all.

If you are a fellow blogger who is still in ARCP please note I am not "calling out" anyone or trying to point at others losing investments. Lord knows I have been in many myself and will once again in the future. I've been burned by this exact thing, poor management,.What happened to ARCP is a great learning experience if one can get past the denial game of "nobody could see it coming" and dig into the public data that was always available.


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Introducing Sharpe Trade

You may have noticed I've been rather quiet recently. There is a good reason for that. I've been rather busy on a new project...

I'd like to introduce you to Sharpe Trade. What it is and how it came about.

When I first started out on Youtube and with this blog years ago, I had a mission. I wanted to help people learn about the capital markets and avoid all the dumb mistakes I had made for years and learned the hard way on my own. I vowed that when I got my act together I would try to help others avoid the mistakes that I made.

Then I ran into Dan Shy, aka Aileron of No Nonsense Trading. He had been blogging and had his own Youtube channel for a number of years before me. We and some others got to talking and got to know each other.

The biggest problem we all noticed is how newcomers to the markets were being tricked. Financial news media and institutional fund managers would push their own agendas while other newcomers to the markets would act like they knew what they were talking about. You had a case of blind leading the blind. What they did have though is emotion. Anger and frustration from what happened to them with the Financial Crisis of 2008. They caused more harm than good. Long time readers might recall my thoughts on the precious metal community.

But its not just a gold or silver thing and I now see the same thing happening with equities. People who started their financial education after 2009 have only known a bull market. Buy anything with a yield without regard to price and wait for decades to live off your income. There is so much more to investing than that. I fear that the first real correction we get will be a rude awakening to many. My primary goal is as it always has been... to have open dialogue with rational reasonable human beings to learn about the markets together.

On Sharpe Trade both Dan, myself, and others will be talking about the markets on podcasts, videos, and plenty of text entries. The level and depth we will offer is far more than what I have offered here. I'm really excited for where its going.

So what happens to this blog? It will remain. It is a progress portfolio blog and I've grown fond of the name Pully. But its also time I step forward and talk more openly and directly.

My name is Brad Bradford and I'm an investor who wants to cut through the B.S. and ignorance of these markets that is far too common.



Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Monthly Update: October 2014

I'm continuing to get myself caught up from my absence...

Portfolio Acitivities
Sold CPA @ $99.24
Sold AAPL @ $97.76
Sold ARCP @ $11.70
$750 deposit into Investing.

Portfolio Income
Dividends ($22.48)
     AFSI: $4.64     
     ARCP: $6.35
     BLV: $2.55
     JNK: 4.64
     PCY: $1.90
     Interest from Cash: $1.91
Lending Club
     Interest: $49.74
Rental Income
     Townhouse 1: $950

Market pullback: October showed a market pullback. Was it going to be a dip, pullback, downturn, correction, crash? You can never tell going into them and I was in a very defensive mindset. I placed several stops and AAPL, and CPA got triggered for sales. ROST and PETM had stops but were not hit and I am still long those two.

Painfully low dividends: I haven't had this low of a month income wise in a long time. Not only was it the smallest one traditionally of the quarter but I had several sales and am sitting on 45% cash right now while I was waiting out the market downturn.

Low deposits: Real life events prevented me from contributing as much as I would have liked. I'm ok with that because of how I run my accounts. I put some into savings, I pay my bills, then the rest goes into my various accounts. By its nature it will be variable. I prefer this to a static deposit rate which I think is unrealistic. Life itself isn't static. 

Sold ARCP: I sold ARCP early on in the month. It was when I was inactive and because it was for a great price compared to now I want to post a screen capture of the sale least I be accused of revisionist history. Your trust is very important to me...

I have quite a bit to say on ARCP. Why I sold and why I think it collapsed in price. It had become a popular investment in the dividend community and it warrants discussion. I saw a lot of people buying it in October and I made a few comments on a few blogs but I am kicking myself for not saying anything more. The loss imo was complete avoidable but more on that in the next day or two...

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Why I sold Whiting USA Trust II (WHZ)

Yesterday I sold my royalty land trust, Whiting USA Trust II (WHZ). The price was $11.59 and when you add in distributions for total return, I broke even.

Royalty land trusts are companies that give you access to the sale of a natural resource but only for a limited duration of time. Then they expire and your units that you hold in the trust go to $0. You do not own the land the trust operates on; you only get access to the oil, natural gas, iron, timber, or whatever resource is on or under the land.

Knowing that an asset will go to $0 and expire makes a royalty land trust a lot like musical chairs. Its great while the music is playing and you can easily get 10%, 15% or 20% yields. But when the music stops, it REALLY stops. The trick is to take a few turns around the room but walk away before you are left without a chair.

Trusts have a termination clause that states when they will end so for the observant, there is no surprise. Its in their quarterly reports. But lets be honest here. How many investors know about quarterly reports let alone read them? Trust investors most often have no idea what they are invested in.

Case in point is Great Northern Iron Ore Properties (GNI). They terminate in a few years and the price will go to $0. The only value out of it is the quarterly distribution. Its quite simple actually, you add up all the remaining payments and that is the fair value of trust. Take a look at January 2014. When it was in the $70s. Clear example of trust investors having no clue what they hold.
I and many others warned them that fair value was in the $20s and sooner or later the music will stop. "But it has a 10% yield its too good to pass up!" Those investors lost the equivalent of 5 years of distributions on an asset that ends in about 2. They will never get their money back.

Back to WHZ and why I sold yesterday. I had expected it to hold its share price steady like most trusts do and collect a 20% yield for a few years then move on. The market though has kept it pretty close to its estimated fair value and it always drifted lower after each distribution. Obviously oil prices will rise and fall and the remaining payments will only be estimates so fair value is also an estimate. We've recently seen oil fall from the $110s down to the $80s. That's going to cut into future distribution payments from WHZ. In fact the most recent distribution is lower and I expect it to drop more next quarter.

However the share price however has not yet adjusted down like so many other oil companies. I'm expecting WHZ share price to fall sharply in the next 1-2 weeks. WHZ has a history of dropping when the distribution is paid and then recovers. This time I am not so sure it will recover.

It certainly might. I am not making prediction. I'm just saying I'm stepping away while the music is still playing...

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

My old blog posts are back

Back during my Rebirth entry when I revamped my blog I decided to hide all my old posts. I had wanted to shutdown my Youtube channel and videos and that meant that a lot of content I created here on the blog was going to make absolutely no sense. I wanted a cleaner experience for you.

However it did cause a problem. The history of what I had said publicly was hidden from view. The things I say and write about now have less context and as a reader you have less understanding of where I am coming from. And that's important when judging a person in determining if you should believe what they have to say, especially when it comes to something as important as finance.

Additionally, hiding old content could be viewed as covering up past mistakes, bad market calls, and losing investments. I've been public with my view on that and repeat it here.
I HATE people who cover up their mistakes.
Its pointless because its how human beings learn. You experience something new and have limited information to make decisions yet at times you have to make a decision. It will be a terrible choice. The wrong choice. One you learn to never make again. And you move on like an adult.

You probably know the type of who I am talking about. The Youtuber who learns a few financial terms and spouts off nonsense. I and others call them out for the frauds they are and then amazingly that video or their entire channel just vanishes. Replaced with a new channel trying to start over.
Or a blogger who moves to a new site and takes down their old blog. They are seem great at the markets with a whole new perspective. They of course sit there hoping people won't notice.

Now that is not to say everyone who starts a new venture has something to hide. New opportunities come up. Plenty of my fellow bloggers start off on blogspot and then move on to their own site. A social media content creator gets better with time and wants to improve. Nothing wrong with that at all. The difference is in the intent.

So my old blog entries are back. The correct calls like the gold and silver community losing their minds, as well as my incorrect calls like my postion in Enerplus (ERF). I've certainly made mistakes in the past. Not only should I be more open about that I embrace them.

One disclaimer though. The videos remain hidden, for now at least. This means that many entries will not make sense or be incomplete. I don't plan to go back and redo them as its 4 years and nearly 400 entries. If there are any questions or comments though I will certainly expand on the ones people have interest over.

Otherwise my time will be better served with new content and new ventures...



Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Monthly Update: September 2014

A September portfolio update in November? Gadzooks am I that far behind? Apparently so but there is no time like the present to get back on track...


Portfolio Activities
$1,000 deposited into the Investing Account
Bought 7.9481 CPA @ $125.32
Bought 4 AAPL @ $99.11
Bought 5 IBM @ $192.65
$250 deposited into Lending Club
$1,500 extra paid to Townhouse 1

Portfolio Income
Dividends ($79.72)
     AFL: $5.97
     IBM: $6.04
     ROST: $2.99    
     ARCP: $6.35
     PSEC: $12.06
     PSEC: $11.94
     TCPC: $22.42
     NDRO: $1.17
     BLV: $2.43
     JNK: 4.51
     PCY: $1.93
     Interest from Cash: $1.91
Lending Club
     Interest: $46.90
Rental Income
     Townhouse 1: $950

Planning to refinance: My main focus this month was paying down the mortgage on my rental. I am very close to not being underwater anymore which means I am eligible for refinancing. I must have talked to half a dozen lenders and the first thing they asked was whats the home worth and whats left on the mortgage. Nobody would talk to me
As I bought the unit before the housing crisis I have over a 6% mortgage and reducing that would free up some cash flow.

Several purchases: The beginning of the month was quite active with purchases in a new company. Copa Holdings (CPA) is a Panamanian airliner. Never let it be said that I stick to conventional U.S. blue chip companies. I also added to Apple (AAPL) and IBM (IBM)


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Still alive... and a new opportunity.

The markets have had a crazy October with sentiment changing from "this bull will never end!" to "Sell everything its the beginning of 2008 all over again!".

I was defensive going into this downturn and was heavy cash. I was up to 45% cash at one point. Several stops were hit and I could see the potential of it becoming worse even as it turned up. Now though we have a lot going for us in the equities markets to be long.

Seasonally, the Christmas rally begins now. The next 6 months traditionally gives the greatest amount of returns for the year.
The U.S. economy continues to recover. Perhaps not as strong as some would like and the jobs being created aren't the best paying but it is A recovery. That's better than no recovery. I'll be looking to deploy my cash in November.

As you may have noticed I've been pretty silent here for the past couple months. Most often that means a blogger has given up and walked away. In my case I have certainly not been idle.
I'm happy to share that I have a new writing opportunity to work with some others. When I am able to share details I will but I think its going to be an exciting new chapter for me.

With that in mind, this blog will not be going away. I've grown fond of the self directed retail investing community and have no plans to leave it. Its always a pleasure to read monthly updates and see people working on their goals and sharing stories of their accomplishments. With the popularity of fear sites like ZeroHedge out there, that sort of mentality is critical in this day. I want to continue contributing to that message.


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.