{"id":34335,"date":"2012-12-14T10:39:25","date_gmt":"2012-12-14T15:39:25","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=34335"},"modified":"2012-12-14T10:39:25","modified_gmt":"2012-12-14T15:39:25","slug":"mlps-the-ultimate-asset-class-for-2013","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/12\/14\/mlps-the-ultimate-asset-class-for-2013\/","title":{"rendered":"MLPs: The Ultimate Asset Class for 2013"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

I saw a headline this week that really caught my eye: \u201cSaudis Cut Oil Output to Lowest in a Year<\/a>.\u201d<\/p>\n

Generally, Saudi Arabia cuts its oil output for one and only reason: demand has slackened due to a weak economy, causing the price to fall.\u00a0 But then, that was before \u201cfracking.\u201d<\/p>\n

The Saudi move to cut supplies has little to do with demand, as growth has been lackluster for most of 2012.\u00a0 This time, it has everything to do with supply.\u00a0 U.S. domestic oil production rose by 760,000 barrels per day this year\u2014the biggest increase since records began being kept in 1859. And this is just oil; I\u2019ve said nothing at all about natural gas, of which the United States now produces far more than it can use.<\/p>\n

\"\"<\/a>And in an unrelated story, Fed Chairman Ben Bernanke gave the markets a jolt this week by announcing that \u201cQE Infinity\u201d will be even larger than originally planned.\u00a0 Rather than \u201conly\u201d buying $40 billion in mortgage securities per month, the Fed would also be buying $45 billion in Treasuries.\u00a0 That\u2019s $85 billion per month in new cash being dumped into the system.<\/p>\n

Oh, and Bernanke also plans to keep short-term rates at zero until he sees the unemployment rate dip below 6.5%.<\/p>\n

I bring up these two seemingly unrelated points for a reason.\u00a0 The combination of higher volumes of domestic oil and gas being pumped and the loosest monetary policy in history should make mid-stream master limited partnerships one of the safest bets for 2013. \u00a0The fundamentals for domestic energy haven\u2019t been this good in decades.\u00a0 And as yield-sensitive investments, MLPs are a no-brainer in a world of zero interest rates.<\/p>\n

Even better, we have a chance to buy them on the cheap.\u00a0 The whole sector has taken a beating after the election due to fears of higher taxes coming.\u00a0 Investors who have owned MLPs for years\u2014and who had large unrealized capital gains\u2014have decided to take their medicine today rather than wait for the inevitable.<\/p>\n

Well, the end of the year is approaching fast, and the tax-loss selling should have mostly run its course.<\/p>\n

Action to take: Buy the JPMorgan Alerian MLP Index ETN (NYSE: $<\/span>AMJ<\/a>)<\/strong>.\u00a0 Alternatively, if you are buying with the intention of holding for a while, assemble a portfolio of individual MLPs.<\/p>\n

As with dividend paying stocks, there is often a trade-off between high current yield and prospects for growth.\u00a0 Higher yielding MLPs often times have low expected distribution growth.\u00a0 So keep that in mind when researching the sector.\u00a0 And if you would prefer a \u201cone stop shop,\u201d then AMJ is a decent option that also happens to be IRA friendly.<\/p>\n

Though this is website dedicated mostly to shorter-term trading, my recommended time horizon on these is longer-term.\u00a0 I recommend holding MLPs for the duration of Bernanke\u2019s \u201cQE Infinity.\u201d\u00a0 That means holding until either the unemployment rate shows meaningful improvement or until inflation starts to creep up.\u00a0\u00a0 For risk management, consider something along the lines of a 15-20% trailing stop.<\/p>\n

Disclosures: Sizemore Capital is long AMJ in its Strategic Growth Allocation<\/a>. \u00a0This article first appeared on TraderPlanet<\/a>.<\/p>\n

SUBSCRIBE <\/a><\/strong>to Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

The post MLPs: The Ultimate Asset Class for 2013<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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