Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Nasty MLP ETF Indicator Flashing Investor Warning Signal Again

Companies / Exchange Traded Funds Jul 27, 2010 - 08:02 AM GMT

By: DailyWealth

Companies

Best Financial Markets Analysis ArticleTom Dyson writes: In early 2007, investors were reading news stories about hundreds of new ethanol plants... enormous demand for grain in China... and rice shortages in Thailand.

Potash and farm-equipment stocks were soaring. The world's most widely published investment gurus – like Jim Rogers and Marc Faber – were touting agriculture and farmland as their favorite investments.



In short, agriculture was quickly becoming one of the most sought-after new investments in America. But you couldn't speculate directly on agriculture unless you had a futures account.

Wall Street stepped in and issued new exchange-traded funds (ETFs) to fill the gap in the market and supply investors with the "one-click" agriculture investments they were demanding. Between September 2007 and January 2008, six new agriculture ETFs launched...

In late February 2008, the agriculture bubble popped. Nine months later, these ETFs were down an average 45%.
 
Fund Symbol Return
Market Vectors Agribusiness MOO -53%
ELEMENTS Rogers Agriculture RJA -43%
iPath DJ-UBS Grains JJG -45%
iPath DJ-UBS Agriculture JJA -44%
ELEMENTS MLCX Grains GRU -46%
ELEMENTS MLCX Biofuels FUE -39%
  Average -45%

The same thing happened with commodity ETFs just before the commodity bubble popped in 2008. It happened with short-selling ETFs just as the stock market was about to bounce in 2009. And it happened with currency ETFs just as the dollar was about to soar.

Wall Street lives on the fees it generates selling investments to the public. When the retail public falls in love with an investment idea, Wall Street cranks out products it can sell them. The more popular the investment, the more products Wall Street creates.

Whenever you see Wall Street creating lots of new investment products to sell to the public – especially ETFs – you know investors must love the idea... and prices might be forming a bubble. You should be extremely wary of buying or holding stocks in these sectors. Chances are, they're about to enter a severe correction.

So what's the hottest new ETF sector right now? It's master limited partnerships...

A master limited partnership (MLP) is a special business structure available to a small number of firms trading on the stock market. Right now, there are 91 companies in the sector. MLPs treat their shareholders as partners in a business instead of owners of a corporation. This way, they avoid corporate tax. Many different businesses can qualify for MLP status... including real estate businesses, shipping lines, and money-management businesses. But the biggest companies in the MLP sector are all pipeline businesses.

Master limited partnerships are safe, recession-proof businesses that generate stable earnings and pay high dividend yields. These characteristics make them very popular with investors... especially right now when everyone's looking for safe income stocks.

Over the last year, the money-management industry has obliged investors by introducing four new ETFs focused on MLPs, including a double-long MLP fund. This month, two more firms filed papers to float new ETF products, which will bring the total to six.

firms filed papers to float new ETF products, which will bring the total to six. 
 
Fund Symbol IPO Date
JPMorgan Alerian MLP AMJ Jun 2, 2009
Credit Suisse Cushing 30 MLP MLPN Apr 14, 2010
E-TRACS Alerian MLP
MLPI Apr 14, 2010
E-TRACS 2x Long Alerian MLP
MLPL Jul 7, 2009
ALPS MLP Fund   Coming Soon
Market Vectors MLP Fund   Coming Soon

 

The fact that Wall Street has introduced so many MLP investments is a huge warning sign that the MLP sector has become too popular and could be about to enter a correction. I prefer to buy MLPs when they yield over 10%. Right now they yield 6% on average.

So even though MLPs are one of my favorite income investments, I recommend you avoid the MLP sector for now... and focus on safer, less popular income investments like preferred stocks and safe stocks that relentlessly raise their dividends.

If you own MLPs, don't sell them now. The industry is in such a strong uptrend, MLPs could easily rise another 25% to 50% from here. But I recommend you use a trailing stop loss. In my newsletter, we're using a 15% trailing stop loss. This way, we'll capture any additional upside, without risking the profits we've made so far.

Good investing,

Tom

P.S. There are still great places to pick up safe high yields. For instance, we've told you about virtual banks yielding more than 15%... and safe bonds that trade on the stock market. These unique ideas make up what I call my "Black Market Income" system. You can avoid conventional Wall Street scams and learn about this system here.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2010 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in