I sold a couple holdings to harvest some tax losses among other reasons.
music selection: “Shine” — Collective Soul
A large part of my core strategy, after holding a healthy allocation to closed end bond funds is to have equity holdings that pay fat dividends to ensure there is steady income coming in. Historically, this has included a lot of oil and gas MLPs especially in the pipeline space. With my double normal size investment in the double leveraged AMZA, holding onto individual company MLPs makes less sense especially when they are underperforming.
I sold two holdings today and am left with about 20,000 of AMZA plus about 10k in exposure to SDLP (which is attractively priced around 3.50 a share). I am making a long term strategic decision to have less oil and gas exposure for the foreseeable future. This is going out on a limb a little maybe but I think the long run picture for oil and gas is dark. Shale oil fracturing has brought enormous new supplies online that suppress pricing. At the same time, I think the electric car revolution, which is still in its infancy, is going to strike a mighty blow to demand.
Early reports from ride sharing services in California that run Teslas are that battery efficiency after 200,000 miles is a loss of only 6% capacity. There are people who believe electric car batteries will soon have an effective 1,000,000 mile lifetime. The economic proposition for the lifetime cost of owning and operating an electric vehicle will soon eclipse that for an internal combustion engine vehicle. I expect we will in the next few years see the mass adoption point where sales of the old technology falls off a cliff. When the mix of ICE vehicles in operation becomes trivial, demand for crude will fall about 30%. Many O&G operators will find themselves with stranded assets. The time to get out may be a few years ahead but I want to be too early instead of too late.
To that end I sold CNNX for 16.43 a share. The position was initially entered at 20 dollars a share on 22JULY2017. I book a short term capital loss of 1,785. The net return on the position after all distributions and options premiums is a smaller loss of 437.65. I recover 8,215 in cash for redeployment into more attractive opportunities. I also sold GEL for 20.69 a share. The position was entered on 19AUG2016 at 37.50 a share. I book a long term capital loss of 3,362. The return after all distributions and options premiums is a loss of 2,327. I recover 4,138 in capital for redeployment. Both positions are left with naked calls on them that expire on the 15th. Neither is likely to be exercised.
I hope to raise some more capital by exiting ADM with an options trade. Sirius XM is also near the money and could see cash returned. Cash on hand with my main broker is up to 36,064. That should provide some wiggle room for writing puts in the new year.
Devour your prey raptors!