Wednesday, April 26

Today we saw slight losses across our portfolio – though with the exception of FTR/PR we mildly outperformed on strong gains in Shell, despite a weakening crude price. The likely reason for this being that crude dropped barely 0.1%, less than institutional consensus. On a day-to-day basis having a sense of institutional consensus for crude oil prices is the strongest way to make short term gains in that segment – it’s often the case that these larger traders have a more accurate (or at least more expensive) forecast than the general public, and are therefore trading on different information. Just something to keep in mind.

FTR/PR is still predictably tanking – though FTR itself is performing very well, which we like to see. It’s going to be a constant source of underperformance in our portfolio, but it shouldn’t drag us down too much – the lowest this issue can really go is about $40/preferred before they start to convert (which won’t happen, bullish activity will take over long before we get there). This is because at the current $2.00/share this issue converts to 20 shares of common stock for an immediate arbitrage value at $40. That’s ignoring the remaining balance of payments until maturity – this issue is actually dipping back into undervaluation, but we’re satisfied with the size of our position (and we have until June to think about it).

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