The idea, as I understand it, is to have yield but with more safety than the ten year treasury which is likely to drop in price because of the Fed.
Let me say up front that I am a big fan of the energy trusts. Too much of a good thing is a negative.
The chart shows how Jim's picks have done in the face of the drop in energy prices over the last month.
A 5% drop for an income vehicle in such a short is a lot. If you bought this group a month ago you would be down in price. It is possible that energy prices down here might stay down for long time.
If you buy this portfolio today and oil goes to $55 there could be another similar drop in the trusts. It could take months and months for the prices to come back. If you buy several different types of income vehicles, yes they might all drop at the same time but I think the difference would be that different types of products would need different events to lift the prices back up. I would not want my entire income portfolio to rely on a single outcome. Of course we'll see what his other five picks are.
I added one name to the chart that is not one of Jim's picks, the Fiduciary Claymore MLP Opportunity Fund (FMO). I have been negative on this concept from the start with the idea being that moves in the premium/discount during times of energy market duress could cause the fund to do worse than the individual issues it owns. Well over the last month oil has dropped a lot and FMO has been the worst performer amongst Jim's picks which I assume is a good cross section of the group but maybe not.
Some clients own one of Jim's picks, Kinder Morgan (KMP).
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