Archive for January, 2012

Natural gas truckin’ along

By Kirk Spano

This week the Energy Information Administration released a preliminary draft of its
US Energy Outlook From Now Through 2035

. A few things jump out that reaffirmed a simple thesis I have, shared by many, which is that the trucking industry will gradually shift much of its fuel consumption towards natural gas over the next decade or so.

While we all know that international demand for oil is rising, it is clear that most Americans underestimate that demand. Over the next several years, it is very likely that the United States sees even more dramatic reductions in oversea oil imports than the past few years, as other nations demand the oil instead. China in particular has demand that is growing at 5% per year and has growing ties to many oil-producing nations. This will all contribute to continued upward pressure on diesel and gasoline costs.

Much of the reduced levels of oversea imports will be offset by increased Canadian imports and domestic production, as well as by continuing improvements in efficiency. However, much of the rest of the difference will have to be made up from substitution fuel sources. In my last article I discussed that passenger cars and SUVs which account for 63% of transportation energy usage appeared headed for a
hybrid future

. Trucking, which accounts for about 20% of transportation energy usage, seems headed in another direction, natural gas.

Why natural gas for trucks and not cars? The simplest reason is that trucking is the easier of the two segments to move to natural gas. While some would espouse cars going to natural gas, that would be a huge undertaking. Converting the semi-truck fleet over time, given the more centralized refueling points and periodic replacement of engines, is the most obvious choice for using natural gas as a transportation fuel.

T.Boone Pickens has talked about converting trucks to natural gas for years now and is gaining traction with his
Pickens Plan

in Congress. Pickens, like others, discusses how battery-powered trucks are not yet, and possibly not ever, possible as a replacement for diesel, although natural gas is. Given the that natural gas is in abundance and the price difference versus diesel appears relatively stable, the cost of moving toward natural gas engines does not seem so daunting.

Chesapeake Energy

/quotes/zigman/126832/quotes/nls/chk CHK

, America’s second-largest natural gas producer, recently committed a billion dollars to

technologies with investments in Clean Energy Fuels

/quotes/zigman/102863/quotes/nls/clne CLNE

and Sundrop Fuels. While Chesapeake has a clear motive to see natural gas demand increase, it is not a backward-looking company. They were smart enough to expand their focus on oil a few years ago as the natural gas glut developed. They are smart enough to know that eventually, natural gas will play a role in transportation.

Clean Energy Fuels is a leading fueling equipment and systems company for providing natural gas for transportation. It is well positioned to prosper as natural gas use ramps up in trucking and bus fleets. If cars do move towards natural gas, either on a stand-alone-engine basis or as a part of a hybrid engine, Clean Energy Fuels could see a substantial boom. Clean Energy Fuels stock has moved relatively sideways for two years forming a solid base as the company approaches profitability.

Among other companies poised to profit from trucking and other heavy vehicles such as buses, moving toward natural gas power is


/quotes/zigman/42077/quotes/nls/wprt WPRT

. Westport is a leader in natural gas engines from new builds to conversion of diesels. Westport common stock has been on a steady upward trend the past year and is owned by members of Congress and Pickens, as well as several highly rated funds.

Westport is not profitable as of yet and is struggling like many other small companies do, though is low debt. While the future in theory seems bright, much of the share run-up could be due to several stock letters promoting it with speculation that natural gas will gain traction in transportation relatively quickly. Westport, with its market cap under $2 billion, is with little doubt also a take-over target.

I see the move toward natural gas large vehicles as being more gradual, so I am moving with caution. Westport offers fairly rich option premiums and might be a worthy put-selling-strategy candidate if you want to own the company in the long run. For example, you may want to consider selling the April $35 put which you would receive about $1.75 for. That is a 5% return for a three-month holding period if the stock stays above $35 per share. If the stock falls below $35 from its current perch near $38, then you get the company for a net of 33.75 per share, minus trade expenses. While this is not the sexiest strategy, it is a slightly more conservative way of getting involved.

Kirk and clients of Bluemound have no direct holdings in any company mentioned in this article. Neither Kirk nor Bluemound clients plan any related transactions in the next three trading days. Opinions subject to change at any time without notice. Follow Kirk on Twitter @GALPinvesting and read his monthly letter at


add Add CHK to portfolio




add Add CLNE to portfolio




add Add WPRT to portfolio




Friday, January 27th, 2012 EN No Comments

Making Cents: Financial plans begin with setting goals – Sentinel

As the famous philosopher and Hall of Fame catcher Yogi Berra once said, “If you don’t know where you are going, you might wind up someplace else.” Unfortunately, this is how most people run their family finances, particularly if they don’t focus on goal-setting.

A starting point for goal-setting is to think about how you’d like to spend your time – the details of each day, week, month and year. Don’t assume that you must go punch the clock each day. Now, developing the vision doesn’t mean that you’ll be there starting next Monday, but it should pique your curiosity enough to wonder what may have to happen for this to become reality. That’s where financial counsel and forecasting may shed light.

Think of your ideal use of time in terms of the categories, activities or values that are most important to you. Now rate your satisfaction with how you are currently enjoying your time spent in each of these areas, and ask yourself how to improve your satisfaction. You’ll dig out those fun things that you used to do, but have been lost in your busy life. Make this the year that these meaningful and invigorating activities make it to your calendar.

The next part of goal-setting involves planning for the consequences or costs of living out your meaningful purpose. And the first consequence is discovering and trying to eliminate obstacles that prevent you from living the dream today. Some may be obvious, such as you simply can’t afford to move to Maui and surf every day. But you can calculate what it may take to afford that lifestyle, and design a plan to know when you’ll be able to live it. Perhaps there is a middle ground that finds you in a wetsuit in the Northeast or taking annual trips to Maui.

Also, ask yourself what should happen if something goes wrong – such as a job loss, severe illness or premature death. What would you like to happen to your lifestyle and loved ones? It’s not the most fun part of goal setting, but it will be meaningful in the event that something does hit the fan.

The one thing that you can guarantee is that things will change. What is important to you now may not matter in a few years. This part of planning is just as important and should be the centerpiece of all planning discussions.

John P. Napolitano is the CEO of U.S. Wealth Management in Braintree, Mass. He may be reached at For online discussion and more information, go to



Wednesday, January 25th, 2012 EN No Comments

Advisors Asset Management to Distribute Versus Capital Multi-Manager Real …

/PRNewswire/ — Advisors Asset Management, Inc. (“AAM”), a trusted investment solutions provider partnering with financial advisors and broker-dealers, announced today that it will act as “a sub-distributor” of the Versus Capital Multi-Manager Real Estate Income Fund (the “Fund”), the first publicly registered Investment Company Act fund to provide individual investors with access to institutional real estate managers and funds.


Versus Capital Advisors LLC (the “Adviser”), an investment adviser focused on multi-manager institutional real estate investments, will act as adviser to the fund. Callan Associates, one of the largest independently owned investment firms in the country, will serve as sub-adviser.

“Our relationship with Versus is indicative of our efforts to provide advisors with investment solutions that help them deliver more diversified portfolios to their clients,” said Andrew Williams, President of AAM. “Investors are increasingly seeking new sources of portfolio income while demanding the regulatory scrutiny that a post-Madoff world requires. We believe the Versus Capital Multi-Manager Real Estate Income Fund delivers on both counts.”

The Fund’s primary objective is to seek consistent current income, with a secondary objective to seek capital preservation and long-term capital appreciation by allocating capital primarily among a select group of institutional asset managers with expertise in managing portfolios of real estate and real estate-related securities. These are asset managers that have typically been reserved for institutional investors such as foundations, pensions, endowments and other institutions.

“We developed this Fund to give investors access to institutional direct real estate funds, a meaningful part of many wealth management portfolios, in a structure that removes many of the barriers typically associated with other direct real estate products,” said Mark D. Quam, CEO of Versus Capital. “Investments in real estate provide meaningful advantages for investors, including income-oriented returns, portfolio diversification and a potential hedge against inflation.”

The Fund directly addresses the need for low-minimum real estate investment vehicles and offers investors transparency not found in many other direct real estate products. The Fund additionally features no upfront fees, daily NAV pricing and potential quarterly liquidity.

“We are excited to build this relationship with Versus and offer advisors a true alternative to non-traded REITs,” Mr. Williams said. “Our independence allows us to team with high-quality managers, offering innovative products to deliver truly diversified solutions to advisors, helping them grow their business and remain competitive for the future.”

For more information about Advisors Asset Management, please contact Chris Moon of JCPR at 973-850-7304 or via email at

About Versus Capital Advisors

Versus Capital Advisors LLC, is an investment adviser registered under the Investment Advisers Act of 1940, exclusively focused on building and managing multi-manager real estate and alternative investment platforms that seek to have an income oriented return focus and low correlation to the broader stock and bond markets.  Versus Capital builds these platforms to give individual investors access to institutional managers once reserved for foundations, endowments, pensions and other institutions.  For more information, please visit

Advisors Asset Management

For more than 30 years, Advisors Asset Management, Inc. (AAM) has been a trusted investment solutions partner for financial advisors and broker-dealers. AAM provides a diverse range of innovative, high quality products and support services that enable advisors to meet their clients’ needs. It offers access to the fixed income markets, as well as portfolio analytics, unit investment trusts (UITs), exchange traded funds (ETFs), structured products, separately managed accounts (SMAs) and alternative investments. In addition, the firm offers highly specialized sales support services to advisors on an ongoing basis. AAM has ten major offices across the nation and  partners with more than 90 broker-dealers and over 35,000 financial professionals. AAM is a broker-dealer, member FINRA/SIPC and SEC-registered investment advisor. For more information, visit

Investors should consider the investment objectives and policies, risk considerations, charges and expenses of the Fund carefully before investing.  For a prospectus which contains this and other information relevant to an investor in the Fund, please contact AAM at 866.930.2663.  Investors should read the prospectus carefully before they invest or send money.

The Fund is a newly formed entity with no significant operating history upon which prospective investors may evaluate the Fund’s potential performance. The Fund’s investments may be negatively affected by the broad investment environment in the real estate market, the debt market and/or the equity securities market. Real estate is subject to special risks, among which are tenant default, environmental problems, and adverse changes in local economic conditions. The Fund is “non-diversified” under the Investment Company Act of 1940 since changes in the financial condition or market value of a single issuer may cause a greater fluctuation in the Fund’s net asset value than in a “diversified” fund. The Fund is not intended to be a complete investment program. You should not expect to be able to sell your shares of beneficial interest of the Fund (the “Shares”) other than through the Fund’s repurchase policy, regardless of how the Fund performs. The Fund does not intend to list its Shares on any securities exchange during the offering period, and the Fund does not expect a secondary market in the Shares to develop. As a result of the foregoing, an investment in the Fund’s Shares is not suitable for investors that require liquidity, other than liquidity provided through the Fund’s repurchase policy. The success of the Fund depends in large part upon the ability of the Adviser to choose successful institutional asset managers (the “Investment Managers”) and upon the ability of the Adviser and the Investment Managers to develop and implement investment strategies that achieve the Fund’s investment objectives.


Not FDIC Insured, No Bank Guarantee, May Lose Value.

CRN: 2011-1130-2888 R


SOURCE Advisors Asset Management


Wednesday, January 25th, 2012 EN No Comments

Planners Call Obama’s ‘Union’ Address Optimistic But Short on Specifics – Financial


Financial planners, detail-oriented as they are, thought President Barack Obama’s 2012 State of the Union speech struck an optimistic tone, but were left wanting more specifics on how and who would foot the bill for several initiatives.

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The plan to train 2 million Americans in skills that will lead directly to jobs was a major step in the right direction, said Mark Lamkin, CEO of Lamkin Wealth Management, based in Louisville, Ky. It is a refreshing break from the rhetoric that he feels normally characterizes Obama’s speeches, and reassurance that the president cares about job creation.

“Overall, from the jobs perspective, it was not progressive or populist rhetoric,” Lamkin said. “I think most financial planners — and clients — feel like he bashes capitalism.”

Lamkin also approved of the president’s drive to catalyze economic activity by granting tax incentives to companies the manufacturing sector. Yet he had hoped the president would have included the technology industry, and any other sector that has exported jobs, in that plan.

“Why not any company? Is it because manufacturing is the base he’s trying to appeal to?” Lamkin asked.

The open question is how these initiatives, among others, will be paid for and whether any substantial work will get done in an election year, says Diahann Lassus, president of Lassus Wherley, a fee-only financial planning firm in Providence, N.J., with an office in Bonita Springs, Fla.

“Many of the things he talked about that are positive, like education, probably won’t happen soon because of the budget, and because Congressional leaders are more concerned about who will elect for president than what to do for the people,” Lassus said.

Although tax credits and deductions for small businesses and industries are positive, Lassus said, they have their limits.

“Increasing deductions is not an effective way of reducing taxes for business,” she said “We need to look at the overall structure, [rather] than keep doing piecemeal fixes along the way.”

Obama did not spare the hot-button issue of fair tax policies for all socio-economic classes in the U.S.

“Tax reform should follow the ‘Buffett Rule,’” Obama said. “If you make more than $1 million a year, you should not pay less than 30% in taxes.  And my Republican friend Tom Coburn is right:  Washington should stop subsidizing millionaires.” 

Yet financial planners still question whether those rigid divisions are fair, given the way tax bills actually shake out in the U.S. The top 10% of earners in the U.S. pay about 72% of federal taxes in the U.S., Lamkin noted, citing IRS figures. Part of that revenue funds services for lower-income Americans who pay little or no taxes.

Lassus added that at least Democrats have revised their perceptions on what classifies a household as wealthy, in a way that takes the rhetoric down a notch.

“Democrats in many ways, and Obama specifically, have gone away from classifying wealthy as those who earn a $250,000 annual income to those who earn $1 million,” Lassus said. “I don’t know that anyone agrees that anyone needs to pay 30%. We need a more equitable tax system for everyone, to make sure that middle-income people and everyone else is paying their fair share.”

Donna Mitchell writes for Financial Planning.

















Wednesday, January 25th, 2012 EN No Comments

Millionaires back Buffett tax on wealthy — if they’re exempt

Millionaires support Warren Buffett’s view that the wealthiest should pay more in taxes, as long as it’s other rich Americans, according to a survey released.

About 71 percent of millionaires surveyed said they agree with Buffett, chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc., that the very wealthy ought to pay more taxes and give more to charity. That included 49 percent who said that they’re “not in the same league” as Buffett and that the higher taxes shouldn’t apply to them personally, according to the survey from PNC Wealth Management, a unit of Pittsburgh-based PNC Financial Services Group Inc.

“When we compare ourselves to somebody else, we always think that they should do more,” said R. Bruce Bickel, senior vice president of PNC Wealth Management, whose parent company is the sixth-largest U.S. bank by deposits. The 555 respondents, each with investable assets of $1 million or more excluding real estate, may be saying, “‘I don’t consider myself the ultra- wealthy, when I compare myself to a Buffett,’” Bickel said.

Buffett, 81, the world’s third-richest person according to Forbes magazine, urged Congress in August to raise taxes on households earning more than $1 million. About 236,883 households earned $1 million or more in 2009, according to the U.S. Internal Revenue Service.

Tax rates

Income-tax rates for top earners will rise to 39.6 percent from 35 percent in 2013 and rates on capital gains and dividends also may rise, unless Congress acts.

The survey didn’t ask what level of income or assets should trigger higher taxes, according to Alan Aldinger, a PNC spokesman. About 41 percent of those surveyed said they would change their investment strategy in response to an increase in taxes, and 24 percent said they would reduce commitments to philanthropy.

Almost 70 percent said they plan to increase charitable giving or give the same amount, and about 22 percent have cut back or plan to donate less. About 27 percent of respondents, who were surveyed in September and October, said they gave more than $25,000 to charity in 2010, up from 9 percent who reported donations of that size three years ago.

Giving back

“People are beginning to say, ‘In difficult times, those of us who have been blessed with financial wealth need to give back,’” Bickel said.

Taxpayers generally can’t take deductions for charitable contributions of more than 50 percent of their adjustable gross income, according to the IRS.

About 71 percent of respondents said they’re much better off than their parents were at the same age, compared with about 10 percent who said they expect their children will be much better off by the time they’re the same age.

“Some may be saying the American dream is not something that’s achievable for the next generation,” Bickel said.

PNC hired Artemis Strategy Group, a public-relations research and consulting group, and HNW Inc., a marketing firm, to conduct the online survey.


Sunday, January 22nd, 2012 EN No Comments

American Funds is the biggest loser in shift toward passive investments

American Funds is the biggest loser in shift toward passive investments

By Jason Kephart

January 22, 2012 6:01 am ET

More than any other mutual fund company, American Funds is bearing the brunt of investors’ latest infatuation with passive investing.


Related to this story

Index mutual funds took in a record $76 billion last year, and exchange-traded funds, which are predominantly passive, scored another $121 billion. Actively managed funds, meanwhile, lost about $9.4 billion, according to Morningstar Inc.

That change in preference has spelled disaster for American Funds, which grew to become the second-largest fund family, with more than $854 billion in assets, on the strength of its active management.

Last year, American Funds had net outflows of $81 billion, up from $18 billion in 2008. For a different perspective on American Funds’ problems, consider this: With $33 billion in net outflows, the company’s flagship mutual fund — American Funds Growth Fund of America (AGTHX) — had more outflows last year than all the funds at any single company.


In total, since the end of 2007, American Funds has shed about 15% of its assets.

The outflows have given advisers reason to be concerned.

Eric Toya, vice president of wealth management at Trovena LLC, said that he is watching the American Funds in his clients’ 529 plans to see if the outflows create “hidden” costs, such as tax consequences from forced selling or extra transaction costs.

“The biggest thing we’re looking for is managing expenses,” he said.

Of course, it doesn’t help that American Funds’ performance hasn’t been consistent year in and year out. Last year, the company’s average mutual fund beat 65% of its peers, up from 43% in 2010.

“Some of our funds have not performed as well as we would like in the short term,” said American Funds spokesman Chuck Freadhoff. “We feel that the way we manage money has produced solid returns over the long term and we’re not going to change that.”

The company’s underperformance — whether it be long-term or not — caught many advisers by surprise, said Kevin McDevitt, an analyst at Morningstar.

“Advisers may have had unrealistic expectations that American Funds would hold up in any market because of how they did in the early 2000s,” he said. “They didn’t do as well in the last bear market, and some of the outflows are a hangover from that.”

At least part of the company’s problems also can be attributed to advisory firms’ shift toward fee-based business models, from models based on accepting commissions. That shift, which has been occurring in fits and starts over the past 15 to 20 years, has led more advisers to sell no-load funds — rather than the load funds sold by American Funds.

Advisers’ intense scrutiny of fees and expenses — no doubt a byproduct of the low-interest-rate environment — has spurred interest in passive investment products, which are cheaper than those that are actively managed.

It certainly hasn’t helped the case for active management that 2011 saw two of its brightest stars, Pacific Investment Management Co. LLC’s Bill Gross, and Bruce Berkowitz, founder of Fairholme Capital Management LLC, have their worst year.

The $7 billion Fair-holme Fund went from being the top performing large-cap-value fund in 2010 to the worst-performing fund in 2011.

The struggles of active managers aren’t exactly new.

In each of the last 10 years, more than half of all active equity managers have beaten their benchmarks only four times, and in none of those years did more than 63% beat their benchmarks.

Long-term performance hasn’t been much better. Over the past five years, only 48% of active equity managers have had better total re-turns than their benchmarks, ac-cording to Lipper Inc.

Other giant fund families, such as Fidelity Investments and BlackRock Inc., have been expanding their index fund lineups over the past year. Fidelity added five index funds, bringing its total to 13. The firm’s index mutual funds had inflows of $1.6 billion, while its actively managed funds lost about $29 billion.

The Charles Schwab Corp. also is making a big push for index mutual funds. It plans to launch an index-fund-only bundled 401(k) product this quarter.

Don’t expect American Funds to go the indexing route, though.

“We don’t feel that over the long term, investors will do as well with a passive investment as they will active management, and we have the long-term track records to back that up,” Mr. Freadhoff said.

Client demands aren’t falling on deaf ears at American Funds, though.

The firm is readying its first major product launch in more than a decade. Eight funds of American Funds will be launched in May, geared around investment goals, such as growth, income or tax preservation, rather than asset classes. The funds will offer a one-stop shop for manager diversification at American Funds.

Mark Delfino, managing director and chief investment officer at HoyleCohen LLC, is one adviser who has sold his holdings at American Funds in order to buy cheaper alternatives.

He had owned the $75 billion American Funds Capital Income Builder Fund (CAIBX) in a number of model portfolios, but he began to cut his stake in 2009 after being disappointed with the performance.

“With a fund that size, you’re not looking for it to be in the top 10%, but you want it to be better than average,” Mr. Delfino said. “We started to ask ourselves, what are we paying for?”

He exited the fund last year and replaced it with a combination of low-cost passive dividend funds and smaller, more focused actively managed funds. The sideways market is putting pressure on margins, and paying lower fees for funds helps relieve some of that pressure, he said.


Sunday, January 22nd, 2012 EN No Comments

Wirehouse market share has shriveled since crisis

Wirehouse market share has shriveled since crisis

By Andrew Osterland

January 22, 2012 6:01 am ET

The wirehouses have been losing market share hand-over-fist since the financial crisis, and according to estimates from Cerulli Associates Inc., the trend may only accelerate over the next three years.


Related to this story

“The advisory industry as a whole continues to rebound, but the four wirehouses are not rebounding,” said Bing Waldert, director at Cerulli Associates. “The years since 2007 represent a worst-case scenario for the wirehouses, as these firms were punished by the bear market and their perceived role in the financial crisis.”

The four wirehouses are Merrill Lynch Wealth Management, Morgan Stanley Smith Barney LLC, UBS AG and Wells Fargo Co.

Total assets under management in the financial advisory industry finally recovered to pre-crisis levels, topping $11.2 trillion at the end of 2010. That figure was $11 trillion at the end of 2007.

Assets at wirehouses, however, fell from $5.5 trillion to $4.8 trillion during that same period. In market share terms, that is a drop from 50% to 43%.

The numbers would have been even worse if not for the $300 billion in assets at Bank of America Corp. that were thrown into the wirehouse bucket after the bank acquired Merrill Lynch Co. Inc. in 2009.


Cerulli is estimating that, based on these trends, wirehouse market share could drop another 8 points to 35% by the end of next year.

“Our projections are grounded in what’s happened in the past, so they reflect to some extent another worst-case scenario for the wirehouses,” Mr. Waldert said.

The market share losses, to a degree, are by design as the wirehouses increasingly have focused their resources on advisers serving wealthier clients.

Morgan Stanley Smith Barney has been openly culling lower-producing advisers from its ranks for the past year. Recent changes made by Merrill Lynch to its compensation grid suggest that the focus on the more profitable high end of the market will only increase.

“The market share decline is an after-effect of the wirehouses’ focusing on fewer larger advisers with fewer and larger clients,” Mr. Waldert said.

However, perhaps most troubling of all from the point of view of the wirehouses is the fact that despite their focus on the high-net-worth market, they are losing share there, too. According to Cerulli’s research, the wirehouses’ share of clients with more than $5 million in assets fell to 45% at the end of 2010, from 56% in 2008.


So what explains the dramatic decline in wirehouse market dominance?

Mr. Waldert said that it is a likely combination of three things.

First, advisers are leaving for other distribution channels, with independent broker-delaers and RIAs the fastest-growing segments of the market. Second, clients are leaving their wirehouse advisers, though Cerulli doesn’t have specific numbers on that trend.

Finally, weak investment performance, again with no numbers to confirm, may be a factor.

Mr. Waldert said that the first two factors are the most important, but suggested that poorer investment re-turns might also explain part of the huge decline in assets under management.

“It’s possible that customer distrust in the wirehouse channel made them more likely to stay on the sidelines, and therefore they didn’t participate in the recovery as much as others have,” he said.

A spokeswoman for Merrill Lynch Wealth Management declined to comment.

Officials at Morgan Stanley Smith Barney, UBS and Wells Fargo didn’t return calls seeking comment.


Sunday, January 22nd, 2012 EN No Comments

Hugoton Royalty Trust Declares January Cash Distribution

(a)      Sales volumes are recorded in the month the trust receives the related net profits income.  Because of this, sales volumes may fluctuate from month to month based on the timing of cash receipts.

XTO Energy has advised the trustee that it has deducted budgeted development costs of $500,000, production expense of $1,942,000 and overhead of $905,000 in determining the royalty payment to the Trust for the current month.


XTO Energy has advised the trustee that scheduled maintenance on a gathering and processing system in the Hugoton area resulted in a decrease of approximately 200,000 Mcf for October 2011 production. Scheduled maintenance was completed in October 2011 and the system returned to normal operations in November 2011.

Hugoton Royalty Trust

For more information on the Trust, please visit our web site at

Statements made in this press release regarding future events or conditions are forward looking statements.  Actual future results, including development costs, could differ materially due to changes in natural gas prices and other economic conditions affecting the gas industry and other factors described in Part I, Item 1A of the trust’s Annual Report on Form 10-K for the year ended December 31, 2010.






Saturday, January 21st, 2012 EN No Comments

The bitter sweet truth about credit card reward schemes

Perhaps the biggest allure of credit cards is the ability to spend without having to carry cash. But for some people, part of the appeal is the belief that frequent card use can bring a host of incredible rewards.

In rewards schemes, the cardholder earns a fraction of the amount spent in the form of cash, vouchers and gifts.

Free tickets to a dream destination, weekend stays at a luxury resort, dining and retail discounts are just a few of the freebies up for grabs.

Because the offers often look too tempting to resist, cardholders are increasingly pursuing air miles and points to supplement their expenses. Consequently, as consumers swipe more, spending and debt levels also rise.

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A Federal Reserve Bank of Chicago paper published in December 2010 tackled the impact of credit card rewards on spending and debt in the United States.

Authors Sumit Agarwal, Sujit Chakravorti and Anna Lunn examined whether consumers spend more when given rewards and if they incur more debt because they receive incentives. Specifically, they reviewed thousands of accounts of individuals enrolled in a one per cent cash-back programme.

“We find that consumers generally spend more and increase their debt when offered [rewards]. The impact of a relatively small reward generates large spending and debt accumulation,” Agarwal, Chakravorti and Lunn wrote.

On average, a consumer spent about $68 (Dh249.71) more and owed $115 more per month during the first quarter of the cash-back programme.

“Our results confirm that cardholders not only increase their spending but also their debt,” they said. “The greater increase in debt compared to spending suggests that average monthly payment drops more than the marginal increase in spending from the cash-back programme.”

Spending increases were more significant among married cardholders compared to single consumers. Those with higher credit thresholds also showed a tendency to swipe their card more and pile up more debt.

“We find that cardholders who do not use their card prior to the cash-back programme increase their spending and debt more than cardholders with debt prior to the cash-back programme,” they added.

Besides encouraging excessive spending, many financial experts argue that reward schemes are not really worth it because the value of the incentives rarely offsets the amount spent by the cardholder.

Many banks in the UAE and abroad promise to offer rewards equivalent to 1 per cent of the purchase, which means a cardholder has to spend Dh10,000 to get Dh100 worth of cash or freebies back. One bank’s latest offer is an iPad, to be given away to a customer who has accumulated more than 400,000 air miles or spent more than Dh400,000 on his credit card.

But it doesn’t mean reward cards are bad for everyone and need to be avoided at all costs.

“It depends on the individual scheme,” says Richard Taylor, a chartered financial planner at Acuma Wealth Management in Dubai. Taylor admits he is one of those cardholders who find loyalty programmes useful.

Something for nothing

“I personally use my credit card to collect air miles and I find the rewards worth the cost and hassle of having a credit card. But that is because I pay off my balance each month and don’t really incur any costs nor experience any hassle. Used this way, the right rewards scheme is a great opportunity to get something for nothing.”

This may not be the case for debt-laden consumers who don’t use their plastic money responsibly.

“The problem is, this is clearly not the way many people manage their credit card and that is exactly what the providers are hoping for,” he points out.

“They want to encourage you to get into debt and stay in debt as this is how they make money from you. So it is up to the end user to take responsibility for using their credit card correctly, as it would be unfair on those who do play the game [ie build up rewards by using their cards without getting into debt] to lose the perks because some people cannot manage their finances.”

Steve Gregory, managing partner at Holborn Assets, agrees that if used wisely, credit cards that are tied to a rewards programme can work to a consumer’s advantage.

“Used unwisely, they create more profit for banks than any of their other retail banking activities.”

However, Gregory observes that defaults in recent years have affected the profitability of UAE banks. Residents in the UAE are estimated to have owned about 70 per cent of the credit cards in the GCC.

Datamonitor International’s July 2010 data showed that more than a fifth of UAE expats had been unable to meet loan or credit card payments in the previous twelve months.

To avoid the risk of racking up huge credit, consumers who sign up for incentive programmes are advised to use their card only for regular purchases instead of seriously pursuing air miles or reward points. This way, they won’t spend more than what they earn, but still earn freebies at the same time. Regular spending can be anything from groceries to utility bills that one pays on a routine basis, with or without an incentive.

“All it takes is some personal organisation and discipline, which is available to all of us,” says Taylor.

However, financial experts warn it is so easy to rack up debt, so if you honestly feel you can’t afford to settle all your dues on time, you are better off not having any credit card.

“Credit cards offer a superb and almost cash-free way of managing finances, but it is part of the make up of many human beings not to want to wait for things they desire, and to spend all they can access as soon as they get access,” Gregory said.

“It is so, so easy to build up credit card debt, especially in a place such as Dubai,” adds Taylor.

“Only using your credit card to pay for routine spending may go some way to helping. However, I am of the opinion that if you are the sort of person who struggles with this, you are likely to just use your debit card if you know there are surplus funds in your account that should be earmarked for your credit card bill.”

Taylor’s advice is simple: “If you are the sort of person who can have a credit card and pay it off in full each month, then have one and exploit the advantages. If you are not this person, then stay well away, as no amount of air miles or free/reduced golf will compensate for the financial and emotional turmoil of unpaid credit card debt.”


This card is good for those who love to buy groceries as it promises to give away shopping vouchers. For every Dh10 spent at any Geant Hypermarket and Le March Supermarket in the GCC, a customer earns two “La Carte” points. It doesn’t mean only your purchases at the named shops will be credited. You can also earn one point for every Dh10 spent in the UAE or anywhere else worldwide.

You only need to spend at least Dh10 to be eligible for points. However, a minimum of 100 points is required to get a reward, which means a customer has to spend at least Dh500 on his card to start redeeming grocery money. If you manage to increase your points to 1,000, you can claim Geant vouchers worth Dh100. In real terms, your Dh5,000 will give you Dh100 back, or about 2 per cent of your purchase. Compared to other schemes in the UAE, that’s one of the highest reward values. This card also does not have an annual fee and any points earned will not expire. There are other benefits to enjoy, such as up to 20 per cent discount at various dining outlets across the UAE, up to 55 days interest-free credit and a chance to win Dh1 million every six months.


For every dirham spent on the credit card, whether for air tickets, movie tickets, groceries, hotel rooms or dining, you will get one “Noor point”. Points earned can be redeemed for cash or Flydubai e-vouchers and are valid for up to three years. A cardholder needs to accumulate 10,000 points to request for redemption, or spend Dh10,000 dirhams to get cash or voucher worth Dh100. So, if you intend to fly to Karachi and you manage to raise 10,000 points, you’re likely to shell out extra cash to get the ticket. Depending on the card type, you may have to pay an annual fee between Dh150 (for Classic Shams card) and Dh1,000 (for Infinity Shams card). NIB Light cardholders don’t pay annual fees.

Holders of Fit For Life cards are entitled to 15 per cent off on full meal packages and 8 per cent off on “Serenity” lunch packages at Health Factory, free access to a golf club at Arabian Ranches in Dubai (for Infinity holders), as well as free gym access at Intercontinental Hotel in Abu Dhabi and Emirates Towers Health Club (for Platinum and Infinity holders).


For every Dh1 spent in any retail transaction, the cardholder earns between 0.5 to 1.5 “NBAD Stars”, which are redeemable within three years from the last day of the month during which the points are earned. To claim a reward, a minimum of 5,000 stars is required, which is equivalent to Dh5,000 worth of expenditure for Classic cardholders.

Depending on the points earned, you will be able to use them to pay for airline tickets, hotel stays, restaurants, electronic items, jewellery, entertainment, furniture or household items. Cash redemption, however, is not available. To claim a ticket worth Dh800, a Classic cardholder needs to accumulate 80,000 points, while 15,000 points will be enough to pay for a meal worth Dh150. So, you get back about 1 per cent of your money spent. Additionally, the rewards scheme does not only offer a high redemption value for each point (one NBAD Star equals one fil), it also allows a customer to earn up to 10 bonus points for every Dh1 spent at any of the bank’s rewards partners.


This is mainly an air miles rewards programme which promises to offer free tickets to cardholders. You can get back as much as 2 per cent of what you spend, depending on the card type and average monthly expenditure. Purchases on the Platinum card worth Dh25,000 could earn a customer up to 500 “AA dirhams”, redeemable for a ticket worth Dh500 on Air Arabia. That’s 2 per cent of your money spent. If you make Dh5,000 worth of purchases on average per month, you will earn back 50 “AA dirhams” monthly, so in a year, you can get a free ticket worth Dh600 from Air Arabia. That’s a Dh600 yield out of a Dh60,000 spend.

There is no minimum threshold required for redemption, but the points earned are valid for 24 months. An annual fee worth Dh100 is also collected from Classic members and Dh200 from Platinum holders. For Platinum cardholders, the best reward this programme offers is a free airline ticket upon first payment, as well as a Priority Pass that provides lounge access at over 600 airport lounges across 300 cities around the world. Other perks include a 10 per cent discount at Sharjah Duty Free and a 5 per cent discount on Air Arabia Holidays.


For every dirham spent, cardholders can earn 2.5 reward points, which can be used to get free flights, shopping vouchers and for annual membership fee waiver. When dining anywhere in the UAE, customers get 10 per cent cash back. Consumers can earn as much points as they can, but cash back on dining is capped up to Dh3,600 annually.

Points earned are valid for three years and a cardholder is required to earn at least 10,000 points to be able to request for redemption. The incentive value for 10,000 points is equivalent to Dh50, while 100,000 points can be redeemed for Dh1,000 worth of reward. That means the more you spend, the bigger the bonus and you get back 1.25 to 2.5 per cent of your card spend. The good thing is if you’re aiming for free tickets, the points earned can be claimed for any airline ticket online or through travel agents. Cardholders also enjoy complementary airport lounge access at 600 lounges globally. For those who fancy golf, Barclaycard Edge offers complementary golf and buy-one-get-one-free offers in UAE, as well as 30 per cent discount at more than 300 courses worldwide.


This rewards scheme is ideal for both travellers and avid shoppers as it is packed with numerous freebies from gift vouchers, frequent flyer miles from leading airlines, to cash back and waiver of annual membership fees. Cardholders are automatically enrolled into the programme, so anyone can collect “Plus” points that have no expiry. All retail purchases offer 1 to 2.5 per cent cash back. Maximum monthly earning for points, however, is capped up to 3,000. Members also have to pay annual fees, which range from Dh99 to Dh1,500.


Cardholders get 1 to 1.5 air miles for every dirham or two spent, depending on the type of credit card. Customers can earn rewards points twice when they shop at Air Miles partners. The more you swipe your card, the bigger your chances of earning freebies like airline tickets, hotel stays, restaurant meals, gold, jewellery, electronic items, fashion, gifts and stationery, among others. You can accumulate as much points as you like and there is no expiry to worry about, but to redeem rewards, you need to meet the minimum threshold of 12,000 air miles, which is roughly equivalent to Dh12,000 spend. A minimum spend of Dh8,600 is also required to qualify for rewards, in case of Premier customers. But this can be further reduced if cardholders shop at Air Miles partners.

One of the latest rewards is an Apple iPad 2 (3G, 32GB), redeemable for 476,000 miles. That means you need to log more than Dh300,000 worth of purchases on your Premier card to bring home the prize. If the iPad costs Dh2,899, you get about 1 per cent of your money spent. Premier and Advance customers are exempt from annual membership fees, while other cardholders pay anywhere between Dh150 and Dh600. The rewards scheme is also traveller-friendly, as it offers free flights on any airline in First, Business or Economy class. There are no blackout dates and members can redeem one-way or return fares.


Saturday, January 21st, 2012 EN No Comments

Morgan Keegan sites may survive

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Don’t expect Morgan Keegan’s Jackson branch to shutter its doors anytime soon.

The brokerage firm’s parent company, Birmingham-based Regions Financial Corp., announced last week it has entered into a stock purchase agreement to sell Morgan Keegan and related affiliates to Florida-based Raymond James Financial for $930 million. The sale is expected to close within the first quarter, pending regulatory approval.

Morgan Asset Management and Regions’ Morgan Keegan Trust are not included in the sale and will remain part of Regions’ Wealth Management organization.

“We don’t expect any changes in our branch. It’s business as usual,” Morgan Keegan communications director Kathy Ridley said of the Jackson office at Meadowbrook Office Park.

Morgan Keegan also has branches in Columbus, Greenwood, Grenada, Hattiesburg, Laurel, Meridian and Tupelo.

Raymond James on Wednesday hosted an open-house style session at its St. Petersburg, Fla. headquarters for more than 80 Morgan Keegan branch managers and employees. The event served to welcome Morgan Keegan managers to Raymond James and demonstrate how similar the two firms are in culture, shared values and focus on clients and associates.

The event also let managers see first-hand the support and depth of resources available to advisers, particularly in the areas of asset management services, marketing and technology.

Logan Phillips, branch manager of Morgan Keegan’s Jackson office, wouldn’t confirm on Thursday whether he attended the open house, referring all questions to corporate headquarters.

“The meetings have helped show our managers that Raymond James is run a lot like Morgan Keegan. We’re confident that Raymond James offers the kind of environment where our financial advisors can be very successful,” Bill Geary, co-head of Morgan Keegan’s Private Client Group, said in a statement.

Chet Helck, CEO of Raymond James’ Global Private Client Group, added Morgan Keegan professionals have been reassured of Raymond James’ commitment to client service and an advisor-focused culture.


Saturday, January 21st, 2012 EN No Comments