Proposing a Play on AMJ's Lockdown

I have been a big fan of master limited partnership (MLPs) for the last several years. These unique securities, which generally offer exposure to companies engaged in the storage and transport of energy commodities, are known for hefty dividend yields and relative stability. And, as we all know a bit too well, those two characteristics are hard to come by in the current environment -- especially in the same wrapper.

My actionable investment idea for today revolves around MLPs but has nothing to do with dividend yields, volatility, or any other traditional valuation metrics. It's based purely on my understanding of the nuances of exchange-traded products, and, perhaps, a bit on expectations or irrational investor behavior. Late last week, JPMorgan (JPM) announced that it will suspend creation of new shares of its popular Alerian MLP ETN (AMJ), effectively cutting off the mechanism that is used to bring new shares of ETFs and ETNs into circulation. More importantly, that announcement essentially means that JP Morgan has shut off the mechanism that is traditionally used to keep the prices of exchange-traded products in line with their net asset values (NAV). Once that switch has been flipped, AMJ will lack the traditional "safeguards" that kept the price of the ETN from going significantly above or below the value of the underlying assets. ...295 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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