OH JOY...MORE MLP SUPPLY
As if we didn't have enough supply coming on line already Buckeye Partners (BPL) is increasing its stock offering which explains the 3 dollar drop. Also Kinder Morgan Partners (KMP) is trading like a secondary is coming although i do not see a news release yet. Atlas Pipeline Partners (APL) has 27.5 million shares from priviate equity placements that become available for sale which may put some pressure on prices although it is not dilutive. Bottom line is more shares competing for dollars in the MLP space. However some MLPS seem to be moving away from their recent lows. Linn Energy (LINE) is back over 26 after seeing 23 and change last week. EV Partners (EVEP) which dropped to 30 and change Monday jumped nearly 3 points yesterday. Looks like the pressure has shifted to the big boys in the group and while we will probably be under pressure until year end with all the tax games being played eventually all of this will get discounted.
Its also no accident that MLPS have been in the toilet since late July and continues to remain near its August lows while the credit crisis has by most measures has moved back to its August peak. In fact last night on Kudlow and Company, Larry was showing charts of the TED spread and LIBOR and the commercial paper markets. As all those charts have returned to the August depths of the credit crunch, its no accident that the MLP index is reflecting the same thing. So i think that MLPS won't start moving higher until the banking system starts repairing itself. Perhaps this next rate cut will finally jump start all this. The dollar has been rallying on the back of the fed comments. Wayne Angel, former fed big cheese, made a point last night that rate cuts will help the dollar because the state of the markets now is preventing normal business from moving from point a to point b. He argued the dollar is rising because the fed has signaled that it will do what it has to do to repair the banking system. All food for thought here as we watch stocks rally while MLP's generally languish.
Stock futures are sharply higher this morning on Bernake last night indicating more cuts are coming and Oil futures are down 2 dollars this morning and under 90 bucks. Its an early morning post so no headlines so far.
joseph cioffi's Source Page - Associated Content
5 comments:
This was filed 11 minutes after Thursday's close.
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Form 8-K for KINDER MORGAN ENERGY PARTNERS L P
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29-Nov-2007
Regulation FD Disclosure
Item 7.01. Regulation FD Disclosure.
The following information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
We expect to conduct an underwritten public offering of our common units representing limited partner interests. If an offering is made, the securities would be issued under our existing shelf registration statement filed with the Securities and Exchange Commission. We are currently considering an offering of approximately $250 million of common units. Any offering is subject to market and other conditions, and we may change the number of common units offered or the timing of the offering or decide not to proceed with the offering.
This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state. Any offering will be made only through a prospectus supplement and accompanying prospectus.
http://biz.yahoo.com/e/071129/kmp8-k.html
with the markets in rally mode, where is the tax selling in the general market and why is it just in MLPS. with rates going lower every day these stocks like, NRGY are 20% off the highs and yielding nearly 400 basis point to the 10 year bond. I just don't get it
A little perspective might be in order. All the recent supply in MLP secondaries is merely a pimple on the Elephant that is the Treasury Market. Money has flowed away from risk into treasuries.
Perhaps with some of Bernanke's and other ( The Treasury and Banking confidence building efforts ) people will realize that the banking system is not going to colapse, and that the flight to safety was way overdone.
After all, MLPs and (equity)REITs, have traditionally been "Bond substitutes", but have been priced in recently as "Junk" Bonds.
Add a little confidence, and sub 4% 10 year treasuries will begin to look less appealing than growing 7%+ distributions that MLPs offer.
JF50
I see what your saying, and thanks for the reply but many of these MLPS like NRGY, MMP ETP have increased the distributions quarter over quarter and they provide, in many cases the gas, oil propane supplies to run this country. While it is not likely that the banks fail, it's either a screeming buy down here or not. I think it is, but the markets have spoken and like you said, priced these units as junk. LF
In July prior to the sell off, the spread between MLP and treasury yeilds were narrow, implying that MLPs weren't "Junk". Perhaps (in July) with some MLPs LPs then having Distribution yeilds of Sub 5%, MLPs were over priced?
Just as Mr. Market overshoots on the up-side, he often overshoots on the down-side.
When normal MLP /Treasury spreads return, ( and if the fed lowers by another 50 basis points ), we should see 5% MLP LP yeilds again.
Meanwhile I guess we'll have to endure some pain.
JF50
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