MASTER LIMITED PARTNERSHIPS

Friday, July 25, 2008

MLP index just went negative!

Glory!

5 comments:

Anonymous said...: It never ends...; 7/25/2008 3:23 PM
Anonymous said...: IMHO it is all about housing. MLPs are getting hit very hard because they must continually raise capital to fund growth. The credit crunch/financial deleveraging have made capital very hard to come by. The correlation of MLP yield spreads and corporate high yield spreads is unbelievably high. MLPs are suffering because people are pricing in the risk they won't be able to raise the capital.

When housing stops going down and the negative feedback cycle of deleveraging stops ... then MLPs can perform. Until then we will at best just get distributions and at worst see forced consolidation at 15%-ish yields. I hope we don't have to go there but I am not optimistic.

Oh and I didn't even mention the forced selling my closed end funds who have to stay under there leverage limits.; 7/25/2008 3:45 PM
Anonymous said...: 15% yields? So EPD goes down 14?? You need a cocktail.; 7/25/2008 4:48 PM
Anonymous said...: This is one weird market. And it's not just MLPs, it's virtually every sector that is normally the stomping grounds of conservative, yield conscious investors. This economic shifting paradigm (energy, food, Asia, housing, credit, Paulson/Bernanke/Cox, etc) feels more like quicksand than a mere shift.

But if you're correct in your assessment that the drop in MLPs is correlated to the drop in housing and that when the later stops falling so too will the former, then we might be in for a long ride down before we see this mess reverse. Earlier this week, Bill Gross estimated that the write-downs in the credit markets would likely total some $1 trillion, a sum 2 1/2 times larger than the widely assumed $400 B. If he's right, and you have to admit he's a pretty smart guy, then housing is far from bottoming.

Time will tell. It always does...; 7/25/2008 5:08 PM
Anonymous said...: I do need a cocktail. $6 pitchers of miller lite down at the beach and I am headed that way. At least that's one good thing about the credit crunch ... lots of beer specials. I think Bill Gross is spot on in saying that housing prices are going to fall another 10-15%. There are just too many foreclosures. Why sit on negative equity when you can walk away and buy another house a lot cheaper and start from zero again.

Anyway, did you see Regency just raised $200 million in equity at a 5% discount to today's close? Not too bad in this market. Of course all the buyers knew for weeks it was coming, so they were able to crush it down to where it is now and then get their discount. Same thing for ETP's offering.

That is the thing that really pisses me off about these private placements. Maybe it is the only way to raise capital, but there should be a way for the little guy to participate in buying units at the placement prices. We should at least be able to reinvest our distributions at the same level as Kayne, Tortise etc.; 7/25/2008 5:51 PM

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