THE BOTTOMING PROCESS
Judging from the posts in the comments section the sentiment here is pretty awful. Make no mistake we have a years worth of damage to repair and its going to take a long time to undo it. But as Billie Burke says...its always best to start at the beginning...and
Its a Friday in August so i would expect slow trading today but stock futures are stronger. Crude and the rest of energy is lower. The dollar continues its massive rally. Gold is imploding. The question again today will be if mlps diverge from bigger energy stocks that will start off lower. No upgrades or downgrades.
joseph cioffi's Source Page - Associated Content
9 comments:
How can KSP issue shares at this price? Pathetic.
A casual look through the history of share issuances reveals that they are easier to accomplish when yields are highest rather than lowest. If you were going to place money with one of these MLPs, wouldn't you want the highest yield and therefore the least downside potential in your capital?
Steve
On the other hand, did KSP need this money and it was not available as debt ( due to the credit crunch ) at say 8%?
This explans the poor price performance of MLPs as an asset class. If reasonably proced debt financing isn't available, MLPs will have to tap equity financing to the dismay of existing shareholders.
Another big move in the Dow and another shitty day for MLP investors.
Now you know why KSP has been flopping for the last few weeks.
But, there are examples recently of MLPs doing debt financing at reasonable prices. I'm guessing it has to do with individual circumstances. But, I agree with you, why pay 12% in distributions when you can pay an 8% coupon. The reasons for that murky and it makes you wonder what really goes on in the corporate boardrooms.
steve
The guys in the corporate boardrooms don't give a damn about individual shareholders. The clowns running corporate america know that they will get paid alot regardless of performance.
There's plenty of reason to be upset about the performance of MLPs, but being upset isn't very condusive to making good judgments about investments.
Depending on when you bought, some of them have been "bad" investments, in that they have depreciated in value while they were paying their distributions. But these are investment vehicles, not speculative ones, so hopefully you could use a longer time horizon to evaluate them their their performance over the last year. I have owned MLPs for many years and have had regular increases in income and very volatile stock performances. On some of them I have gains, some losses, but all of them have paid regularly increasing distributions.
If you're in MLPs for the short term, you may be making the wrong choices. Having said that, I'm betting a good chunk of my portfolio that they will be higher one, two and five years down the road if you enter during this very nerve-wracking time.
steve
One would think a decline in the price of crude and nat gas would be a positive for MLP's that transmit these products as lower commodity prices mean greater demand and more throughput.
In addition, with yields on 10 year notes below 4, the 8+ yields of MLP's should be atrractive.
Thus, the bear market in MLP's is perplexing.
My prediction is that MLP's will come back into favor in 2009 when investors consider the fundmanentals, and that we will get a sustained rally.
When does football season start already?
MLP's on a relative basis have been cheap for at least 6-9 months. It is my belief that there are just not enough eyeballs and dollars focused on the sector. When and if that changes-who knows?
Post a Comment