Before i get to some individual charts i just want to touch on the MLP index which continues to show some nice basing action in here. Now remember we could go back down to below 260 and still be okay...though we rather not take that adventure again....and 275 would be the upside top to get through...and that could takes us awhile should we get there. Base building is a long frustrating process which pisses everyone off until the breakout comes.
Meanwhile i was poking around a few mlp charts yesterday and noticed some nice double bottoms are forming in some of these like Holly Partners (HEP) which has been decimated as much as everyone else and has done nothing wrong along the way. Eagle Rock Energy Partners (EROC) is another one in here that looks like a double bottom is forming. Buckeye Partners (BPL) above tends to follow the mlp index and there is a "w" formation there which you can find on the chartsin other places. That has led to trading rallies before.
Linn Energy (LINE) has come off its double bottom from the spring and peeked under 20 briefly in this last downturn but is now back above 20 and looks like it wants to rally.
Also on balanced volume on Linn which is a running total of up volume minus down volume is no where near its spring lows. Ultimately here we are searching for "the" bottom and not another trading rally bottom. And of course any rally will have to prove itself ultimately and the first test will be the moving average resistence which is sitting above current levels.
Newswise its quiet this morning. We have tailwinds with stock futures and energy futures higher. Inventory numbers at 10:30am will drive crude. No upgrades or downgrades.
joseph cioffi's Source Page - Associated Content
10 comments:
Joe,
I envision the MLP sector as having a "creeping" recovery. Where things move up 25c here and there, as we creep higher, it should attract a few investors who sense that the recovery is in, those purchases allow further creeping etc, etc. A positive feedback loop with the occasional pullback just to keep everyone off balance.
Good work on the charts.
Mr. P
Natgas recovering a bit today. Should help the E&P's (they need it).
Hi,
Thx for a great blog. I am quiet new to MLP's and wonder what the biggest risks are in ininvesting in these assets. The dividend looks very attractive and it seems to be a great way to diversify your portfolio.
Is there an easy way to generalize the risks involved or is it very different from company to company.
/Samuelsson
Sweden
Samuelsson: stay out. they are value traps. the yields are high and the sector is a disaster. no real buying interest, plenty of sellers, large borrowing needs in a tough capital markets environment, secondary issuance is a constant threat to further destroy value. i suggest that you read the last 3-6 mos worth of posts on the blog.
Do a few 6 month charts: WPZ, CEP, KSP, APL, BPL, ETP, PAA, NGLS, EVEP, QELP, on and on it goes. That will give you a good idea of MLP performance.
I cannot guarantee that you will MAKE money with MLP's, but I can almost guarantee that you will LOSE money buying them. They are investments from hell. If you want a one way ride to becoming poor-buy MLP's.
Samuelsson: Some of the advice you are getting is from people who are angry about the capital erosion of their investments. At least some of the people bought within the last year and some bought for the wrong reasons. Take a longer term look at the MLP sector and you will see that performnance over the longer term is more in line with market performance. In my opinion, this is a historic opportunity to buy into this sector, especially if you anticipate a strengthening dollar, something for you to consider. There are risks, to be sure, but very large declines in value have already been recorded, reflecting the discounting of some risk.
Steve
Some of the previous posts make me wonder why this poster bothers to read this blog since he has no interest in the sector. In the unlikely event he actually owns any MLPs, why not sell them and be done with it?
I guess some people think it is better to invest in sectors when they are at all-time highs, rather than at multi-year lows.
Personally, I think that anyone buying MLPs today will look smart in 18 months and brilliant in 3 years. In the meantime, they will enjoy hefty--and growing--distributions.
Bruce Sherman
Oakland, Oregon
Hi again,
Thx for your answers. Why I do ask these questions is because when looking at the long term charts they look great, when looking at the dividends and the history of that it also looks great. So with all that in place and also having the opportunity to buy into a new asset class not to collerated to other assets there normally would be a catch... ;) It is always interesting to hear other peoples opinions about the risks involved.
I guess it is capital intensive. That is a risk.
I think I can understand how a pipeline business work but what is the risk with it?
What about the coal MLP's? In one of the companies I saw that they were renting out land where the coal were. Maybe this is a silly question but what will this company do when the coal is gone...
There must be other risks, otherwise I dont understand why they still have such high dividends. I mean, a lot of investors would love to have dividends like this every year. On top of this I dont even have to pay taxes on the dividends in Sweden... ;)
Samuelson,
Welcome to the blog. The readers have been posting what has been pretty much the sentiment around here as MLPS have been getting hammered. However a couple of notes.
You mention no taxes...well the dividend is actually a distribution and is considered return of capital so it is not taxed until the asset is sold and at then it is taxed as a capital gain. So we get to defer those fabulous distirbutions.
As per the coal mlps some of them can get a bit mundane with what they do with their property..but the us runs out of coal is about as likely as Saudi Arabia running out of oil. Its just not going to happen for a few lifetimes anyway.
MLPS have suffered through a very bad period and have been impacted by the seizing up of the US credit markets. It has forced companies to sell equity and that has pressured prices as well. From a yield spread basis we are trading as a group on average some 700 basis points above the 10 year bond. Normal is between 2 and 300 basis points. That 700 figure is the highest ever..even higher than the 1998 asian crisis. So from the standpoints of extremes...we are pretty much there.
Everyone should visit Samuelson's blog. Can't read it but there are some great political cartoons posted!
http://samuelssonsrapport.blogspot.com/
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