MASTER LIMITED PARTNERSHIPS

Thursday, September 11, 2008

Down 5 quick points on the MLP index. Damage extensive and everywhere. Just Fabulous!

20 comments:

Anonymous said...: Joe and the Blog,

I simply think that prices of MLPs and many other investments have become decoupled from reality. A boring company like Teppco trading with a 10.35% yield is just plain dumb. This company (and I chose TPP randomly) isn't going away, isn't in finacial distress, doesn't have a bad business model and certainly has hard assets which are worth more than the current market value indicates.

The MLPs have proven again and again that the capital markets, both equity and fixed income are open for them. There is ample liquidity and banks will always lend against hard assets such as pipelines.

We are just in a selling panic. I for one have lost a ton the last few months. I would say my portfolio currently yields well over 10%. If I reinvest my distros(assuming 10% yield) this gives me 12.21% annual yield over the next five years, assuming no capital appreciation and no distribution increases.

I think we are simply suffering from a market overwhelmed by sellers, with defeated buyers and investors simply walking away. I for one have my hands in my pocket.

I welcome feedback and commentary,

Mr. Pipes; 9/11/2008 10:41 AM
Anonymous said...: i have paired back but also have lossed plenty with the mlps i hold.
i was hoping at some point we may hold 240 on the amz, but can't be sure with the price action out there.

i would agree with you views, but do not see much in the way of a move up coming any time soon.

lou; 9/11/2008 10:57 AM
Anonymous said...: The AMZ is now -11% MONTH-TO-DATE.

WTF?

Good points brought up by Mr. Pipes.

We need a catalyst.; 9/11/2008 11:00 AM
Anonymous said...: "I simply think that prices of MLPs and many other investments have become decoupled from reality."

Do we know who the MLP sellers are? If they are the bankers, would the volumes not be a lot larger? For that matter, who are the buyers?

For years, these investments were the pets of the very wealthy, who bought and kept, and kept, and kept...because they are great for estate tax planning. The new closed-end funds also are long-term investors. So, what's happening now? Have people bought these on "carry" and are unwinding? What do know about volume trends in these stocks?

Dave; 9/11/2008 11:03 AM
Anonymous said...: Dave, do small frye like us ever know who the sellers are? I think we have to take a deep breath and try to look at this logically. When in the history of capitalism have we had companies growing the business, growing distributions, giving postive forward guidance and in an industry which is not going away trade this poorly?

I don't have all the answers, but there is something very wrong with the market right now. MLP's will just get flushed down the toilet with everything else, but should they?

Ramius; 9/11/2008 11:11 AM
Anonymous said...: Other industries see consolidation when valuations crumble, but that's rarely been the case in the MLP world. It looks like valuations will have to be the catalyst.

Lehman and WAMU not going bankrupt and supporting their preferreds would also help.; 9/11/2008 11:12 AM
Anonymous said...: The GPs really have just fallen off the cliff. Most GP's will yield more than the underlying MLPs by this time next year. Does that seem odd to anyone here?; 9/11/2008 11:13 AM
Anonymous said...: Can someone please just put the "CLOSED" sign up on Lehman already. This story is getting stale and the outcome is a given.

Any word on if repo lines are still open with LEH?; 9/11/2008 11:15 AM
Anonymous said...: It looks like the MLPs have survice the first selling assalut of the day, let's see how the rest of the day goes.

At this point I have no hope...; 9/11/2008 11:16 AM
Anonymous said...: Well said, Mr. Pipes!

I just don't think anyone should underemphasize the enormous impact of hedge fund and institutional selling (certainly including LEH) right now. They need cash and have to sell--regardless of price or fundamentals. Most people do not realize just how high the institutional ownership is of most MLPs. Institutional ownership of the GPs is even higher.

All of this makes the sector particularly volatile when the big guys need to exit. At some point, this will stop and the trend will reverse. Historically, MLP recoveries have been quite sharp for the same reasons.

Bruce Sherman
Oakland, Oregon; 9/11/2008 11:22 AM
Anonymous said...: It's simple here, there is forced selling and the shorts are in control.

Paulson (Mr. Moral Hazard) just killed future preferred financing when he destroyed the GSE preferreds, when investors bought 20 billion since Nov. 2008.

I'd think twice before buying any new issue of any financial bond for the same reason.

Now it's a "Moral Hazard" to be part of the soilution of providing capital to financials.

Chris ( short's best friend at the SEC ) Cox lets naked shorts destroy any company that they want using concentrated capital and illegal naked shorting bear raids.

If you notice bear raids almost always take place during the quiet period before earnings, so that the target company can't defend themselves.; 9/11/2008 11:58 AM
Anonymous said...: I don't believe it is institutional liquidation. The volumes don't support it. XTEX down 1.25 on 60K shares? That's not a fund dumping. The same story with PAA, MWE, NRGY, and NS. It has to be small time investors selling day after day because of fear and capital preservation. I still believe this is an opportunity, but it's hard to keep those convictions when my gut is wrenching. So far this week I have lost $75K of value. Not pretty.

Steve; 9/11/2008 12:00 PM
Anonymous said...: Steve-O,

The volumes are relatively heavy:

BPL 400,000
PAA 200,000
ETP 200,000
BWP 900,000
APL 300,000
WPZ 600,000
EPD 650,000

I doubt its grandma and grandpa dumping 900,000 BWP near the lows.

Alot of it could just be margin clerks doing the selling.; 9/11/2008 12:10 PM
Anonymous said...: " It has to be small time investors selling day after day because of fear and capital preservation."

Steve,

If you are right, that is even better news since individual investors are notorious for selling at market bottoms.

Bruce; 9/11/2008 12:11 PM
Anonymous said...: Retail money = dumb money!; 9/11/2008 12:26 PM
Anonymous said...: Bruce: I understand and that is my conviction as well. Last year when PWE was being sold down to 23.52, I watched the trades happening: 50 shares, 69 shares, 130 shares, 12 shares, and it was perfectly obvious that it was a bottom. I have not seen that level of detail here, but volumes of a few 100,000 shares do not indicate institutional volume.

Steve; 9/11/2008 12:27 PM
Anonymous said...: bRUCE,

We're retail money.; 9/11/2008 12:28 PM
Anonymous said...: "We're retail money."

The be smart and don't act like it.

Bruce; 9/11/2008 12:39 PM
Anonymous said...: I have been fully invested in this space since last fall and like the others, have seen serious principal degradation during that time. I am a long-term investor, however, and am thoroughly committed to and have complete faith in this sector. I welcome the sustained depressed prices because I'm using all my distributions to buy more via DRIP (EPD and TPP have 5% discounts to boot).

Although I consider myself all-in, I scraped together some cash and bought a small block of MGG today. This represents just a small increment to my MLP portfolio, yet I found it invigorating to be a buyer in this panic market.

mike; 9/11/2008 12:53 PM
Anonymous said...: The danger in all markets today, is that even conservative investors like us get trampled when overlevered players have to unwind. We pay the price for the reckless behavior of others, similar to the "crisis" in the housing market right now.; 9/11/2008 12:58 PM