MASTER LIMITED PARTNERSHIPS

Thursday, October 02, 2008

Down 6 points on the MLP index at 222. 1.50 to 2 point losses today in Penn Virginia Holdings (PVG) Alliance Resource Partners (ARLP) Atlas Energy Resource (ATN) Hiland Partners (HLND) Natural Resource (NRP) and Williams Partners (WPZ).

Take at look at Exterran Partners (EXLP) which is up 50 cents today as one of the few winners and take a look at Exterran Holdings (EXH) which is down from 70 to 26. Unbelieveable. And even more unbelieveable is the plowing under AG shares are getting today . Potash (POT) has gone from 220 to 95!

Dow just ticked dow to minus 299.

14 comments:

Anonymous said...: Am I everyman? I have been waiting for the market to be sold out, but I increasingly fear that I will be last man out and that that event will turn the market. An even deeper fear is that the market will never turn until I sell. I am trying to be serene about this, but I am losing my nerve. That should be good news for the rest of you who will be there to pick up the pieces of my portfolio. We must be near a bottom or I would not be feeling this, but I have no confidence in that cerebral musing. Still long, but seriously questioning the wisdom of being so.; 10/02/2008 1:18 PM
Anonymous said...: If you compare the 6-month charts, EXH and EXLP track each other quite consistently. They are both atrocious charts but they are consistent!

This company is a bit off the beaten path of the typical energy MLP: contract compression services. I know that RGNC is moving into this business, but am not aware of any others.; 10/02/2008 1:30 PM
Anonymous said...: Looking at early volumes for the MLP's, it looks like there is not a huge wave of selling today. More like a lack of buyers. So just a medium sized seller is knocking the market down. Anyone seeing anything different?
If so, this is (could be)a sign of a bottom. Or, is it just wishfull thinking on my part?; 10/02/2008 1:32 PM
Anonymous said...: It seems like every momentum play has been destroyed along with the capital that supported it. This is supposed to be hedge fund redemption notice time for those who want their money back.
AG, Gold, Oil , Commodities, and Infrastructure names seem to be hardest hit.
Need I remind anyone that people who file 2007 income tax extention are due to pay by OCT 15, 2008.

Add to this pressure is the fear of credit armageddon makes buying stocks not a fundimental exercise of each company's prospects, but if they will get enough credit to survive.

Hopefully the Bank Rescue bill will take credit armageddon off the table, leaving us with a nasty recession... which MLPs and stocks can survive. A solid company, facing a couple of lousy quarters due to recession is worth a lot more than a solid company facing default because a disfunctional credit market won't roll over that companies debt.

We need the credit issues to ease so bargain hunters will feel safe.

Will we see WTI crude priced at $55.00 a barrel before this is all over?

HS; 10/02/2008 1:58 PM
Anonymous said...: I suggest that everyone listen to the replay of the XTEX investor call today.; 10/02/2008 3:48 PM
Anonymous said...: "I suggest that everyone listen to the replay of the XTEX investor call today."

What did they say about the cost and availability of credit, and what did they say about how it effects their capital needs going forward

?

HS; 10/02/2008 3:55 PM
hanumanhojo said...: I listened to XTEX's CC call. Basically, they said that normal channels for raising capital is pricey so they won't be able to grow profitably. They would need to go to alternative financing which would be cheap enough to allow growth though at reduced distribution growth rates.

On CC, they said if worst came to worst, they would simply stop growing and maintain distributions. Distro coverage currently at 1.0x.

Listening to XTEX's call and reading APL's recently posted presentation, I really don't see a logical reason for drop in MLP prices. No BK on the horizon.

I'd say it is just the credit crunch resulting in the market demanding high yields from all yield bearing investments. Look at Buffet getting a 10% yield on his Goldman Sachs and GE investment.; 10/02/2008 4:51 PM
Anonymous said...: APL and XTEX are two completely different partnerships. One (APL) will grow distributions and have 1.30x coverage, while the other (XTEX) will have to cut their distribution.; 10/02/2008 4:58 PM
Anonymous said...: There's one of 2 things going on.

1) That we are heading into another great depression and the market is pricing in that certainty.

2) That we're just going into a recession, and the market is irrationally pricing in a great depression.

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HS; 10/02/2008 5:35 PM
Anonymous said...: AG stocks are down, I guess people stop eating during a recession.

Reading tee leaves; 10/02/2008 6:00 PM
Anonymous said...: "APL and XTEX are two completely different partnerships. One (APL) will grow distributions and have 1.30x coverage, while the other (XTEX) will have to cut their distribution."

Hey asshole, listen to the CC before you spout off such ignorant ramblings.; 10/02/2008 6:13 PM
Anonymous said...: reading tee leaves:

Intersting article on Fertilizer + AG stocks,

HS
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Fertilizer Stock Bubble Pops On Phosphate Pricing Fears
NEW YORK (Dow Jones)--The bubble has burst for fertilizer and agricultural chemical stocks, with former stock-market star Mosaic Co. (MOS) off by a third in Thursday trading and others hard on its heels as excess supply and reduced demand slow the pattern of price increases on farm chemicals.

The blowback has also hit firms such as farm-equipment giant Deere Co. (DE), off 9.3% at $42.

Mosaic, one of the two largest fertilizer makers by sales, was off 31.4% to $46.33 midday - and has lost two-thirds of its value since mid-June.

Thursday's decline came despite the company's report late Wednesday of robust fiscal first-quarter earnings growth as it also warned that prices of phosphate, a particular grade of fertilizer, were leveling off. That sent hedge funds and Wall Street brokers fleeing from the sector, where consistent price increases had resulted in great expectations.

The action in fertilizer stocks in particular is comparable to the technology bust of 2000 to 2001, when profitable companies like Microsoft Corp. (MSFT) and Intel Corp. (INTC) suffered from speculators' realization that the sky was not the limit.

Farmers could not bear the weight of ever-increasing costs forever, especially as grain prices fell by nearly half in recent months and credit tightened. And the popularity of the momentum "ag trade" with hedge funds and day traders has led to a decline similar in magnitude and pace to the tech bust.

The other giant fertilizer maker, Potash Corp. of Saskatchewan (POT) - named by Goldman Sachs as one of the top 20 most popular names in hedge-fund portfolios - was down 20.1% recently at $102.31, less than half its summer peak. Another peer, Bunge Ltd. (BG), fell 19% to $51.01, down about 60% from its high and a bigger decline than such beaten-down financials as Citigroup Inc. (C).

Seed-and-weedkiller processor Monsanto Co. (MON) trimmed some of its losses by late-morning as it again boosted its fiscal-year outlook. The stock was recently down 13% to $85.89, putting it 41% below its high.

Mosaic said fiscal first-quarter earnings almost quadrupled to $1.18 billion, or $2.65 a share, falling shy of the average of analysts' estimate of $2.94 a share.

The immediate issue was the price of phosphate, a grade of fertilizer that contributed more than half of Mosaic's quarterly revenue of $4.32 billion. In response to an "excess" of phosphate on the market, Mosaic, the leading producer of that fertilizer, reduced its production, and, as a result, its projection for sales volume of phosphate for the year.

Mosaic expects the average price of phosphate to be around $1,020 to $1,080 a tonne, more or less level with $1,013 this quarter, after a string of price increases.

The first signs of pricing trouble came last week, when Citigroup warned that the price of urea, another grade of fertilizer, had fallen sharply. Urea is a chemical compound, whereas potash and phosphate are mineral based. Shares of Agrium Inc. (AGU) started falling in the wake of that report, and continued their decline Thursday, off 21% to $43.35.

"What's happened is that the inventory pipeline got a bit full late in the summer," said Mosaic Chief Financial Officer Larry Stranghoener. "That together with...the overall falloff in commodities prices caused buyers to sit on the sidelines and not make new purchasing commitments."

Stranghoener added that, "to the extent that there could be a significant global economic slowdown, it would fundamentally cause grain and oil-seed prices to drop sharply from where they are, and clearly that would have a negative effect on our business. We don't see that happening; we believe the long-term fundamentals for agricultural economics are excellent. There's still not enough food in the world."

That's an argument that drew top ratings from many Wall Street firms for agricultural stocks and heavy purchasing from hedge funds and day traders. Agriculture stocks were darlings when grain prices doubled and, in some cases, tripled earlier this year. But many of those gains have been given back of late.

On Thursday, Merrill Lynch cut its investment rating on the agricultural chemicals sector because of signs of weakness in phosphate and potash, another major grade of fertilizer. Merrill also warned "a global recession, particularly in Asia, represents a risk to corn prices, as it could lead to reduced demand growth."

One long-term skeptic, Citigroup chief U.S. equity strategist Tobias Levkovich, said the bullish argument on agricultural stocks never held much weight. "One of the arguments is that there's no supply," Levkovich said. "When demand falls off, guess what? There's a little more supply."

For its part, Mosaic insists that price increases for potash, in particular, will continue. For the current quarter, Mosaic projects an average potash price of $560 to $620 a tonne, up from the prior quarter's $488. Still, phosphate and potash are often used on the same crops, and it isn't clear whether they will diverge for long.

The economic slowdown is far from the only worry for agriculture stocks: hedge funds are facing requests from clients for redemptions and are forced to sell their holdings. That's affecting commodity prices and the prices of commodity stocks that hedge funds rode up to their peaks in the summer.

The run-up in fertilizer prices earlier this year also drew scrutiny on Capitol Hill. Sen. Byron Dorgan, a Democrat from North Dakota, asked the Federal Trade Commission to investigate pricing practices in the industry. Dorgan had met with farmers in his state concerned about the increases.

Lastly, with credit historically scarce, farmers may struggle to get the funding for seeds from Monsanto, or fertilizer from Mosaic. Farmer Mac (AGM), the country cousin of Fannie Mae (FNM) and Freddie Mac (FRE) which helped farmers buy land, is in some distress on the stock market.

Mosaic itself remains optimistic, however.

"I would counsel investors to keep their cool and focus on the outstanding fundamentals of this business," said Stranghoener, the financial chief. "We believe we have a very positive outlook and are going to generate a lot of cash throughout this financial year."

-Rob Curran, Dow Jones Newswires; 201-938-5176; robert.curran@dowjones.com
http://www.cattlenetwork.com/Content.asp?ContentID=257363; 10/02/2008 6:29 PM
Anonymous said...: Hedge funds Problems:

I guess hedge funds that haven't had a lockdown are selling in anticipation of investor withdrawels:

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http://www.gulfnews.com/business/Markets/10249465.html

Millions are trapped in hedge funds lockdown
Financial Times
Published: October 03, 2008, 00:13

An increasing number of hedge funds are telling customers they cannot have their money back as rising withdrawals and exposure to Lehman Brothers hit the industry.

In the past week, Amber Capital, the $3.2 billion (Dh11.76 billion) New York fund, Guy Wyser-Pratte's $500 million activist fund, a $400 million fund run by London's Cheyne Capital, and a slew of smaller funds have blocked redemptions temporarily.

The inability to access money has already had a knock-on effect: Absolute Return Partners' Millennium Wave, a small fund of hedge funds, has had to tell its customers they cannot have their money back until it can retrieve it from the funds in which it invests.

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Luqman Arnold's Olivant is also struggling to access its shares in UBS, which are stuck at Lehman's London arm, meaning it will not be able to vote them until they are returned by Lehman administrators.

Deadline

This week was the final date for clients to put in re-demption requests for many funds in order to get their money back by the end of the year, and the industry is worried about the scale of withdrawals.

In particular, funds of hedge funds servicing wealthy individuals have been bombarded with re-quests for billions of dollars of withdrawals.

"It is really ugly out there," said one large London hedge fund manager.

The failure of Lehman, prime broker to many funds, looking after their assets and providing leverage, compounded the problems facing the industry, already having its worst year on record.

Amber told clients it was suspending withdrawals because it could not calculate the value of assets at Lehman's London arm, where administrators say it could take months to return even assets held in accounts safe from bankruptcy.

"Our assets are frozen at the moment," said Gulf International Bank of its $35 million Falcon Relative Value fund, which used Lehman as a prime broker.

Amber, which had several hundred million dollars of assets at Lehman, is in the same situation. MKM Longboat, which decided last week to wind up its $1.5 billion flagship fund, told investors that part of the reason was its Lehman exposure, although it has also had big redemption requests.

Others with less significant exposure to Lehman, including GLG Partners, CQS and Augustus, continue to allow withdrawals.

Scale

The scale of investor withdrawals from hedge funds remains unclear, and big institutions seem happy to keep their holdings, say prime brokers, managers and investors.

But if the wave of redemptions by wealthy individuals proves accurate, it could force many managers who relied on them into firesales of assets, potentially adding to the instability on world markets.

Many of the largest funds of hedge funds have put in big "protective" redemption requests to the hedge funds in which they invest.; 10/02/2008 6:56 PM
Anonymous said...: To the "everyman" poster:

I've been absent from this blog most of the day and am just catching up now, hence my belated response to your post. Frankly, I'm surprised nobody responded to you because I have to believe most people feel your pain. I certainly do. I think you captured the fear that grips all investors today. Those of us who have not abandoned ship yet are all wondering if this game of chicken will get us killed or if our nerve will brand us heroes at some point. I don't know.

I do know, though, that selling any asset means you are buying dollars and I think the dollar is doomed for the intermediate term. I also believe we are in for a rally near term. There is way too much cash on the sidelines to stay dormant once the first little ray of sunshine peeks through. So if you decide to liquidate, you might want to grit your teeth and wait for the bounce... assuming there will be a bounce.

On an unrelated matter, Cramer gave KMP, LINE, and ETP a nice little nod tonight, for what that's worth.

Lee; 10/02/2008 8:31 PM