MASTER LIMITED PARTNERSHIPS

Thursday, October 16, 2008

The overall market is making a stand today as we went all the way down to8198 and has been making higher lows since and it seems like it wants to rally in here. At the low we wiped out Monday's gain and thensome. The MLP index is a little wierd today on that misprint 206 close so it shows it down 15 when in reality its down about 3. Crude is down over 4 dollars but big energy stocks have stopped going down (as of this post).

Inergy Holdings (NRGP) is up 2 on its distribution boost. Holly Partners (HEP) is up 1 and changed and has almost doubled off its panic low last week under 15. Got over 29 earlier today. Alliance Resource Holdings (AHGP) and Penn Virginia Holdings (PVG) are fractional winners along with Kinder Morgan (KMP).

I went long the Double Long Oil and Gas (DIG) which is only 100 points off its high.

9 comments:

Anonymous said...: With Obama in the WH and Dems controlling both houses of Congress (perhaps with a fillibuster-proof majority in the Senate), I am staying away from coal. Far away.

And I don't care how wonderful the latest scrubber technology may be.

Bruce; 10/16/2008 2:53 PM
Anonymous said...: Coal produces about 1/2 of the US's
electricity. Even the most idiotic member of Congress must understand that after the Lehman Brothers debacle, we are just one policy error away from another great depression.

Hopefully they will tread very carefully with any Coal legislation.
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BTW the settlement date for the Lehman CDS auction is Oct. 21, 2008.
The DTCC has estimated the net cost to insurers of Lehman bonds to be about 6 billion dollars ... others have estimated as high as 400 billion.

The big systemic risk with CDSs is that some one will default on their their obliglation, leaving everyone else on the hook.

Nightmare senario:

IE: JPM buys protection from Goldman, who to limit their risk, buys protection from Morgan Stanley, who to limit their risk buys protection from hedge fund "A", who buys protection from Merrill Lynch who then buys protection from Hedge fund "B".

If Hedge fund "A" folds, then JPM, Goldman, and Morgan Stanley have little or no protection.

In this senario, Hedge fund "B" pays Merril Lynch, Merrill Lynch pays the receiver of Hedge fund "A" in bankruptcy.

Morgan Stanley becomes a general creditor of Hedge Fund "A" and when that Hedge fund is wound down may get pennies on the dollar.

JPM sues Goldman for the full amount owed. Goldman sues Morgan Stanley.

Both Goldman + Morgan Stanley might go Bankrupt if 400 billion is at risk, thus triggering CDS defaults on Goldman + Morgan Stanley... eventually causing everyone who bought or sold CDSs protection into bankruptcy.
Compounding the problem is nobody knows who is on the hook for what, my example was just an illustration of what might happen. If the Lehman settlement goes smoothly ( DTCC 6 billion cost to insurers ), with no defaults, then markets might rally, because the nightmare senario might not be a likely one for other future CDS defaults.

HS; 10/16/2008 5:57 PM
Anonymous said...: Should be a bad day for CPNO (which I own) tomorrow based on these very disappointing results:

Copano Energy Increases Quarterly Cash Distribution
5:10 p.m. 10/16/2008 Provided by

HOUSTON, Oct. 16 /PRNewswire-FirstCall/ -- Copano Energy, L.L.C. (CPNO) announced today a cash distribution for the third quarter of 2008 of $0.57 per unit, or $2.28 per unit on an annualized basis, for all of its outstanding Common Units. This distribution is $0.01 above its distribution of $0.56 per unit for the second quarter of 2008. The distribution will be payable on November 14, 2008, to holders of record of Common Units at the close of business on November 3, 2008.

"We are pleased to announce an increase in Copano's quarterly distribution to unitholders, which represents our fifteenth consecutive quarterly distribution increase. This distribution reflects year over year growth in service throughput volumes, Copano's strong liquidity and the continued progress of our organic initiatives. Primarily as a result of market disruptions associated with Hurricane Ike and subsequent declines in Oklahoma natural gas and natural gas liquid prices, our distributable cash flow coverage will not meet our usual standards," said John Eckel, Chairman and Chief Executive Officer of Copano Energy (CPNO). "Management anticipates that the Board will continue to consider further distribution increases on a quarterly basis."

Bruce; 10/16/2008 9:21 PM
joewxman said...: i'm thinking you are being sarcastic but in all seriousness these prices have pretty well priced in any near death experience.; 10/16/2008 9:28 PM
Anonymous said...: I just watched the Al Smith Memorial diner on Fox.

I have to say that after watching McCain and Obama speak... as an American, there is much to be proud of.

HS

BTW
I have Copano as well ( Down about 50% ). MLPs are in the position of proving a negative. That they are not now, nor will they be in the future, impaired in any non trivial way by the recession and the credit crisis.; 10/16/2008 10:06 PM
Anonymous said...: Joe,

Actually, I wasn't being sarcastic at all. These results (reduced DCF coverage and a puny, 1 cent distribution increase) are extremely disappointing. The case for CPNO is that it is supposed to be a strong distribution grower. That case is now greatly in doubt.

Bruce; 10/16/2008 10:24 PM
Anonymous said...: Bruce,

Except for a few die hards on this board... are there any MLP investors left?

With the new distro and the current price, CPNO now yields 12.25 %, More if you figure a large chunk of the Nov. .57 distro as an almoist instant return of capital.

Cpno will probably trade down tommorrow, in part because of the clumsy way the Ike story was handled. If CPNO's release stated that Ike disruptions caused a one time reduction of .15 cents distributable cash, then the .01 distro increase would be easier for investors to understand.

In any case, this market sucks, and imho it will get worse.

Many company's guidence going forward ( general market ) will be less than stellar, and markets will discount the worst possibility.

MLPs imho have to address how they are well positioned to weather the down side risks of both the recession and the credit crisis.

This is more important now than distro increases.

HS; 10/16/2008 11:20 PM
Anonymous said...: All that negativity and MORE is built into the current prices however.; 10/17/2008 6:12 AM
Anonymous said...: No recommendation from me but Warren is buying.

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Futures are down, but.....

Warren Buffett Says Now Is the Right Time to Buy U.S. Equities

By Alan Purkiss

Oct. 17 (Bloomberg) -- Warren Buffett said he's buying U.S. stocks and, if prices stay attractive, his personal investments, as distinct from his stake in Berkshire Hathaway Inc., will soon be wholly in American equities.

Writing in the New York Times, he said he's following the principle: be fearful when others are greedy, and greedy when others are fearful.

Exaggerated concern about the long-term prosperity of the many sound U.S. companies is foolish, and most will probably be setting profit records in years to come, Buffett said.

While short-term stock-market movements can't be foretold, the likelihood is that the market will recover before the economy or general investor sentiment do so, and ``if you wait for the robins, spring will be over,'' he said.

Referring to the 1930s depression, Buffett pointed out that the Dow reached its nadir on July 8, 1932; economic conditions continued to deteriorate until Franklin Roosevelt became president in March, 1933, but by that time the market had climbed 30 percent.

Bad news, Buffett concluded, is an investor's best friend, for it enables you to buy ``a slice of America's future at a marked-down price.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_p0g99V7HUg&refer=home; 10/17/2008 9:21 AM