a blog dedicated to the discussion of MASTER LIMITED PARTNERSHIPS and the day to day news related to the group...along with perhaps a few other things...as long as the conversation is kept civil. Although i have no problem telling you what i am doing regarding my trades...PLEASE DON'T ASK ME WHAT YOU SHOULD DO REGARDING WHETHER TO BUY, SELL OR SHORT!!! i am not in the stock business.
Thursday, March 20, 2008
Losses cut to 1.50. Kinder Morgan and Enterprise unwind marking some sort of a bottom?
Too much money sloshing around the hedge funds means it has to go to less and less likely places. I believe that is why it ended in our arcane little world.
Hopefully we are getting close to the end of the purge. If we are lucky, things will revert to the mean and we can can back to normalcy. The last month has just been horrendous.
One thing to consider is that a rally could be just as powerful as this selloff. If we are all convinced there is nothing wrong with the underlying business (distributions are growing, correct?), yield-oriented investors could come flying back in when they sense the bottom has been found.
There are some crazy situations out there. A few that caught my eye: i) MGG is selling below its IPO price of 2 years ago. Because of its favorable setup, MGG has been and will likely continue to grow distributions at a rate of 18-20% annually; ii) RGNC is at the same price as before GE announced it was buying out its general partner to facilitate enormous asset dropdowns. Anybody remember that? It seems like a lifetime ago; iii) GEL is selling for LESS than it was before its big acquisition last spring that tripled the size of the company.
This current situation with MLPs has to be an example where the efficient market theory is not working.
Outside of Dan Duncan, I don't see much insider buying here in MLP's , which is a little disturbing. If these guys aren't stepping at these valuations, I may wait longer.
key reversal in CEP...trade below yestesrday's low...close above yesterday's high on increasing volume. +1.89 today. I guess a 15% was too much for some people.
I'm new to this blog, so this might be old news. But according to a March 10 Citi report on the MLP sector, the reason for the drop in values is because yield-hungry investors have abandoned the asset class in favor of high yield bonds (junk). The Citi analyst assets that any time the yield spread on the MLP Index is greater than 200 bps, investors jump into junk. At the moment the spread is some 370 bps.
Hang in there. This trend will reverse in due time and MLPs will continue their upward assent. In the meantime, enjoy the firesale. You'll look back on these "dark" days wishing you'd loaded the boat.
Morningstar insight: a fundamental change in cost of capital for MLP's means growth will be less rewarding and more difficult to achieve.
by Jason Stevens
Analyst Note 03-18-2008
We are placing the majority of our midstream master limited partnership coverage under review to assess the financial markets' impact on our valuations. By nature, MLPs must tap debt and equity markets for capital to fund growth projects or acquisitions. Generally speaking, MLPs seek a 50/50 debt/equity mix of funds, and recent market conditions have increased the cost of raising equity capital. In recent weeks we've seen Oneok Partners OKS and DCP Midstream Partners DPM price equity offerings below our expected range, meaning that the companies had to issue a greater number of new units to meet equity capital requirements. We view this as a troubling development, as increased units outstanding translate into higher levels of distributable cash flow required to maintain or increase per unit distributions.
As we see it, MLPs with the greatest degree of financial flexibility, or with the most modest capital expenditure budgets, will be the least affected by current equity market conditions. However, we fear that MLPs that must seek equity financing in this market will pay too high a price, in terms of increased unit counts, for their equity needs. We are likely to reduce our fair value estimates for these MLPs.
Did anybody watch Cramer last night ? He mentioned EPD in particular but also talked about the mlp group in general and how the price action (downward) was affected by hedge fund selling. He apparently likes EPD a lot.
End of quarter maybe brings an end to all this nonsense. Nice to see Constellation finally bouncing and closing near its high of the day for a change.
As per morningstar what a stroke of brilliance on their part to put us on alert after all the damage has been done. Now they want to review their positions when we are closer to the end of the hedge fund selling then the beginning? Glory and Praise!
From 262 to a 266 close..down but way off the low.
This is an article may also be old news but it may shed some light on recent MLP declines. If anyone understands the article please share.
" NEW YORK (Reuters) - Sat Mar 1, 11:33 PM ET Private equity firms have an advantage in developing energy infrastructure, particularly in comparison to the master limited partnerships (MLPs) that have become a popular structure for holding such assets. MLPs pay no corporate taxes, but distribute most of their profits to investors and often have to rely on external financing to fund growth."
FULL ARTICLE: http://news.yahoo.com/s/nm/20080302/bs_nm/column_deal_energyinfrastructure_dc;_ylt=Atx.2Gwj4cdkqKzhtZEILUCyBhIF
lessismore: It may be that the private groups can retain earnings for expantion. Where MLP must pay out most earnings and have little retained earnings for expantion. Therefore are often issuing more shares to expand. And as morningstar says even when the market is not accomodative.
for the guy who called me a jack ass, sounds like, by your tone of your post you may have lost a few bucks the last for months along with a key part of your brain
IMHO, MLP's were concieved to attract investors since they deal with low growth-long lived assets. Why a private equity firm would find this attractive (versus other investments) is beyond me. I think the author just put some random words together.
We can only hope so...
ReplyDeleteCEP yielding 14.51%
i wonder why a hedge fund would pick mlps to leverage up on when these stocks trade so thin?
ReplyDeletenot a great cocept i would think
Too much money sloshing around the hedge funds means it has to go to less and less likely places. I believe that is why it ended in our arcane little world.
ReplyDeletesteve
as old older guy, looking for a safe place to pick up some divs
ReplyDeletesure got my head handed to me
Hopefully we are getting close to the end of the purge. If we are lucky, things will revert to the mean and we can can back to normalcy. The last month has just been horrendous.
ReplyDeleteMLP's just refuse to participate in market rallies. It would be really insightful if someone(anyone) from the industry could weigh in here.
ReplyDeleteOne thing to consider is that a rally could be just as powerful as this selloff. If we are all convinced there is nothing wrong with the underlying business (distributions are growing, correct?), yield-oriented investors could come flying back in when they sense the bottom has been found.
ReplyDeleteThere are some crazy situations out there. A few that caught my eye: i) MGG is selling below its IPO price of 2 years ago. Because of its favorable setup, MGG has been and will likely continue to grow distributions at a rate of 18-20% annually; ii) RGNC is at the same price as before GE announced it was buying out its general partner to facilitate enormous asset dropdowns. Anybody remember that? It seems like a lifetime ago; iii) GEL is selling for LESS than it was before its big acquisition last spring that tripled the size of the company.
This current situation with MLPs has to be an example where the efficient market theory is not working.
SPH up over 5% today on double volume.
ReplyDeleteWhat gives ?
Outside of Dan Duncan, I don't see much insider buying here in MLP's , which is a little disturbing. If these guys aren't stepping at these valuations, I may wait longer.
ReplyDeleteNS and NSH had some insider buying.
ReplyDeleteDOW +250 and MLP's going nowhere...
ReplyDeleteEven the financial sector has outperformed MLP's over the last few weeks, that is pathetic...
key reversal in CEP...trade below yestesrday's low...close above yesterday's high on increasing volume. +1.89 today. I guess a 15% was too much for some people.
ReplyDeleteI'm new to this blog, so this might be old news. But according to a March 10 Citi report on the MLP sector, the reason for the drop in values is because yield-hungry investors have abandoned the asset class in favor of high yield bonds (junk). The Citi analyst assets that any time the yield spread on the MLP Index is greater than 200 bps, investors jump into junk. At the moment the spread is some 370 bps.
ReplyDeleteHang in there. This trend will reverse in due time and MLPs will continue their upward assent. In the meantime, enjoy the firesale. You'll look back on these "dark" days wishing you'd loaded the boat.
Morningstar insight: a fundamental change in cost of capital for MLP's means growth will be less rewarding and more difficult to achieve.
ReplyDeleteby Jason Stevens
Analyst Note 03-18-2008
We are placing the majority of our midstream master limited partnership coverage under review to assess the financial markets' impact on our valuations. By nature, MLPs must tap debt and equity markets for capital to fund growth projects or acquisitions. Generally speaking, MLPs seek a 50/50 debt/equity mix of funds, and recent market conditions have increased the cost of raising equity capital. In recent weeks we've seen Oneok Partners OKS and DCP Midstream Partners DPM price equity offerings below our expected range, meaning that the companies had to issue a greater number of new units to meet equity capital requirements. We view this as a troubling development, as increased units outstanding translate into higher levels of distributable cash flow required to maintain or increase per unit distributions.
As we see it, MLPs with the greatest degree of financial flexibility, or with the most modest capital expenditure budgets, will be the least affected by current equity market conditions. However, we fear that MLPs that must seek equity financing in this market will pay too high a price, in terms of increased unit counts, for their equity needs. We are likely to reduce our fair value estimates for these MLPs.
Did anybody watch Cramer last night ? He mentioned EPD in particular but also talked about the mlp group in general and how the price action (downward) was affected by hedge fund selling. He apparently likes EPD a lot.
ReplyDeleteEnd of quarter maybe brings an end to all this nonsense. Nice to see Constellation finally bouncing and closing near its high of the day for a change.
ReplyDeleteAs per morningstar what a stroke of brilliance on their part to put us on alert after all the damage has been done. Now they want to review their positions when we are closer to the end of the hedge fund selling then the beginning? Glory and Praise!
From 262 to a 266 close..down but way off the low.
Well said joe
ReplyDeletehedge fund blow ups
ReplyDeletenothing but a pile of time bombs ready to blow, ticker be next epd kmp
evep....
invest at your own risk
hedge fund blow ups
ReplyDeletenothing but a pile of time bombs ready to blow, ticker be next epd kmp
evep....
invest at your own risk
Thanks for the brilliant analysis of the market jackass...
This is an article may also be old news but it may shed some light on recent MLP declines. If anyone understands the article please share.
ReplyDelete" NEW YORK (Reuters) -
Sat Mar 1, 11:33 PM ET
Private equity firms have an advantage in developing energy infrastructure, particularly in comparison to the master limited partnerships (MLPs) that have become a popular structure for holding such assets. MLPs pay no corporate taxes, but distribute most of their profits to investors and often have to rely on external financing to fund growth."
FULL ARTICLE:
http://news.yahoo.com/s/nm/20080302/bs_nm/column_deal_energyinfrastructure_dc;_ylt=Atx.2Gwj4cdkqKzhtZEILUCyBhIF
lessismore: It may be that the private groups can retain earnings for expantion. Where MLP must pay out most earnings and have little retained earnings for expantion. Therefore are often issuing more shares to expand. And as morningstar says even when the market is not accomodative.
ReplyDeletefor the guy who called me a jack ass, sounds like, by your tone of your post you may have lost a few bucks the last for months along with a key part of your brain
ReplyDeletestick with it you will get rich being rip-sawed
IMHO, MLP's were concieved to attract investors since they deal with low growth-long lived assets. Why a private equity firm would find this attractive (versus other investments) is beyond me. I think the author just put some random words together.
ReplyDeletereading-tee-leaves