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Anthony Grossi

 
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  • MLPs - How To Start A Bubble [View article]
    For the Rebel

    the 10 year comment was aimed at the law of large numbers theory. As regards to continued access to low cost capital I am clueless.

    EPD has been pretty darn consistent about the 1.5 cents per quarter distribution hike (I was an EPE owner where the 1.5 c was the golden rule), so you can basically make a spread sheet of future distributions and calculate the growth rate and years until payback at any share price. My personal bias is that I would not want to expose myself to the heightened credit risk if the yield dropped to 4% and would much rather look elsewhere. The current forward yield is just shy of 4.5%, and the future growth rate is ok but not exciting.

    It's all about relative returns influencing the factors I highlighted in the "lollapalooza effect" section. I think we are at/approaching a point where yields on LPs have pulled even with other income products, if so the chances for outperformance are gone.

    And I feel exactly the same way about my pipeline that I do about utilities in general, as "infinite duration bonds" they are only compelling compared to how much the T-bond market sucks right now. On a historic basis all of these asset heavy investment vehicles look overbought.
    May 2 02:33 PM | Likes Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    Fine, they are not "required by law"... however, if they wish to continue to receive tax treatment as a partnership for federal income tax purposes, then their "organizational mandate" is to payout all earnings not needed for current operations and maintenance of assets.

    Thank you for highlighting that distinction.
    May 1 08:32 PM | 2 Likes Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    As a capitalist at heart, I have to assume that interest rates will normalize when the market stops buying.

    Return on capital is supposed to equate to cost of capital, or so I've read.
    May 1 07:05 PM | Likes Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    Richard Kinder is some kind of genius and you certainly can't complain about past performance at KM P R or I, but recency bias has historically been an investors foe more often then friend.
    May 1 06:58 PM | 1 Like Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    I'm just ruminating on some possible downside risks.

    Yes any company could take a turn for the worse, but it's nice to know what to look out for.
    May 1 06:53 PM | 1 Like Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    current holders of BRY will receive 1.25 shares of LNCO for each share of BRY.
    May 1 06:50 PM | 2 Likes Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    Actually, one could make their own estimate of sustainable dcf by taking net cash from operations and then subtracting maintenance capex, working capital, and income attributable to non-controlling interest. And then you could do estimate future distributions by estimating something like (cfo + inflation) - (maintenance + depreciation). Or something like that. To see what distributions would look like under no growth.

    DCF as reported includes some other stuff like working capital used, hedging/risk management activities, sale of assets, etc.

    I'm changing the subject but I still think growth equal to the last ten years growth rates are being assumed as being sustainable indefinitely by current market valuations.

    But again, changing the subject isn't fair.
    May 1 06:46 PM | Likes Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    I list specific things about my investment I am concerned about. As well as two reasons why the current state of things can't last forever.

    It has use because current investor enthusiasm for the investment product directly influences future industry returns, whereas with KO or PM it would not.
    May 1 06:32 PM | Likes Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    Historically, SA readers have been very polite when pointing out my shortcomings.

    As to your question: I think it's many years away, like 10 or more. Mostly because as long as there are worthy assets to invest in there is apt cause to continue tapping additional credit.

    There real variable is the cost of raising capital. Wherein I have no crystal ball.

    Lower yields is a tell. EPD specifically has and will continue to raise its dividend by 1 and 1/2 cents per share per quarter. So you know that the distribution will be growing slower, and at some point that growth rate won't be enough to attract new investors (relative to other product offerings).

    The timing of this will depend on some of things I listed and maybe some other things I wasn't clever enough to think of. Credit markets, interest rates, investor enthusiasm, distribution growth rate, etc.

    Or maybe I'm just flat out wrong.
    May 1 06:24 PM | 1 Like Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    I wouldn't get too carried away.

    but certainly many deemed safe income products seem over-extended
    May 1 06:12 PM | 1 Like Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    continuum fallacy
    May 1 06:10 PM | Likes Like |Link to Comment
  • MLPs - How To Start A Bubble [View article]
    AMLP is an etf
    May 1 06:08 PM | Likes Like |Link to Comment
  • Aflac's Moat Explained [View article]
    I was trying to highlight why I think Aflac's underlying business is still strong and that the concerns over bonds and currencies are probably short term problems (short term compared to the life of the company, not necessarily the life of your particular investment horizon).

    Aflac's competitive position in Japan is so much stronger than their position in the US that you have to analyze them as separate businesses.
    Apr 25 06:16 PM | Likes Like |Link to Comment
  • Don't Look At Kinder Morgan's Payout Ratio [View article]
    you've inspired me to write an article about the fallacy of distributable cash flow. The problem is not the KMI or any other specific company is currently at fault, but simply because the opportunity exists someone will eventually use an MLP vehicle for fraud.

    Lets say I own a GP with IDRs in an LP and my dividend is based on distributed cash flow instead of profit. If I lend $100 to the LP and they distribute $10 per year for 10 years to the GP, the GP has increased its distributable cash flow but has failed to make any profit.

    This same trick can of course be used to hide unprofitable investments by diverting investors attention to dcf and dividends. The never ending issuance of shares further delays the inevitable by allowing the company to leverage this process.

    See the flaw?
    Profits are always what counts.
    Apr 25 06:12 PM | 6 Likes Like |Link to Comment
  • Looking For Value In An Overbought Market? Try These Hated Conglomerates [View article]
    If you add up BAM's ownership interests in the publicly traded holdings, the combined market value is around $22 Billion, compared to the holding company's current market cap of about $22 Billion.
    Apr 17 01:07 PM | 1 Like Like |Link to Comment
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