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Disturber

 
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  • Kinder Morgan: The Calm Before The Storm? [View article]
    "The states where taxes ar elowest rank lowest in education and quality of life."

    Not so. California where I live is a very highly taxed state. Our schools, roads, educational systems, etc. rank very near the bottom. Our budgets are disproportionately consumed by the pensions and benefits of the army of municipal and government employees that spend their time needlessly harassing out citizens. The same is true of New York.

    There is a clear need for taxation and for the provision of government services and yes, I believe in helping those that truly are in need. However, taken to excess, government imposes a strangle hold on the productive elements of the society.
    Nov 23, 2014. 04:53 PM | 16 Likes Like |Link to Comment
  • Kinder Morgan: The Calm Before The Storm? [View article]
    Could not agree more. I pay lots of taxes and truly resent it when my tax dollars are used to fund lavish vacations for government officials, or to finance their political and fund raising activities. When the fireman next door retires at 50 with a pension of $150k per year and life time med benefits, I feel something is wrong. Without trying to provoke a political argument here, I would think that every person interested in the financial viability of our great country would be concerned about the government excess that we are all experiencing.
    Nov 23, 2014. 04:49 PM | 15 Likes Like |Link to Comment
  • Kinder Morgan: The Calm Before The Storm? [View article]
    I agree completely. All should remember that most indexes are capitalization weighted. As a result of the merger, the relative capitalization of KMI will increase substantially and hence KMI will enjoy a heftier position in such indexes.

    In addition, the dividend projections for KMI are delicious to any dividend oriented investor and I would expect there to be quite a bit of demand pull from this segment of the investing public.
    Nov 23, 2014. 04:43 PM | Likes Like |Link to Comment
  • Kinder Morgan: Stock Nosedives, Time To Sell Out Or Buy With Both Hands? [View article]
    As my son so rightly said about my KMR-KMI investments: "Dad, you won the lottery!!"
    Nov 21, 2014. 09:22 PM | 2 Likes Like |Link to Comment
  • Kinder Morgan: Stock Nosedives, Time To Sell Out Or Buy With Both Hands? [View article]
    I agree with the following comment. If you are honest with yourself, you will take all the deferred income that your received since you bought your KMP, add that to the price gains since then, and then apply the tax rate to determine the percentage in actual taxes due. I think you will find that while the timing is different, the KMR shareholders will be in exactly the same position or very close if they had the same holding period. Your continuing laments are not based upon the correct analytical approach. You can't calculate the percentage based upon current market value. You have to add all the tax deferred amounts that your received, banked or reinvested.
    Nov 21, 2014. 09:20 PM | 2 Likes Like |Link to Comment
  • Kinder Morgan: Stock Nosedives, Time To Sell Out Or Buy With Both Hands? [View article]
    Would it not have made sense to hold on through the one year anniversary of your purchase so that you would get long term cap gains treatment? In most instances, the LTCG's rate is considerably lower than the short term tax rate and would have justified holding on even through some turbulence. It surely is not likely that within three months the price would drop so precipitously as to justify giving up your already accrued 9 month holding period.
    Nov 21, 2014. 09:14 PM | Likes Like |Link to Comment
  • Kinder Morgan: Stock Nosedives, Time To Sell Out Or Buy With Both Hands? [View article]
    I have no explanation for today's drop and it doesn't matter because time moves in one direction. I do expect that there will be some price erosion in the near term as portfolios are rebalanced and some new KMI holders sell for any number of reasons including taxes. I think things should stabilize after the first dividend payment goes ex in 2015. Some buying opportunities may well be presented.

    I also expect to see two significant trends with KMI. First, as the article notes, KMI will certainly be able to institute and realize some economies of scale. These guys run a tight ship and they will be able to consolidate functions, will have lower compliance costs now that the capital structure is simplified, and will be able to streamline a number of management functions. I am looking forward to seeing their 2015 first quarter g & a figures in comparison to prior periods.

    The second trend is going to involve acquisitions of both other pipelines and pipeline companies as well as acquisitions of strategic assets. along the line of the boats recently acquired. One of the great intangible assets that KMI possesses is a very highly refined view of their industry and the opportunities that it offers. Tanks, docks, ships, terminals, storage facilities, processing facilities, etc. are all out there and there are many more needed. KMI has a fantastic track record of evaluating these kinds of opportunities, selecting among them, and then implementing on time and on budget.

    The new capital structure opens the door to a much higher level of acquisition strength and I will not be surprised to see both large and small acquisitions over the next few years. I also will not be surprised to see an even larger backlog of strategic projects.

    I have only been following KMI for about two years. I was initially attracted to the steady payout and particularly, to the tax benefits of holding KMR of which I accumulated quite a bit with an average cost in the 70's. I welcome KMI into my portfolio and expect to hold on to it for the foreseeable future. I have been buying on the dips and took a giant bite a few weeks ago at $34. I couldn't be more pleased at the outcome.

    Disturber
    Nov 20, 2014. 09:37 PM | 7 Likes Like |Link to Comment
  • Kinder Morgan: Is The Merger Actually Bad News For KMP Unitholders? [View article]
    You are not correct. Your tax basis in the KMI stock is the identical basis that you have in your KMR stock before the merger. This is absolutely the correct analysis. You have a carry-over basis and a carry-over holding period. There are no exceptions in the KMR situation.
    Nov 19, 2014. 08:03 PM | Likes Like |Link to Comment
  • Kinder Morgan: Is The Merger Actually Bad News For KMP Unitholders? [View article]
    You are wrong on both counts. After the deal closes, your tax basis in the KMI shares received will be exactly the same as your basis in the KMR shares that you gave up. This is a carry-over basis situation.

    Likewise, your holding period for the KMI shares received will be the same as the holding periiod for the KMR shares given up. If you are in a short term position for the KMR shares, the additional period that you hold the KMI shares received will be "tacked onto" the holding period of the KMR shares that you gave up. Your holding period is not reset by virtue of the merger, it is also carried over.
    Nov 19, 2014. 04:15 PM | 2 Likes Like |Link to Comment
  • Kinder Morgan: Just Cleared Major Hurdle On Way To Merger Vote [View article]
    I greatly appreciate your reply. It is one of my pet peeves that a disproportionate number of so called financial advisers are purely fee driven and really don't take the time and do the research to fully understand theramifications of their advice. I have read most, if not all the comments of the KMP holders on these threads and believe me, I am not being callous and I truly emphasize with the situation they are in.

    I have been investing for more than 45 years and I too have taken my lumps, especially from so-called advisers. About 20 years ago I happened to catch Bob Brinker on the radio and he opened my eyes to the need to do your independent research and to avoid any investment that you don't fully and completely understand.

    I have this suggestion going forward. If you feel that you are going to be largely dependent upon financial advisers to identify investment prospects, then instead of taking single issue risks, invest in a diversified portfolio of no-load mutual funds from one or more of the giants. Be sure that you have at least 30% (or more) of your investment in index funds as the long term trends are generally favorable as is the historical record. As far as single issues are concerned, pick companies which meet the criteria of having a long dividend track record both in terms of payments and dividend increases. You might also consider Blue Chip or Equity Income funds as these are typically well managed.

    My approach is to have my entire retirement portfolio in no load mutual funds spread across six or seven funds. My taxable portfolio is in solid companies with excellent dividend records and with no more than about 10% in what I would call special situations. I invested in KMR because with the shale boom there was no question that mid stream infrastructure was going to grow considerably. I have a comparatively small amount invested in another MLP, where there is no general partner and hence no incentive distributions from the MLP to another entity and all distributable income is distributed to the unit holders. I am not a financial adviser but because of my legal work, I have a great deal of knowledge about corporate and business entity structures. If you would like to email me privately, I would be happy to share the funds that I have selected and stuck with for many years.

    Finally, I do not trade. I suspect that I have less than four transactions per year other than DRIP purchases.
    Nov 12, 2014. 10:16 PM | 1 Like Like |Link to Comment
  • Kinder Morgan: Just Cleared Major Hurdle On Way To Merger Vote [View article]
    Wrong. The exchange of KMR shares for KMI shares is treated as a tax free reorganization with a carry over basis. It is not a taxable event.

    Disturber
    Nov 7, 2014. 11:10 PM | 4 Likes Like |Link to Comment
  • Kinder Morgan: Just Cleared Major Hurdle On Way To Merger Vote [View article]
    With all due respect, and without trying to get into a beef, the three tax and legal professionals that you consulted don't know what they are talking about. It has been clear for several years that the KMI structure would have to change. There were several possible ways to restructure the company, but there was only one that would amount to a complete departure from the MLP model and that is the one that was chosen. The C corp structure achieves all of the objectives: lower cost of capital, riddance of the incentive distribution rights issues, gain of a huge depreciation base, and a simpler structure that is easier to understand by analysts and by investors.

    Any KMP holders that didn't understand the risk that they would not get favorable reorganization tax treatment in the event of a merger have only themselves to blame as there is no possible way that the other entities (KMI and KMR) would have been merged into KMP. It simply would make no business or tax sense. The decision to invest in KMP was universally driven by the allure of deferred taxes on the distributions and by the allure that the distributions were in cash. However, it has been perfectly clear from the beginning that this was not a tax free situation but was rather a tax deferral situation and that the piper would be paid sooner or later.

    A knowledgeable investor that did his homework would have invested in KMR. KMR had the identical benefits as KMP except that in order to realize cash, the investor would have to sell the distributed shares. In the meanwhile, shares accumulated tax free and that was the closest thing to true compounding. Also, KMR was not a partnership and was treated as a corporation for tax purposes. That meant that if it were ever acquired, as it most certainly would ultimately be, it would be eligible for tax free reorganization treatment.

    Please describe an "alternative deal structure" that would have provided the same benefits to the entity and would have achieved the same objectives.

    MLP investors pay attention. There are quite a few other MLPs that are in exactly the same position as KMP and which are going to get acquired with the same consequences. This industry is ripe for consolidation and it will happen. If you are putting in new money, put it into the right vehicle - one that will get tax free reorganization treatment upon merger.

    Disturber
    Nov 7, 2014. 11:08 PM | 13 Likes Like |Link to Comment
  • Kinder Morgan: Just Cleared Major Hurdle On Way To Merger Vote [View article]
    I question the wisdom of your layering approach. Judging from the market activity over the past several days, I think that investors are betting that the merger will go through without a hitch. Once the votes are counted, I expect the KMI price to bounce at least two points and settle in around $41. The time to make the move is now.

    As an attorney who knows a bit about these things, I am highly confident that the court challenges to the merger are going to fail. As I have noted in several posts on this subject, the KMP holders took a known risk in their decision to buy KMP rather than KMI or KMR and that risk has materialized. There has been adequate discussion of a restructuring of the KM enterprise over the past two years to put all on notice that there was a strong likelihood that the structure was going to change sooner or later. Knowing what you are investing in is part of investing.

    That having been said, I do sympathize with the KMP holders that are getting a tax whack, but it surely was predictable.

    Disturber
    Nov 6, 2014. 08:05 PM | 13 Likes Like |Link to Comment
  • What Will Be The Impact Of Consolidation On KMP Unitholders? [View article]
    There is an excellent article on these maneuvers in Saturday's Wall Street Journal. Read it carefully.
    Oct 26, 2014. 05:49 PM | Likes Like |Link to Comment
  • Update: Kinder Morgan Earnings - Another Strong Quarter In The Bag For This Dividend-Growth Star [View article]
    I saw the same analysis and I agree with your conclusion. There are several things I particularly like about KMI. First, there is a very strong commitment by management to shareholder value. Second, the consolidation is going to make it much easier for analysts to follow the company and apropos that, there have been a number of substantial upgrades projecting movement into the high 40's. Third, while the oil price drop will affect some drillers and there may be a slow down in production acceleration, the infrastructure needs of the energy industry are huge and KM has the experience and the credibility to get the new projects done. Fourth, the export of petroleum and petroleum products is only going to increase and KM is positioning itself to take advantage of this growth. Fifth, the transit contracts for energy gases and liquids are use-or-pay which means that there is a predictable revenue stream for the new projects and for the vast majority of the existing facilities. Lastly, KM seems to have a uncanny understanding of the natural growth paths for their facilities. Their new projects are largely expansions of existing pipelines, terminals etc. where they are in a particularly good position to evaluate demand. They execute very well.

    I have also been nibbling at EPD lately. It is a MLP without a general partner so the IDR issue is not present. I am very comfortable to have a heavy position in the midstream segment for the foreseeable future.
    Oct 16, 2014. 05:33 PM | 3 Likes Like |Link to Comment
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