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arbtrdr

arbtrdr
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  • Linn Energy: Not A Ponzi Scheme; Not Even 'Ponzi-Like' [View article]
    James has also made many other calls that were a disaster. If you take a look at the number of "abusive" posts that are deleted James has got to be at the top of the list. Evey time I comment on one of his "articles" I await the deletion that often comes.

    MLP - Thank you for a well balanced and clear article. It is too bad that there are so many articles on SA that are sensationalized, inaccurate or both. Even worse when a national publication like Forbes gives incorrect information nationla support.

    As to disclosure - I have bought and traded primarily MLPs since 1994. I currently have positions in 21 MLPs. MWE and EPD are my largest positions and LINE is by far my smallest at about .001 of my portfolio. I do not trade options or use margin becuase I have never understood options and don't like paying interest.
    Jul 14 11:13 PM | 18 Likes Like |Link to Comment
  • Get Skeptical About This MLP Claim [View article]
    authentic - MLPs vary from the very conservative - EPD to shipping and fertilizer MLPs to MLPs paying variable distributions. Some have been around almost 20 years and I would suggest that MLPs like KMP, OKS, PAA, and EPD (among others) are certainly worth a 5-10% portfolio weighting.

    Probably the biggest issue with many investors is they simply hate dealing with K-1s. older investors and those who have "K-1 phobia" are obviously going to invest elsewhere. For those seeking appreciation combined with tax deferred income, MLPs provide one good method of achieving growth and income.
    Jan 27 02:34 PM | 14 Likes Like |Link to Comment
  • Energy Transfer Partners: A 6.6% MLP With Strong Distribution Growth Prospects [View article]
    I have ETP as one of my largest holdings but your suggestion that it has been one of the stronger preformers is a bit misleading. ETP has had exactly ONE quarter of stong distribution coverage - last quarter. Before that ETP struggled and for a number of YEARS had no distribution increases and its unit price actually fell from the high 50s to $41.
    ETP has used a bit of slight of hand and convoluted business deals to get things back on track. ETP needs serious tailwinds becuase they were the guys who could not shoot straight from 2009 until late 2012. At that time you could buy ETP with a 9% yield. Why? No distribution increases, failed distribution coverage quarter after quarter, and generally little direction.
    FWIW, Susser makes sense in that ETP thought it had a great deal with the Sunoco retial operation. Instead they were not able to sell it without booking a loss. Combining it with Susser provides for a larger retail operation with people who understand how to manage the operation and thus ETP can evetually spin or sell the retail off.
    ETP is going lots of directions today. Their ownership of lots of SXL is benefitting them. Their adventure into propane that was a disaster is almost over (APU units almost all sold) and they have gotten away from basing their business on NG differentials which mostly disappeared. ETP is a bit late to the party and should do OK going forward.
    Just basing the look on the last quarter and preformance on the last 2 years, however, is misleading. There is a reason the yield on ETP is higher. Best to understand that before investing.
    Jun 3 09:11 AM | 12 Likes Like |Link to Comment
  • Time To Sell Enterprise Products [View article]
    Interesting comment with some errors.

    There are a number of MLPs with lower yields.

    Elliot has already indicated your .01 increase per quarter forever comment is not correct. EPD and Mike Creel have repeatedly stated to me that EPD will evaluate the distribution rate once a year and on an annual basis the BOD will declare distributions for EITHER a special distribution or an increase in the rate depending on capital needs. I would guess this year we will get a special distribution in either August or November of .01 or .02. Your assumptions going forward are flawed.

    My question is has anything fundamentally changed with EPD? The answer is no. EPD also is in the albolutely wonderful position that if interest rates rise and alternative investments sport higher yields it is certainly capable of increasing its distribution by a much higher CAGR.

    Last, where else does one go? SO is increasing its distribnution at a slower CAGR than EPD with little possibility of an increasing rate. MO is a bit higher in CAGR but the overhang of investing in tobacco and those uncertainties. Utilities has limited yearly raises in dividends while EPD could raise by 8-210% quite easily for a few years.

    As to recapture - most long term holders have a basis at or close to zero. Thus would pay taxes at ordinary income rates less any passive losses they carry forward and the expected capital gains. In my case I have an average purchase price of about $20 with $10 in loss carry forwards so would pay about $2.60 in the recapture and a LTCG of about $15. Not awful but it certainly reduces the $$ to invest going forward.

    Mr. Grossi - comments? have yet to see a reply from you.

    I to am happy to stand with the Duncan family into the future. Thier disciplined growth and visionary view of exporting is transforming the business for midstream MLPs in America.

    PS as to your comment as to the Monterrey shale predictions going down 95% - who has been drilling there. Was the original number based on exploration or seculation? What is the current production from that area?
    ARB
    May 25 01:52 PM | 12 Likes Like |Link to Comment
  • MarkWest Is A Must Sell [View article]
    Actually a company in the MLP arena that issues a secondary does it to raise cash. The timing is usually more related to the financial needs than the current valuation of the stock. If MWE had wanted to issue units where the valuation of their equity was high they would have issued lots of units a couple months ago before they issued results and the stock went down from over $70 to about $65.

    The author also forgets part of the equation for MWE. It recently has been growing the unit count in tandem with the growth in DCF - correct. What is missing here is the huge number of projects (14 or 15) that go or have gone into service from October 1st thru 2014. MWE has had to fund all of these with both construction funds as well as administrative and overhead $$ to get them up and running. These fixed fee projects should provide a jump start for MWEs DCF per unit.

    If an example of this is needed look back to when EPD changed its growth model from acquisition to organic buildouts shows what happens. Initially there is a small drag on the DCF as the expansion is planned and a bit more while the expansion is completed - remember all is paid for BEFORE the gas flows - and then DCF ramps up significantly at the in service date and then significantly as the volume ramp up happens over the next 12-18 months.

    The authors financial premise that they cannot grow DCF by 25% has no basis and in fact MWE is likely to increase DCF by more than 25% with the construction plans on schedule and a rising NGL frac spread that still effects the 30% of plants selling on POP or KW contracts.
    Dec 18 10:28 AM | 11 Likes Like |Link to Comment
  • MLPs - A Reality Check ? [View article]
    One question where your analysis does not make sense. We agree that when your basis goes to zero the distributions become taxable and mostly at LTCG rates since they are a return of capital. I am however a bit confused how on a complete sale of units you hold in that same MLP you provided this example:

    " Purchase $100,000 MLP, this is your cost basis
    Receive $100,000 distributions as ROC. No current tax, but reduces your basis to zero
    Next $75,000 in distributions taxed, when received, as cap-gain ROC
    Sell for $200,000 ---Taxed as follows $100,000 untaxed distributions taxed at ordinary rates, $75,000 cap-gain ROC distribution taxed at ordinary rates (recapture) and $25,000 Capital Gains."

    It is not correct. You would indeed pay ordinary income on the $100K in untaxed distributions and since you paid 100K and sold at 200K you would certainly have 100K in LTCG rates, but the other $75K received as distributions would have already been taxed. According to my understanding your basis cannot go to below ZERO.

    ARB
    Mar 26 10:05 AM | 11 Likes Like |Link to Comment
  • Is It A Good Time To Buy MLPs? [View article]
    What are the 13 you own that were not mentioned? Since Factoids mentioned 34 mLPs with either comments or statistics that total about 95% of the MLP market cap how do you only own 2 of the 34.

    Also the in depth discussion of a couple of the largest is most helpful especially when EPD operates in a manner different from every other MLP regarding distributions and KMP is the next largest.

    I also completely agree after the latest runup in prices it is time for a breather. If interest rates actually finally rise and the yiled of MLPs also rises then only EPD and a couple others are in a position to offset that rise with a higher CAGR regarding distributions.
    Jul 5 12:38 PM | 10 Likes Like |Link to Comment
  • How Much Dividend Income Growth Do You Need? [View article]
    First and foremost is that I live on SS and my pension and thus while income is good (dividend paying stocks tend to have higher growth over time) in my case it is not required.

    Where it seems we diverge is I keep a small 2-3% portion of my investment in somewhat to very speculative plays. Pharma startups or oil in a new thing called shale were some of the places I put money in the past. No income here, but if you hit a double and a home run out of every four tries you ultimately provide lots of income over time. And I do get it that you use BDCs, albiet the more conservative of this group, for a bit riskeir plays and higher yield. I have always valued your expertise in this area

    Last, bank preferreds are a vert interesting investment area. Some are counted as paying interest or non-qualified dividends like a REIT and others qualified. Some are likely to go on virtually forever and others like RBS issues likely to be called relatively soon at par because the bank can no longer count them as tier 1 capital. Thus there are preferred that are really sort of value plays and others purely income. This is an area where considerable research is needed to avoid pitfalls and Quantum Online provides great information on the terms of virtually all preferred issues.
    Feb 16 10:19 AM | 10 Likes Like |Link to Comment
  • Why Not Purchase This 7.5% Yield MLP For The Long Term? [View article]
    APL has had an increase in price of almost zero in the last 4 years. Looking at APL when it was near BK in 2008/9 after having decreased in price from about $60 to under $5 is really misleading top suggest it has outpreformed in the last 5 years. Take a look at some of the best MLPs including EPD, KMP, PAA, MMP and others and in relation to these APL has not done well. After cutting their distribution in a near BK they are now up to about 65% of where they were 6 years ago!

    Is APL one of the weaker MLPs - yes. Is it worth holding at the current approximately $30 unit price - yes. But the reason for its large yield is that is has continually given guidance in the last couple years and fallen short. 3 months ago they agreed to have thier GP waive IDRs from the .65 to .70 per quarter payout and APL suggested they would increase in the next quarter to the .65 threshold after they missed for Q3 of 2013. For last quarter another miss and guidance now pushed out till 2014YE.

    APL sadly has lots of KW abnd POP contracts and issues with gas volumes. They are worth buying at this level for those that are VERY VERY patient, but APL has a long history of being mismanaged.

    Suggesting the 8% yield is a reason to invest before APL finds a new bottom is really bad advice. Investors instead should ask why APL is not increasing its distribution and the others are. Investors should ask why APL is yielding that amount if it is such a great company.

    FWIW - I first bought APL in 2000 at about $20. It is in the bottom 1/3 for $$ amount of my MLP holdings.
    Feb 19 02:06 PM | 9 Likes Like |Link to Comment
  • Get Skeptical About This MLP Claim [View article]
    Interesting and logical analysis. I got a bit bogged down with all the numbers but you know I am not into numbers and analysis as much as you.

    Obviously MLPs have a shorter track record and the predictions for DCF gets lost to many in the EPS numbers. Hard to get many to understand the difference between MLPs and regular stocks. Thank you for your reference to NAPTP. Next time maybe the beginning with a hot link would help even more.

    I wonder if in looking at the accuracy of MLP earnings there is a correlation on two things: how many years the MLP has been in business and second the size? I would propose that a longer track record (similar to your grocery store analogy) certainly makes prediction easier and MLPs are dealing with commodities that fluctuate in price much more than food. You also have three other factors that provide volatility in MLPs: the discussion of legislation changing the tax status for MLPs, interest rates, and commodity prices since most MLPs have at least some exposure to prices and the price curve and some a lot.

    As to predicting earnings - Obviously a small company that is growing very fast as a % of EV both by organic projects and acquisition is going to have less predictable earnings than a company with an EV north of $25B. The law of large numbers certainly comes into play.

    Last, one needs to look at changes in the overall landscape and growth. While long haul pipelines were the norm some years ago, today we have a system of shorter lines moving stuff regionally. Also differentials that made ETP rich as usually gone (propane today excepted) or much smaller. The shale revolution has changed the energy map and some companies made that change well and others did not. As to growth - to be a major player in the shale regions one needs to be ahead of the producers if you are a midstream player. Sometimes this means you get a bit further ahead than you planned as in the case recently of MWE. Also growing at the rate of MWE from $400M to over $11B in some 7 years leads to surprises both good and bad. If they simply stopped building their DCF would rise over say three years by about 40% and be very predictable, but further growth depends on expansion.

    Thanks for the article. Eventually I will be buying some more of those grocery stocks!

    ARB
    Jan 27 12:02 PM | 9 Likes Like |Link to Comment
  • Why Not Consider This 12% Yielder As An Alternative To REITs And MLPs? [View article]
    Would agree except PSEC was in the $18 area before the financial meltdown in late 2008 and hit almost $8 in august of 2011. That volatility is really a bit larger than one would call stable. Also what will happen if we get a spike in interest rates? Would guess that most in the high yield area would have share pricing pressure due to alternative opportunities in bonds.
    Apr 22 11:01 AM | 8 Likes Like |Link to Comment
  • El Paso Could Be The Next Problematic MLP [View article]
    A couple of comments -

    You state, "but EPB is not expecting to increase its quarterly distribution over the past three years". This obviously makes no sense. EPB said they would not increase in either 2014 or 2015. Also the Ruby drop down was already planned long ago.

    As to BWP, BWP is providing about $1.60 in DCF, but management (rightfully so IMO) decided to bite the bullet and get their balance sheet back in order. TRhey were not forced to cut the payout to .10 and probably today wish they had made it the .40 they will earn.

    The situation of pipelines is one of change. Pipelines that were taken out of service are being repurposed. NS changing an unused one to take NGLs to Corpus and MMP with one between El Paso and houston are two examples. The problem with pipes is you cannot move them. a great quote from the BWP people. But we need to remember things change - anyone else remember NBP (now OKS) declaring no distribution increases for over 3 years in 2002 when they had contract failures. Today that pipe is both expanded and running at the full allowed tariff.

    Same thing with storage. Today it is worth nothing - absolutely ZERO. BPL, BWP and others are writing down assets and giving estimates of little or no income. Obviously people will not pay to store gas worth $4+ today to take it out and probably sell for less later. But again will we return to a more normal risk based pricing curve where future commodity prices are higher? Definately likely. In this case storage will return to be a profitable business. The midstream business is always in a ste of flux as prodcution moves from place to place and demand as well.
    Feb 13 11:27 AM | 8 Likes Like |Link to Comment
  • Is It A Good Time To Buy MLPs? [View article]
    MLPs are no different from other stocks in that there is a step up on death. I am about 70 and have lots of MLPs with a basis close to zero. Do not think the step up up in basis is worth the cost to me. Given the choice of death or paying taxes on many of my distributions at LTCG rates, I will continue to pay my taxes, thank you.
    Jul 5 12:42 PM | 7 Likes Like |Link to Comment
  • Boardwalk Blows Up - $3 Billion Of Market Value Evaporates In One Day [View article]
    Interesting. First a thought that using earnings is not what should be the tool to evaluate since MLPs distribute cash from DCF and not EPS. Everyone "should" know that EPS varies hugely because MLPs like BWP with huge capital assets have lots of depreciation and other non cash items that effect EPS, but do not effect cash flow.

    BWP has a situation that they took an unusual course of action. With cash flow down 20% - not as portrayed in your article and about to fully support a .40 distribution - BWP decided to take a conservative approach and put money toward reducing leverage and not issuing more units. for this they were destroyed with comments like "End of the Road" .

    Your LINE comments regarding the attack articles by Hedgeye are interesting but nothing that Hedgeye alleged was proven, LINE/LNCO have moved on and they are back near their prior share value iwth no significant changes to how they do business. They also have absolutely no connection to BWP and do not belong in a discussion about BWP unless you are suggesting they have accounting irregularities there too. I do not follow KMP but aghain what does that have to do with BWP.

    Last, risk? BWP has probably the least vrisky business in the MLP workld. They contract to hual commodities on pipes for large numbers of years. They simply at the current time have pipes going in the wrong directions and places. Are MLPs safe - depends on yuor definition, but BWP only needed to reduce its payout by the 20% cash shortfall. Lots of corporations have similar issues. But they do not get articles such as yours
    Feb 11 08:25 AM | 7 Likes Like |Link to Comment
  • Hello Taxes... Goodbye MLPs [View article]
    Ken -

    A couple of questions about your analysis.

    First - Distributions from a MLP put back into the MLP continue the tax deferral almost infinately. That changes the end result.

    Second - There are two situations where many people would sell MLPs. Either they need money in which case they are probably in a lower tax bracket or they die in which case the tax is zero.

    As 65% of MLPs are held by individuals I would think most are not having income over $450K a year (wish I had that problem - how bout you?) and thus thier tax/cap gain rates are lower than you cite. Agree the 3.8% medicare tax will hit some, but again if info from one of the MLPs provided me about their holders is correct the average taxable income is under $150K and thus selling off not a big deal.

    Last, for long term holders using MLPs for income, once the basis goes to zero the distributions are treated as LTCG and not ordinary income.
    ARB
    Jan 2 03:13 PM | 7 Likes Like |Link to Comment
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