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  • Kinder Morgan: A Good Example Of Why Investors Should Never Pay Attention To Wall Street Analysts [View article]
    If you own MLPs in an IRA you must pay tax on the part of the income that is considered unrelated business income tax” (UBIT). Under the UBIT rules, tax-exempt organizations and retirement accounts must pay tax on their “unrelated business taxable income” (UBTI). You can find your UBTI in the MLP's K-1. The tax on UBIT I believe is 39%. This is why MLPs are not considered appropriate for an IRA. There is nothing wrong with holding them in an IRA but you will have to pay the UBTI. The ETN AMJ is a way to get around this.
    Aug 22 09:35 AM | Likes Like |Link to Comment
  • Kinder Morgan: A Good Example Of Why Investors Should Never Pay Attention To Wall Street Analysts [View article]
    Many of the KMI/KMP/KMR bulls are patting themselves on the back and declaring that Wall Street analyst got it wrong. If you go back to about the time of the EPB purchase the Kinder complex, even after the recent jump in the share, have still underperformed the Alerion MLP index.

    It will be interesting to see how the new structure plays out. Some significant tax bills we have to be paid by long term holders and I wonder how this will impact the entire MLP universe. MLPs offer tax deferral not tax elimination. Does a better understanding of this by unit holders weigh on valuation?
    Aug 22 08:52 AM | Likes Like |Link to Comment
  • Kinder Morgan: Strap Yourselves In And Prepare For Lift-Off [View article]
    David, thanks for the article. Just curious if you know what percentage of KMP's earnings would come from the Trans Mountain pipeline in say three years if it is completed by then. Also, Canadian oil is expensive to dig out of the ground. Do you know at what price it becomes uneconomic?

    Jun 11 12:03 PM | Likes Like |Link to Comment
  • Kinder Morgan: The Worm Has Definitely Turned [View article]
    Past performance is no guarantee. The bulls on the Kinder companies look at the low valuations and the Richard Kinder's track record over more than a decade. But looking forward, I believe the Kinder group carries too much leverage and is somewhat weighed down by a rising cost of capital. The MLP units and the C corp are cheap based on yield and deserve a bounce, or maybe they have already experienced it, but I believe there are MLPs with better growth prospects out there. PAA, MWE, EPD, and MMP come to mind.
    Jun 4 04:59 PM | Likes Like |Link to Comment
  • Kinder Morgan: How Feasible Is A GP Buyout? [View article]
    I know everybody thinks Kinder is Godlike and can do no wrong. But it appears to me that by loading the MLPs and GP with so much debt he has backed himself into a corner. The MLPs are trading at low valuations and have as a result high cost of capital. Meaningful expansion capex in the future will require accessing either debt market or issuing more units and the cost will be high relative to what EPD and MMP pay. Buffet has made mistakes, as many other managers who have created wealth for their investors in the past. Blind faith in Richard Kinder's ability to generate high future returns may be misplaced.
    May 29 12:12 PM | 4 Likes Like |Link to Comment
  • Kinder Morgan: The Good, The Bad And The Ugly Truth [View article]
    1GreatCFA, It's my bet that Congress wont' touch the MLP structure as long as it does not leak into other industries. Firstly, Congress can't seem to do anything at the moment, and if the Republicans retain control of the House I think MLPs are safe. But its questionable whether Democrats would challenge an industry that has been creating jobs in a lot of democratically controlled states and districts. Even Obama has been talking up our domestic energy industry and MLPs have been vital players in its growth.

    Canada had royalty trusts, which were similar to our MLPs in terms of tax avoidance/ deference. Originally they were meant to support the build out of energy infrastructure but eventually other companies were using the structure. I owned for a couple of years Groupo Aeroplan which was a royalty trust that held Air Canada's frequent flyer program (I didn't make any money on this one). And at one point there was talk of turning the BCE, the telecom company into a royalty trust. That woke up the politicians and eventually the structure was eliminated.

    Cedar Fair (FUN) is an Ohio based amusement park operator that is an MLP and I'm sure there are a few other non energy MLPs out there. My guess is if larger companies outside of the energy area start going in that direction then Congress may act. But I am also assuming that they will either leave alone energy companies, or grandfather existing energy MLPs.

    It should also be pointed out that you pay taxes when you sell an MLP on the capital gain, and that the basis is adjusted down to reflect all of the distributions you have received over the lifetime of your holding. So a fairly large cap gains tax will be paid for most owner of MLPs who have held them for a long time.
    May 21 02:44 PM | 1 Like Like |Link to Comment
  • Kinder Morgan: The Good, The Bad And The Ugly Truth [View article]
    It's horses for course whether you buy the GP or the MLP. Each investment needs to stand on its own merit and IDRs are a part of the analysis whether buying the MLP or the GP. However, the controversy surrounding the Kinder group of companies, which has been reflected in their under-performance, is not so much about the rights or wrongs of IDRs but the ever increasing amounts of leverage that the Kinder GP and the MLPs have taken on. Kinder may have created a lot of value over the years for investors but that seems to be changing.

    MLPs like EPD and MMP have outperformed the Kinder group because they have been better managers, not just because they do not have pay have GP siphoning off cash flow. Both EPD and MMP are now able to fund major investments without having to go to the capital markets via debt or unit issuance while still paying out large distributions to shareholders, and increasing those distributions annually at a rate that is faster than what the Kinder group can manage.

    Further, should either EPD or MMP decide they need to raise capital they will be able to do it at a much more cheaply and dilute unit holders less than KMI, KMP or KMR could.

    Bulls on the Kinder group are focused on the dividend yield and historical performance. There is value in the group but I would rather own MMP and EPD which have lower yields but are growing distributions more rapidly and have greater flexibility because of their strong balance sheets and related lower cost of capital.
    May 21 02:19 PM | 1 Like Like |Link to Comment
  • ETF portfolio manager tied to selloff [View news story]
    Good Harbor seems to be like your average hedge fund these days - playing the momentum trade, but always late. According to this post they are selling small cap ETF's and buying Treasury ETF's. Maybe a little late? Does anybody know what their performance has been like?
    May 20 04:48 PM | Likes Like |Link to Comment
  • CenturyLink counting on data centers, network to take on Amazon [View news story]
    Don't really care about AMZN as a stock, (too expensive, and price does matter, free cash flow is minuscule) but I hope CTL is beginning to think about getting out of the cloud business. Too much competition. They should let the big boys battle it out and focus on the better returns they can generate by investing in their core business.
    May 7 12:38 PM | Likes Like |Link to Comment
  • Mondelēz International, Inc. misses by $0.02, misses on revenue [View news story]
    The board of directors should do something, but since se appointed them before the split with Kraft they will be slow to act. I bought this stock soon after they spun out of Kraft based mostly on the quality of the assets, the merging market exposure, and the presumed ability of management to increase the margins. When I listened to MDLZ's first results conference call as a publically traded company I was worried. As Sittingcrow points out above, she is full of excuses. And every conference call since has been the same. Warren Buffett wanted nothing to do with her, and actively tried to stop some of her strategic moves, but to no avail. Having heard her present I can imagine how painful Buffet found his conversations with her. I don't believe he surrounds himself with people who constantly make excuses for their failures. I still own the stock and still hoping for the original investment thesis to play out. Patience is wearing thin. New management soon please.
    Feb 12 08:17 PM | 1 Like Like |Link to Comment
  • FCC wants carriers to allow unlocking, pushing ahead with H-Block auction [View news story]
    What is the timing on Dish's need to use it or lose it?
    Nov 17 06:24 PM | Likes Like |Link to Comment
  • More from McDonald's Investor Meeting [View news story]
    DNKN does it and it seems to work for them, in New England anyway.
    Nov 14 05:26 PM | Likes Like |Link to Comment
  • Apple: If I Could Buy And Hold Only One Stock, This Is It... 2nd Anniversary [View article]
    I find the comparison between Apple and Google interesting and respectfully take issue with your preference for Apple.

    Every search that Is done on Google makes the next search better. I.e every search provides new information to the algorisms that informs and refines subsequent searches. Because Google has well over 50% of the search market they do more searches than their next biggest competitor. Assuming that users go to the search engine that gives them the most relevant results Google's position is unassailable. They own their market.

    That is not the case with Apple. Every great consumer product becomes commoditized. The iPhone is the best product out there, but instead of pulling away from the pack, like Google in search, they are seeing the pack close in. The difference between the iPhone and the Galaxy is shrinking. At some point smart phones become a commodity. Don't know when this happens but Apple cannot live on the iPhone forever. I can't buy these shares because I don't know what is next for Apple in terms of new products. It's not enough for me just to hear that they have great R&D, culture, name brand, ecosystem, etc. I've seen this all before with (pick your consumer electronics company) Nokia, Palm, Sony, Nintendo, Atari, Zenith, etc.

    I don't see Apple owning more of the cell phone market in 3 years. And I would place a better than 50% probability that Samsung , or somebody else, will have closed the gap even more with the iPhone. Market growth will also slow even more. Apple needs a new product, and they may in fact defy history and pull it off with another revolutionary product. But I'm not comfortable putting money behind that bet. I actually hope they do pull it off. On the other hand I am fairly confident that Google will still own the search market in 2015.

    Thus if I was putting money in one of these two stocks for 5 years it would have to be the one has a monopoly on its market
    Oct 28 06:19 PM | 2 Likes Like |Link to Comment
  • Dunkin' Brands Vs. Starbucks: A Cup To Cup Comparison [View article]
    Nathaniel, how do you measure best of breed? DNKN has operating margins that are 3X what SBUX sports, 1.5X MCD's.

    No doubt DNKN is well behind in the international arena vs SBUX, YUM, MCD, etc. But that is part of the appeal. To them anything west of the Mississippi is a "frontier" market, yet the have laws and a language that are the same. Taste may be a different matter. It's hard to say if DNKN will work in Cali, but they are lining up franchisees and will start rolling out there soon.

    Btw, DNKN has 7,000 units outside of the US, but more Baskin Robbins than DDs. Baskin's is #1 in Japan and South Korea in their category, and is popular in the Middle east as well for some reason.

    I'd prefer to be looking for growth in California than China right now. I'm not against owning SBUX, I don't, but it has its appeal.
    Though both sell coffee but there are a lot of differences, in particular in their customer demographics and business model. It's not one or the other.
    Jun 6 10:37 AM | 1 Like Like |Link to Comment
  • Dunkin' Brands Vs. Starbucks: A Cup To Cup Comparison [View article]
    Erica, you are missing a few key points in the DNKN story. First op margins of 49% vs SBUX's 15%. Capex to sales is 6% vs SBUX's 27%. The DNKN business model is all about being asset light. They own almost zero stores and they don't even own their distribution centers. This means almost every $ they generate is free cash flow. Yes, they have a lot of debt which reduces ROCE, but that is coming down sharply at about $120 mn a year. ROE is rising from mid teens to mid 30s. One of the things I like about DNKN is that what they call "frontier" markets includes California. Investing in an established brand that has growth opportunities in their own back yard is comforting.
    May 30 07:02 PM | 3 Likes Like |Link to Comment