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NC Investor

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  • Chevron: Past, Present, Future [View article]

    Morningstar shows the ROIC for CVX for the past 12 months to be 11.8, the lowest in the last 10 years.
    Aug 20 02:11 PM | Likes Like |Link to Comment
  • Understanding The Current Conditions In The Offshore Drilling Industry And Understanding Future Trends [View article]

    Great article that sheds some unbiased focus on the deep water drilling area to offset the bearish tone recently prevalent from the big boys.

    Aug 20 11:00 AM | Likes Like |Link to Comment
  • The Misleading Story About George Soros's Filing [View article]

    You raise many valid points and I agree it is not possible to know with certainty what George Soros is doing as well as knowing if he still is doing it. However it is clear from the 13F that he held puts covering 11290509 SPY shares (equals about 112905 put options since each put controls 100 SPY shares) via the filing. These puts at Friday's close of about $195 match the $2,209,777,000 shown on the 13F.

    That is a lot of puts. A glance at the SPY outstanding puts reveals the following where high volume of puts are outstanding.

    Sept - 140 - 190 strike range
    Oct - 150 - 193 strike range
    Nov - 150 -185 strike range
    Dec - 155 - 184 strike range
    Jan Volume declines

    The volumes are such that George Soros only bought a small percentage of the outstanding put options. The volumes of over 100000 put options (10000000 SPY Shares) per strike suggests the buying is being done by the big boys. While I do not like Soros I do recognize he is a very astute investor and tends to get things right. I think some very smart investors are also buying puts as insurance concentrated in the 150 to 180 area. Since SPY closed at about 195 on Friday this suggests these big boys are expecting a decline of from 8 to 23% in the S&P index, or more since they will not make money until SPY closes below their put strike prices.

    Thus this tells me it is a time to be cautious and perhaps raise some cash or buy some puts for insurance. Only time will tell for sure what the future holds and we will shortly see what actually happens.

    Aug 16 08:18 PM | Likes Like |Link to Comment
  • Kinder Morgan: Saying Goodbye To The MLPs [View article]
    Uncle Ted

    I agree that for long time holders of KMP makes sense however I do not think it provides an answer that will make them happy. I say this because the combination of institutionally owned, KMI owned (voted by RK) and owned by shorter term holders of KMP are surely going to vote in favor of the deal. I do not know the percentage of the KMP units held by long time shareholders but I suspect it is relatively small.
    Aug 15 11:20 AM | Likes Like |Link to Comment
  • Kinder Morgan Inc. Will Be A C-Corp Managed Like An MLP [View article]
    No Free Cake

    " As to NC's point, I don't see a need to create a new MLP later on. They'll be buying/consolidating other MLPs in the future and get the larger depreciation deductions as a result. "{

    The new KMI will be obtaining substantial depreciation benefits for some time, however as they decline a need for a replacement will return. i.e. In the near and mid term, KMI will grow largely due to the depreciation benefits to reduce taxes by the $20B over 14 years the company estimates. When they decline to a certain point an MLP with its tax benefits will again present itself. I suspect this would be sometime after 2020.
    Aug 15 11:01 AM | Likes Like |Link to Comment
  • Kinder Morgan Inc. Will Be A C-Corp Managed Like An MLP [View article]
    The WSJ today had an article closely in line with Tim's view. They said:

    "The deal sets a new value for the pipelines and terminals that KMI is getting from the partnerships, based on the price it pays for them rather than their depreciated historical cost. This has the effect of increasing the value of the assets and enables Kinder to deduct more from its income taxes because of depreciation."

    Thus if you look at the new KMI dividends as a payout ratio on EPS it will appear as Hedgeye suggests, however as Tim indicates it will actually coming from distributable cash flow. As the depreciation declines it would seem logical a new MLP would again make sound business strength.

    The key will be KMI able to achieve the 10% growth rate of dividends through 2020. Kinder in the conference call seemed to infer this 10% growth was conservative. Therefore given Kinder's history of over delivering on his promises I could see some even faster growth down the line.

    I remain heavily invested in KMP, KMR and KMI. The KMP will in a tax bill but longer term it should benefit investors who will now own KMI. This should not be a surprise since Kinder is heavily invested in KMI and this likely helped structure the deal to favor KMI.

    Thanks for a great analysis Tim.
    Aug 14 04:57 PM | 3 Likes Like |Link to Comment
  • How To Arbitrage The Upcoming Kinder Morgan Consolidation [View article]
    I see the key question here being will KMI actually decline to $36? I tend to think not. However should the stock market tumble before 4Q14 or if the Fed should indicate they will raise interest rates soon this may cause some of the KMI holders to sell and seek higher yields elsewhere. At $36 and a $2 dividend this would indicate a 5.5% 2015 yield with a 10% growth rate. I doubt this opportunity will occur.

    Thus I view the price you are willing to pay for either KMP, KMR or EPB depends upon what price you view KMI as a good buy. I view the current KMI closing price as a good long term price since it results in a 5.1% yield in 2015 with RK suggesting a 10% rise each year. On the conference call he indicated this was conservative. Others may differently value KMI.

    I bought some KMR today because I viewed the arbitrage to be favorable with a KMI equivalent price of $37.62 ignoring the two KMR 2H14 dividends of about $2.76.
    Aug 13 11:05 PM | 1 Like Like |Link to Comment
  • Update: Kinder Morgan Acquisition; Combined Entity Will Be A Solid Investment [View article]
    A consequence of this deal for KMP and EPB shareholders is the prior taxes deferred via the MLP structure will now become due at the time of the buyout. For long time KMP shareholders this could be a significant tax hit in addition to the $10.77 in cash that will also be taxable.

    The good news is Mr Market likes the deal for all involved companies and thus is likely to be a new trend for other MLP structures.

    I also note 4 MLPs that bought out their GP were also up this morning. Namely MMP, EPD, GEL and MWE. Could the Kinder approach be followed by other MLPs?
    Aug 11 10:54 AM | Likes Like |Link to Comment
  • Kinder Morgan: Saying Goodbye To The MLPs [View article]
    If this change in structure benefits all the Kinder companies as their presentation shows it would seem to be only a matter of time when other MLPs follow a similar process. I notice many up today. I am unclear on the MLPs that bought out their GP to avoid the IDR impact.

    A consequence of the deal on long time holders of KMP is that not only will there be a 2014 tax on cash received ($10.77 per share) but also on the impact of the buyout. Since KMP essentially deferred taxes when KMP will be bought out in 4Q14 the deferred taxes will become due. For those of us who are long term holders of KMP the tax due could be quite significant. Uncle Sam should like this deal as well. (bg)
    Aug 11 10:36 AM | 6 Likes Like |Link to Comment
  • Pebblebrook Hotel Trust - A Luxury Brand To Consider [View article]

    Looks like a great company that at a lower price should be a sound investment.
    Aug 4 11:13 AM | 1 Like Like |Link to Comment
  • Dividends Don't Matter In Retirement Either [View article]

    Well said. I am in your camp.

    My rationale of why investing in high quality stocks paying meaningful and growing dividends is quite simple.

    1) To pay meaningful and growing dividends it requires a company with strong management as well as being in an industry that generates the FCF to pay dividends as well as grow the company to pay ongoing increasing dividends.

    2) Paying meaningful and growing dividends means management is less able to use FCF to buy less desirable companies as well as build mansions for their executive suite.

    It is true some companies have management that invest their excess FCF to grow the company but I find most spend it is an irresponsible way that does not benefit shareholders. It also tends to avoid industries requiring large capital investments.

    A company that is not profitable enough to pay both meaningful dividends as well as grow these dividends is in most cases not a company in which I desire to invest.

    So for me Dividends do Matter and I suspect as the author gains more investing experience he will also recognize.
    Aug 3 10:00 AM | 1 Like Like |Link to Comment
  • AbbVie Shareholders Prevail [View article]
    The WSJ had an article today titled "How to ease the tax hit from an Inversion". You can read about it at:

    The ideas suggested were:

    1) Offset capital gains taxes by offsetting with losses. (Tough to do in this bull market but who knows what may happen by year end)

    2) Give the stock to someone in a lower tax bracket. An example here would be a minor such as grandchild still in school. Be careful not to exceed the $2000 Kiddie tax or this may result in the child taxed at his parents higher rate.

    3) Donate stock to a charity.

    I think most of us will be stuck paying an unexpected tax.

    Of course this only applies to stock held in taxable accounts since deferred accounts are not impacted.
    Aug 2 03:49 PM | Likes Like |Link to Comment
  • AbbVie Shareholders Prevail [View article]

    It is Form 2210. This is the form to determine if your estimated taxes may result in a penalty. Look here

    Basically the US tax system is a pay as you go system and thus if your estimated payments plus withholding in a given quarter, or cumulatively, do not exceed the taxes due there is no penalty. Thus if you receive a 1099 in January that indicates a capital gain occurred in December, your estimated tax in January should not result in a penalty or interest.

    Form 2210 is a bit complex and I would not suggest trying to do it without tax software.
    Aug 2 03:36 PM | Likes Like |Link to Comment
  • AbbVie Shareholders Prevail [View article]

    ABBV has indicated the inversion deal by 2016 will reduce their tax rate from the current 25% tax rate to 16% or a 9% points reduction. My rough calculations using only ABBV revenue show this results in about a 20% increase in net income. This gets the attention of CEOs and CFOs to invert.
    Aug 1 02:55 PM | Likes Like |Link to Comment
  • AbbVie Shareholders Prevail [View article]

    Yes that is correct and you may need more coffee depending upon the hit. (bg)
    Aug 1 02:45 PM | Likes Like |Link to Comment