Author Archive for: Simon Lack
Entries by Simon Lack
Energy Transfer: Cutting Your Payout, Not Mine
Too few writers covering energy infrastructure admit to the many distribution cuts inflicted on MLP holders. Instead, they identify numerous other problems whose resolution will draw in buyers. Incentive Distribution Rights (IDRs), the payments made by MLPs to their General Partners (GP), have drawn scorn for the past couple of years. Eliminating them is fashionable […]
FANG Goes Bang
“FAANG” stocks (Facebook, Amazon, Apple, Netflix and Google, now called Alphabet) were rising for most of the year. For investors who didn’t find that exciting enough, BMO Capital Markets Corp helpfully issued the MicroSectors FANG+ 3X Leveraged ETN (FNGU). As the name suggests, it gives you three times the daily return on these, plus another […]
Oil and Gas Take Center Stage
If pipeline stocks moved with natural gas rather than crude oil, their long-suffering investors could look back on a good week. On Tuesday crude was down $5 per barrel for the week, before recovering $2 by Friday. It’s tumbled $20 since early October, bringing Brent Jan ’19 to $66. By contrast, the Jan ’19 natural […]
Crude’s Drop Makes Higher Prices Likely
Crude oil just set a record of sorts, by falling for eleven consecutive days (as of this morning). Fears that sanctions on Iran would cause a supply shortage, leading to a price spike, now seem unfounded. Not long ago, many were surprised at the high degree of compliance. France’s energy giant Total’s CEO said it […]
Valuing MLPs Privately — Enterprise Products Partners
MLP valuations show that the trust of the traditional MLP investor has been lost, perhaps irretrievably. In Kinder Morgan; Still Paying for Broken Promises, we showed how that company’s history of investor abuse via two distribution cuts and an adverse tax outcome continues to weigh on its stock price. In Magellan Midstream: Keeping Promises But […]
What the Midterms Mean for Stocks
Equity returns are historically strongest in the year following the midterms. Conspiracy theorists will judge that politicians in office focus on market-friendly moves that aren’t limited to government spending in order to stay in power. Whatever the reason, the effect is quite remarkable. Since 1960, the S&P500 has risen by 15.9% on average in the […]
Magellan Midstream: Keeping Promises But Still Dragged Down by Peers
Many MLP management teams have pursued growth at the expense of honoring their promise of stable distributions. We think the sector’s persistently high yields need explaining. Last week’s blog post (Kinder Morgan: Still Paying for Broken Promises) drew thousands of pageviews and over a hundred comments on Seeking Alpha. Although Kinder Morgan (KMI) got there […]
Bonds Still Can’t Compete with Stocks
The Equity Risk Premium (ERP) is a handy way to compare valuations of equity with fixed income. It compares bond yields with the earnings yield on stocks (the earnings yield is reciprocal of the price/earnings ratio). Six years ago, when the Fed was well into quantitative easing and bond buying, it gave a clear signal […]
Kinder Morgan: Still Paying for Broken Promises
Broken promises aren’t quickly forgotten. That’s the hard lesson being learned by pipeline company managements, as the sector remains cheap yet out of favor. Kinder Morgan (KMI) reported good earnings on October 17th. Volumes were up, and they sold their Trans Mountain Pipeline (TMX), including its expansion project, to the Canadian Federal government. TMX is […]
