In this week’s podcast, Simon Lack complains about celebrities lecturing us on climate change
Sources mentioned in podcast:
Julia Roberts, James Cameron and Al Gore
If you missed our webinar last week, titled “Volumes, Cashflow and ESG”, here’s a link to a replay.
In this week’s podcast, Simon Lack talks about climate extremists and good news on US CO2 emissions
Sources mentioned in podcast:
Greta Thunberg in the Economist
New York Post on where CO2 emissions are growing
Extinction Rebellion video protesting on top of commuter train
The Misdirection of Extinction Rebellion
In this week’s podcast, Simon Lack talks about Extinction Rebellion’s misguided objectives
Review of Russell Gold’s Superpower
In this week’s podcast, Simon Lack talks about his conclusions after reading Russell Gold’s recent book, Superpower
Greta’s Grandstanding
In this week’s podcast, Simon Lack talks about Greta Thunberg’s UN speech and long term projections for energy use
Iran Promotes Fracking
In this week’s podcast, Simon Lack is going to talk about the lesson we should take from the attack on Saudi Arabia’s oil infrastructure
Political Promises on Climate Change
In this week’s podcast, Simon Lack talks about the impractical promises from Democrat presidential candidates on climate change, and adds an update on the Blackstone-Tallgrass deal (6 minute mark).
In this week’s podcast, Simon Lack is going to talk about the ethical gulf revealed by Blackstone’s offer to take Tallgrass private.
Links:
Private Equity Sees Value in Unloved Pipelines
https://sl-advisors.com/private-equity-sees-value-in-unloved-pipelines
Blackstone and Tallgrass Further Discredit the MLP Model
https://sl-advisors.com/blackstone-and-tallgrass-discredit-mlp-model
In this week’s podcast, Simon Lack talks about the difference in value seen by private and public market investors.
Show Notes:
Energy remains out of favor (:46)
Recently dropped to 4.5% of S&P500 (:48)
FT wrote about Why US energy investors are experiencing a crisis of faith (1:01)
Being an energy investor requires religious conviction (1:12)
Attractive dividend yields (1:22)
Growing cashflows (1:23)
Malaise caused by reinvesting too much cash (1:36)
Poor expense control (1:46)
Fears of global warming (1:49)
Blackstone bought 56% of Tallgrass they didn’t already own (2:00)
GS estimates $250BN in private capital for infrastructure and natural resources (2:20)
Ultra low bond yields + tremendous demands for stable, long term flows (3:11)
Pension funds are part of the demand. US pensions 28% in fixed income, up 3% (3:19)
Blackstone paying 36% premium (4:06)
All good news, lifted the sector (4:20)
Except seems a bit of bait and switch (4:30)
Blackstone bought 44% earlier this year (4:40)
But buying 56% costs less than buying 44% earlier this year (4:52)
Questions asked about why they hadn’t bought whole company (4:55)
Meanwhile stock has slid over uncertainty about capex, recontracting on pipelines (5:04)
Blackstone took opportunity to bid for 56% they didn’t own at $19.50, 35% premium (5:15)
Management team gets to sell their shares at $26.25, 35% above deal price (5:33)
Good to see private equity buying another pipeline company (6:27)
Finding value in sector (6:32)
Disappointing to see another management team structuring transaction with superior rights for themselves compared with other investors (6:37)
Links:
Why US energy investors are experiencing a crisis of faith
https://www.ft.com/content/71655bca-c8c2-11e9-a1f4-3669401ba76f
In this week’s podcast, Simon talks about the distortions showing up in bond markets.
Show Notes:
Interest rates are low (:40)
$17TN publicly traded debt has negative yields (:45)
Incredible reflection of price-insensitive buying (:50)
Reflects degree of risk aversion. Prefer the certainly of a loss in bonds rather than own stocks (:57)
But bond investors generally do good analysis (1:20)
Look at energy (1:27)
Perennially out of favor (1:28)
Valuations cheap, yields high (1:40)
American Energy Independence Index yields nearly 7% (1:42)
Investor sentiment poor, long term outlook uncertain (1:48)
But a look at bond yields on biggest companies shows bond investors more relaxed (2:00)
EPD, $63BN market cap, yields 6% while its 2054 bonds yield 3.9% (2:08)
KMI, $46BN mkt cap, has 2098 bonds yielding 5.1% (2:27)
In many cases the bond yields are 1.5% below the dividend yield (3:05)
Must be so much better to own the stock where dividends can grow (3:15)
Interesting piece blog called The Pension Fund Apocalypse by Colin Lloyd (3:27)
He highlights the problems for pension funds by low rates (3:33)
Estimates that $26TN in pension assets earning negative real return on fixed income allocation (3:44)
Problem is that bond demand remains strong (4:13)
US pension funds incredibly raised their fixed income from <25% to 28% last year (4:17)
They should be investing less bonds given returns
But regulations make it hard (4:50)
More broadly, bond yields reflect some risk aversion and inflexible investing regulations (5:28)
Investors in energy company bonds are pretty calm, shown by low yields (6:29)
It’s a factor keeping interest rates low (6:58)
All suggests that stocks are cheap, not over the next week or two but over the next 2-5 years (7:16)
Suggested Links:
Bond Buyers Should Buy Pipeline Stocks
https://sl-advisors.com/bond-buyers-should-buy-pipeline-stocks
The Pension Fund Apocalypse
https://www.aier.org/article/pension-fund-apocalypse
