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Is Kinder Morgan a Trap or a Treasure?

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It could be the boldest, most controversial call on Wall Street since Meredith Whitney (incorrectly) hexed the municipal bond market on 60 Minutes in 2010. This time, the target is Kinder Morgan (KMI) and the broader universe of MLP's (or master limited partnerships), and the messenger is a little known analyst Kevin Kaiser, at Connecticut-based Hedgeye Risk Management. In both cases, the bedrock of the institutional investing establishment has not taken kindly to the message.

"This isn't rocket science. It's just us reminding people what GAAP accounting is," says Keith McCullough, founder and CEO of Hedgeye, in the attached video. "When we get into the short side of something, it's not about scaring people or end-of-the-world type stuff. I'm looking for an expensive stock that everybody owns that's going to run into some issues."

Of specific concern to Hedgeye is how Kinder Morgan books its maintenance capital expenditures as an expansion expense, which Kaiser equates to financing maintenance. It's a problem, they argue, that ultimately puts the firm's fat quarterly payouts to investors at risk.

And McCullough argues that those outsized distributions, as the dividend-like payments of MLP's are called, have brought a lot of unwitting investors to the trough in search of better yields in a low rate environment. He thinks it and other high-paying dividend plays are extremely vulnerable to rising interest rates.

"A lot of people own this and don't even know what they own," McCullough says. "67% of KMP is owned by individuals. Do you think that these individuals have actually done the work? No." KMP is Kinder's sister company Kinder Morgan Energy Partners (KMP).

This is not Kaiser's first big pick McCullough says, noting the success of a previous cautionary call he made on Linn Energy (LINE) in which he also went ''head to head" and rocked the boat with the big name pundits. While McCullough says his firm "doesn't typically do the sell-sider price target dance" in terms of how low they think the stock can go, saying only "a lot lower" when pressed.

So far, KMI has slumped about 7% this month at a time when its peers in the energy sector (XLE) sectorhave gained about 3% in September.

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