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Kinder Morgan Energy Partners, L.P. Message Board

  • mcbrayerja mcbrayerja Nov 6, 2004 7:56 PM Flag

    KMR discount?

    Why is it that KMR is at such a discount to KMP? Doesn't each share of KMR own a share of KMP? Perhaps this was discussed at an earlier time. A reference back to that message would be sufficient if it exists.

    Thanks,
    Jeff

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    • IMH doesn't do sub-par mortgages. it does more than 90% alt-a mortgages. (These are people who don't "qualify" for prime for some reason or another, but are prime credit risks. See the IMH website for a definition of this.)

      Their business is 3 parts: alt-a mortgages for single residences, multi-resident mortgages, and warehousing mortgages (which have nothing to do with warehouses, but deal with handling single family residences from other lenders).

      They make their money by leveraging their loans, 8 or 10 to one, which leads to the
      high yield. Since they are a reit, they have to pay at least 90% out as dividends. This means they frequently have to come back to the market for secondaries to get more funds. They are in the process of doing one now. The dividends are mostly not qualifying for the 15% tax bracket, hence one reason for the high yield if one is in the 33% bracket.

      Basically, most of their mortages are arms (more than 90%), so rising interest rates per se doesn't effect them. Of course it does as it takes time for the arms to be adjusted. The worst thing for them is an flat or inverted yield curve. If you think that is going to happen, then you should avoid them. But rising mortgage rates per se are not the issue.

      They hedge their mortgage risks. They had some problems with their hedges in the third quarter and had to sell some of their mortgages at a loss.

      Basically, you are betting on the management, just as you are with Kinder. If you feel they know what they are doing, then they are worthwhile to further look into. They crashed all the way to 2 in 1998 from the fall out from the hedge fund collapse (Long something or other, forgot it's exact name). I've had their stock since 2000, and the dividends have already exceeded my original purchase price.

      One of the reason the dividend is so high is that there is a short attack against them. (Not as bad as NFI, but still there.)

      Hope this helps.

    • Re to:irfkup
      "risky. sub-par mortgages in a rising rate environment are very vulnerable"

      Agree, it the dividend is to good to be true, most likely is.

      I might do well to stick with I do best.

      From Oct 25 or 26 to 8 trading days later, last 10 years, the S&P gained average 4% per year, some gain in every year, 10 for 10. I bought in the market in small cap on Oct 22, now up over 10% in a month.

      Next this: (S&P500)

      12-5-03 to 12-10-03 -1.0%
      11-29-02 to 12-13-02 -5.3%
      12-6-01 to 12-13-01 -4.4%
      12-12-00 to 12-20-00 �8.4%
      12-7-99 to 12-14-99 �1.4%
      11-30-98 to 12-14-98 �4.3%
      12-8-97 to 12-12-97 �3.1%
      12-10-96 to 12-16-96 �3.8%

      So we have a calendar pullback zone soon to be here.

      From the day on the right, to the 3rd trading day of the following year, S&P500 gains 4.7% per year, based on same years. Some gain in 7 of 8 years. Worst year -0.1% in 2000.

      "Forewarned is forearmed"

      I'll be watching and waiting for this one also.

      Happy trading

      -chart-

    • it's very complicated. kmr is a limited partner that doesn't receive a cash distribution. how you can have a partnership in which a partner "owns" the company but doesn't have any rights to the cash is a bit of a mystery. kmr actually "owns" nothing because it has no claims on kmp cash. kmr owners simply have the right to own a larger percentage of a disappearing asset. after morgan's promised "restructuring" maybe they'll start getting checks. what's a 10% yield on $5?

    • no, i mean KMR, the management company that runs KMP.

    • risky. sub-par mortgages in a rising rate environment are very vulnerable.

    • Well as I have said many times I IGNORE the jerk.. but you people keep responding and IT GOES NOWHERE except to clog this board.. But I did call KInder at 1 713 369 9000 and they explain the oil hedges and there is no loss incurred...they will continue to hedge their production as it is a lower risk to them..there is alot of bookkeeping which I dont understand completely BUT I do TRUST this management and the performance and records speak for themselves...If you have questions call the Company and not this negative strong sell jerk.. he is not going to change any more than that stupid analyst..do you spend your time refuting him???? Than quit wasting this boards time..if you like to waste your time alittle more ask Bush to try the middle road!!!

    • gerryria@pacbell.net gerryria Nov 23, 2004 2:36 PM Flag

      Your explanation is exactly correct.

    • because it showed KMI management is not operating in KMP's interest. notice that KMP management does not have any stock incentives related to KMP share price. they only have stock options in KMI stock if KMP reaches a certain payout level--therefore earnings (depreciation) don't matter and KMP stock price doesn't matter, all that matters is reaching that base level in KMP distribution and then boosting KMI stock price. (look it up). notice also that KMI is buying back more shares whereas KMP is selling units. clearly KMI management is good at allocating capital.

    • uh no

    • My guess is that since they are hedged at $24 to $26 a barrel, and oil is trading at $50 a barrel, the loss is the money they would have received if they were unhedged, but then I wouldn't epect billyjoe to tell the truth.

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