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Kinder Morgan Energy Partners Message Board

  • dgd001 dgd001 May 5, 2010 3:29 PM Flag

    Recent drop

    Why the big drop the last couple of days? It appears even more overdone than the broader market.

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    • KMP did a secondary at $66.25 which went underwater right away and probably sparked some selling. Other MLPs and MLP like entities have had secondaries that are also underwater. But the MLP yields really got too low since part of the yield is return of capital and these are stocks with downside risk.

      Ethanol was recently added as a product that could be transported by MLP entities. This would argue for the continued preferrential tax treatment. The small money raised by taxing MLPs will not come close to making a dent in the deficit; GP taxes make sense but would generate even less. Regardless, if you raise taxes on these MLPs new projects will charge more to transport gas and products. Existing MLPs may be able to renogiate contracts if their tax treatment changes.

    • There was news coming out from the administration that there was talk of changing the taxation of the MLP system. Congress is messing around with this.I went to the Yahoo EPD message board, and there was a LOT on this.Some appeared to be very knowledgeable and worth a look. One thing I do know, is that Canada recently changed their tax policy, which changed their MPL's to corporations, exposing the partnership to the corporate tax plus investors tax. The price of their MLP's dropped 40%. Read the EPD board for detail.

    • Last 5 days the Alerian MLP index is down -5.3%, KMP is down -5.9%...sort of middling in the pack. IMHO it has nothing to do with KMP, and more to do with various pressures on the MLP sector.

      The carnage in the MLP market this morning, especially in the first half hour or so, is being attributed to hedge funds liquidating assets they have been trying hard to avoid selling (because of the tax hit they will take). A lot of MLPs were down 10% or more first thing this morning, and some of the biggest were the hardest hit. Most made a lot of that back. The Alerian index still ended up down 3.3% for the day (and KMP down 2.6%).

      Some folks were able to pick up some nice 1-day gains on MLPs today if they bought earlier, and some others locked in some nice yields they will enjoy for a long time. You had to be quick this morning though, and have some guts. Buying in the middle of a storm can work great if your timing is spot on, but those other times....

 
KMP
102.03+1.98(+1.98%)Nov 26 4:05 PMEST