I agree with your dissertation for the most part. I only add these observations to the fire. First KMP has had a wealth of analysts,article writers,Cramer etc recommending it. Another added fact is that oil is at 81-82 which makes EPD the model for midstream mlp's a better buy from now on. Also the 2+ billion funds being added to mlp's, usually ends up in high capitalized stocks. So while facts may be important you have exogenous cross currents taking place ,and in this case very positive for most mlp's now especially midstream and oil associated These are not usual times of last 10 years.I suggest mlp.s are being looked at as a sector niche,added to almost zero interest cd's etc so let everybody have a ride on their "found" mlp's.
The bigger question will be whether MLPs can achieve that which reits have achieved and perhaps do not deserve at this point. Reits were forced to raise billions to shore up overlevered balance sheets; a few MLPs were forced to do so but many MLPs came thru the credit crisis OK. A lot of reits were forced to cut, eliminate or go to the 10/90 cash/stock dividend because they messed up their balance sheets so much. Few MLPs were forced to cut or eliminate. And yet reit valuations are IMO crazy right now. More importantly, their yields suck for the risk of ownership. If you looked at reit yields it seems to me MLP yields should be much lower since they were much better allocators of debt and equity in the last cycle.
So my question is whether MLPs will receive their just due from investors or will investors continue to chase reits into underlying property valuations that make zero sense IMO.
You are ceratinly making an interest point. I did sell out of all of my EPD this quarter. I will be buying more after ex-dvidiend.
To answer your question, you have to answer as a trader and a long holder. I am trader, and I could care less about the distinction, but the run-up in the MLP space has me a bit worried about taking on speculative risk on every increasing prices; whereas, the MREIT's are much narrower in trading range.
I think the MREIT risk is significant both near term and long term. I only say near term, becasue there will be spill over from the foreclosure crises. No more, no less. Long term, the business models are not proven in a rising rate environment and the government ultimately will have to sell some MBS. That is a long way off. Rates are low and the leveraged spread they offer of 2.50% +/- is unbeatable. So, I guess if I were long I would like a little. I am a trader, so I only trade the MREIT's for the $3/$4 change in price per quarter.
I do the same thing with the MLPs. the MLP's have unique risks. First, they are being recognised by investors and they keep hitting new highs. I don't know how you could ask for more than high yields and a rising price scenario. The business plans seem good. Yet, there are an awful lot of MLP's and I have traded four of them. Until the issue of buying out the GP is settled within the MLP community, it is bit opaque for my taste. I would want more than 10% in my porfolio. However, for trading purposes, same thing, I can trade them each quarter for a $3/$4 price increase.
So, I just don't care about the comparison since I don't hold any shares at all. I just trade them.
The calls and shares in both the MREits and MLP's perform very well. Today, I closed calls in AGNC for a 46% return and closed calls in EPD for a 15% return.
However, you should really challenge yourself a little to understand the MREIT business model before dissing it for the MLP's. I think the MLP's could be due for a pullback, and an expert on CNBC said that the MLP's will have yield issues next year. The MREIT's offer you some diversification.
If you don't like risk, the only ting left is a preferred ETF called PGX. The price doesn't move and you get 6% every month.