The market makers are accumulating all the units they can buy in order to sell them back later to you at a profit for them. That is how the market makers stay in business. The market makers also have the power to dramatically mark down the ask price so that they will flush out all the "weak hands" and can then start distribution of their shares at a new higher ask price. That is a decision they make.
These trading houses and high frequency trading systems also like to use any obvious event which logic tells them the stock should be moved big as a result. Then they jump on it full force to go with the direction it is supposed to go anyway. Eight trading days ago oil futures closed at 48 and ETP was at 46 just before the close, KMI at 28, ETE 22, WMB 40.7, and EPD nearly topped 29. The next day oil weakened, the word was that a huge number of oil tankers are out in the oceans just waiting for harbors where they can sell their oil. Computer algos. were put in place and the selling began. All oils were sold and shorted. XOM went from 87 down to 78 today, a loss of some $40B. In just 7.5 trading days the damage was done and the algos. reversed. Those computers raked in billions. That's how they pay for those mansions in the Hamptons on the beach. no kidding. We look at Yahoo finance to check on the short ratio on one particular day and assume those shorts stay there a long time. They do not. They move in and out rapidly. The computer algos. are set up to do it all for them. That way their actions do not show up in the ratios computed. They like to take many of the short positions off for the weekend and a sizeable number of their positions are for only say 1.5 days. This time the whole show only took 7.5 trading days to run its course and garner enough gain to allow them to clear the decks and go long. And have a nice weekend.
Ok, Bruce, I read again through the conference call. I saw no mention of Sasol $12B NG to gasoline conversion specifically, but there was some comment about conversion of pipelines from one product over to another product in order to meet customer needs. Also they said that they were using a new negotiating strategy for cases where customers were asking for adjustment of contracts to fit better the price of NG and crude. They are resisting this as a singular transaction w/customers, and instead are negotiating trade-offs. For example that the customer give them more volume on other pipelines in trade for lower rates on that customer's current contract.....resulting in a win-win for both parties. Lake Charles LNG build out was more specific (1) FERC permits are due now (2) then FID financing will be arranged (3) recognizing that their partner in this project, Shell-BG, is in the slow process of merging their operations, leading to (4) Expect the first Lake Charles LNG exports to come around late 2020, so 5 years away. And they had much discussion about how they would carry the growing debt incurred by this project over the 5 years till it starts gaining revenue. They expressed confidence that ETE/ETP can handle this building borrowing hangover especially in 2017-20. They talked a lot about building out their Rover project currently and coming on-line with much of it late this year and into early 2017. Kelcy talked often in the end about their push to diversify and that this will greatly stabilize the energy infrastructure in the future. I thought it was interesting also that he stressed that ETE would drop down future growth to all 3 of their future partnerships equally. So ETP will be getting additional new growth for sure.
Many questions here about why this extraordinary price action in ETP. This morning the MLPs in general reached BIG lows. The cry from Wall St. these days is that the low must be tested. So the computerized algos. programs put it in: sell and short down to 37.2, the bottom on the close 9/29/15. Then the algos. automatically at that level reverse their shorts and go big time long. We saw that today. Then the opposite algo. goes into action for automatic selling and shorting again at a chosen chart interpreted higher level. Algos. are also set to instantaneously react to news items/key words/earnings reports. That makes it about impossible to get ahead of the computer trading when news comes out or oil falls or rises. On the day of the flash crash several years ago when the computer algos. were crashing the Dow Jones, I happened to have my TV on and many of the big trading houses were reporting that they were shutting down their computerized/algo programs. Then things righted themselves. Hello, that proved the influence of the algos. So it looks like the overriding algo. on ETP successfully tested the 9/29 closing low this morning. They do not want to "kill the golden goose" by killing the Dow Jones or the midstream mlps. And BTW the computerized algos. do not care about the yield on these units. They only care about the pps. They do not exist to collect big yield/dividends. So 11.3%yield this morning means nothing to them. There is also btw the fact of Sector Rotation used by the institutions switching from one ETF to another, Mutual Funds, etc. Seems like this has been in play recently; ie. sell anything that might smell of oil.
ETP's executive officers made statements in the conference call about these dates issues. I will go back to my copy of the call and check on those dates for you. I only remember that I was impressed with all that will be coming on-line during 2016 and early 2017. Cheers.
Someone answered this same question last month and reported that box 20-v in his K-1 for 2014 was about $760 and he held 1500 units of ETP in his IRA. So that would make 2000 units about the limit. And it can vary year to year. Then the question becomes: does then the whole say $1001 in box 20-v become taxable and at what rate? or is only the $1 above the $1000 really the taxed part. If the latter is the case, then the issue of holding 2000 units is meaningless tax wise because your tax deduction would be so small. That is why I just think that this is only a meaningful tax issue for the very rich who pay at the ~40% tax rate on their income and hold tens of thousands of units in their IRA.
Yes, Like_flies, I saw that this morning as well on the Yahoo quote ETP: dist. still at 4.14 and yield 8.5%. And I thought Yahoo computers would automatically compute the yield correctly. Apparently, it is not so. I bought 90 more units at $40.80/unit. That is @ a 10.3% yield. Wish I had enough reserve money to buy that all day. I gave up on my Williams WMB last week and am preferring ETP as a less affected pipeline company.
Yes, epholder, I understand about the KMI board. I stopped going there too. You no doubt read my post earlier today about when I sold my KMI(which used to be in KMR in my IRA). At least Mr. Market gave me a lot of time before May came and I decided to follow the "sell in May rule." This is really useful for IRA's. I just also decided that I liked ETP's financials and story a whole lot better. I also own some EPD, WPZ, WMB, and a Reit, Digital Realty. I hope I hold onto my ETP long enough to get to the point where I won't care any longer about the price just like you. Then only the yield will matter. My wife and I feel this way about our shares of XOM which we first held 35 years ago. I pay no attention to its earnings reports, just the dividend. In August it was clear down to 68. NO big deal and now it is back up to 85. If we had never sold any XOM, our XOM would be worth $500k now. But we used some to pay off the mortgage on our first house. Then we used 160 shares to buy a 1993 Honda Accord which still runs just fine. Then 200 shares were used to help us build our retirement home. Now we only own the reinvested dividends in XOM, but that still has slowly built up again to the 200 share level. That comes to a 17% annual return on XOM through thick or thin. So I understand your view on the fluctuations in the price.
epholder, so never mind about KMI today. Where are the "professional analysts" today on the ETP results? Will they be saying: ETP did horrible because they did not meet our estimated numbers? Who made the mistakes? IMHO if you look deep inside what ETP has done, you will see that ETP has done incredibly well.
OK, I will not quibble with a couple of the adjectives. So delete "greatly" from "increase" revenues. Zacks was one which then and typically even now misunderstands the relationship between revenues and mlp Ebitda and dcf. And yes, I for one did not know in advance what effect the consolidation in KMI would have on its quarterly numbers. I am pretty sure there were thousands more just like me regarding KMI. BTW I sold my 1600 KMI shares in my IRA in May at $44. Then I waited in cash for ETP to fall way down and then started dollar cost averaging in to a new position in ETP. My cost per unit now stands at $44 for ETP and I have doubled my number of units(the ubiquitous "double down"). We will see now if the "professional analysts" misunderstand the New ETP (at present) and the New ETE in the future when Williams merges with them. The media and analyst headlines do not tell you the underlying truth in many cases.(I have no skin in the game for analysts, just ETP)
ETP has to give something over $300m of that DCF to ETE, mostly IDRs. But ETP has ample reserves from previous quarters to easily boost their coverage to over 1.0. This is typical for how it works for these mlps in times of commodity volatility and on-going company restructuring. They got a big tax bill on a reversal of IRS policy regarding tax treatment of a sale they "made." This was nearly a 20% hit to its net dcf for common units. Can ETP handle this $79m hit from the IRS? Easy and it is one time only. Normally there are 2 tax advantages to ETP: to avoid double taxation by eliminating the tax liability at the company level (the IRS didn't allow them to do it this time. A one time event) and then investors being able to defer their tax liability.
Many favorite stocks hit near-term highs on Tuesday and things looked great. Disney hit 116, ETP 46, WMB nearly 41, EPD 28.5, GE nearly 30. Then this morning the traders took big profits: Disney down 5 at one point, ETP down 1.5, WMB down $2 at midday, EPD off its high. Only the latest momentum stocks continued higher: Amazon and Netflix for example. The traders will buy back sooner or later. See my reply under another post(the view from Merrill Lynch) for what I see in ETP's earnings report.
Before I bought into ETP, I was a large unitholder in KMI through their consolidation. The analysts and investors completely misunderstood what was going to happen with the revenues, etc. Revenues were expected to greatly increase with the joint company, but we failed to understand the effect on the revenues was zero and then the oil and natural gas prices started going down and so did their revenues. From my perspective ETP has also since I bought it gone through huge changes in its structure. Tomorrow morning investors and some analysts might react the wrong way misunderstanding what has happened. I hope the CEO explains it in a way that most everybody can understand. The earnings report reveals the following: (1) some of ETP's contracts are non-fee based, and instead based upon a percentage of the revenues passing through the pipes. So yes, there is revenue loss that way, particularly in the midstream and liquids businesses, around a loss of revenue of $1B, but the EBITDA is still excellent in those businesses. Their investment in Sunoco as a sort of drop-down affiliate created a drop-off of $2.4B. The price of oil must be most of that loss of revenue. But again, the Ebitda from Sunoco even improved to nearly $300m. Must be because Sunoco is a subsidiary of ETP and so we collect their Ebitda effectively, with the revenues having no effect upon that. The majority of the loss of revenue is actually beneficial to ETP. It came from the sale of most of their retail business to be dropped down as a new subsidiary affiliate. That dropped ETP's revenue by $4.5B, but ETP still collects a sizable distribution from that subsidiary which drops down directly into ETP's EBitda. After all this, ETP will be a little bit more like the other energy/natural gas MLP's, but their revenues should be still close to $28B/year or better with distributions to common unit holders of just over $2B and interest expense of $1.35B. This leaves ETP with a healthy looking future.
Makes some of us wonder why we participate in buying shares/units in the public market place when so much of the money acts like "swine going willy-nilly over the cliff." Oh well, I will just be happy collecting my $4.14 distributions yearly. ETP is in much better shape than the other big natural gas pipeline companies. That distribution has Nothing to do with oil. Buy all you can get now at a yield of over 11%. Someone suggested a single digit price for ETP. Wow, a 50% yield. You could buy it and get 50% of what you paid given back to you the next year!!!!!
Will add that WMB is off 20% also since the merger announcement. Too many don't like it. Also all this should not affect ETP anyway since they are the MLP, and the GP, ETE is the one doing the buying and taking on the risk of the debt and dilution. Maybe though the options houses, sell-side Big Money players, and the Market Makers themselves have taken control of ETP through options expiration at 4pm on this Friday.
Evident today that oil is not the problem: oil is way up and other MLP's and GP's are positive. Oil is not Energy Transfer's problem anyway; they transport almost purely Natural Gas. They are trying now to sign up customers for a new oil pipeline, but that is way off in the future and ET is not dependent on it. Since the horrendous announcement was made about their attempt to acquire much more debt through merger with WMB, Energy Transfer has lost 20% of its value including another 1% today because probably like "brathe" says "Not everyone (is now) signed up for this particular ride."
The shares are certainly too thinly traded here in the USA. This results in the bid-ask spread being too wide. Like the above poster says, the offer to sell shares (the ask price) is pushed up all the time giving the illusion of upward buying pressure. This is a false illusion as is seen by the very low offer to buy (bid) price. So if you put in a market order you will get the much higher ask price and then it will have to move up quite a bit for the bid price to move up above your purchase price. These shares should only be bought with a limit order say at least 10%-15% below the current ask price. Then only sell with a limit order somewhat above the ask price.
thanks, anmlrescue, for an honest and insightful view on the future. As some investors have reminded us, the future counts more to them than past comparisons. Most of us will agree to that.