Inergy, L.P. Message Board

I know them both quite well - have been following them for years. But if you don't know much about them, you'd do well to research before investing.

LINE has got some bad press of late and that knocked the price down. Probably unjustified so potentially a buying opportunity. The bigger problem is that it may have become a victim of its own size in that it has had no price appreciation in several years and modest distribution growth. Thus total return has not been that great although the yield is safe for an E&P because they have the most hedges of any E&P MLP. There is a distribution increase coming up soon when the BRY acquisition closes and they will be switching from quarterly to monthly distributions which some people like. If you want to hold E&P MLPs, LINE is probably the standard.

EVEP was a high flyer last year on speculation of an asset sale which has not eventuated so the price has now dropped back to the typical MLP yield. People are disillusioned with management for setting expectations regarding the sale and not being able to find buyers. People who bought in the last year are shocked the price has dropped so much but really it has only just got back to normal MLP yields - it was the high prices last year which were unjustified not the current much lower price. I don'r care too much about the asset sale issue - a bigger problem is that they were far from covering the distribution last quarter so we better hope that improves.

EVEP is more gassy, LINE used to be too but has made a lot of oil acquisitions in recent years so is probably 50:50 these days. If you had to choose one, LINE is probably the safer. Both have a bit of baggage which is why their prices are well off their highs.

Not only is your home not an asset (unless you plan to sell it and become a renter), I would go further and say it is a liability. Your roof repair and insurance examples illustrate the point (not to mention property tax).

I agree that rates will be low for years.
However energy trusts like other yield investments are definitely interest rate sensitive.
If rates were to spike (which I don't expect), yields would need to spike across the board on trusts, MLPs, REITs, etc and that means the prices would drop sharply.

I don't care about prices.
My investment goals are all related to cash flow not price.
I rarely sell, so don't really care about the price.
I just want a good and rising cash flow.

Well I am not expecting any distribution cut. Agree with Wells Fargo that it was oversold and the upgrade was on basis of valuation.
My point was just that it is not safe to assume that they would never have to cut the distribution just because they have some hedges.

"I just don't want to be doing the rolling technique with 5-6% yielder, it's just not worth it for me because it requires big margin."

Note that if the underlying security falls below the strike price you will find the margin requirement increasing as the price of the underlying falls. Those highest yielders tend to be more risky and volatile, so you run a higher risk of your margin requirement increasing.

The very critical point regarding put selling is managing your margin. Trying to "stretch" your margin use is very risky.

If you are looking for one security that seems to consistently pay a pretty good put premium, I can suggest the royalty trust MSB. I seem to almost always get more than I expect when rolling forward MSB puts. I have been rolling forward for years now and my strike price ($25) is below the current market price due to iron ore prices falling plus being in the seasonally slow quarter of the year for MSB distributions. Since I now own units (didn't when I started selling puts on it), I would close my puts position if the price rises enough (I normally don't sell puts on the same securities that I won units in) but since the options are in the money it is expensive to close them. So I just keep rolling forward every quarter and get a very nice yield from doing so. If starting now, you'd probably use the $20 strike.

"$200 in two days"

I don't care because you will never accumulate wealth with that piddly trading.

The way to real wealth is exponential compounding.
I invest and re-invest in high yield securities with high total return. The re-investment results in the portfolio value and portfolio income increasing exponentially (and when I say exponentially I don't just mean fast, I mean in the literal sense of the word).
Apart from APL still being a fine investment, there is that little matter of zero cost basis. If I were to sell it an reinvest in something else, the fact that I have received all my investment back and have zero cost basis means that my combined Fed and State tax liability would probably be close to 50% of the sale proceeds.
So I would be left with something like half the current value to re-invest in something else. That means that to achieve the same level of portfolio income from a replacement investment, I would have to get double the yield. Which generally means significantly increasing risk. If I re-invest in something with a similar yield my portfolio income from those funds would be cut in half.
My investment goals are all related to cash flow and it would be senseless to sell an investment with a good and rising yield only to cut my income on those funds in half.
You consistently underestimate the importance of tax minimization (as opposed to avoidance) in this type of investing. When you can get exponential growth in portfolio value and income, every penny you avoid paying the government is one which will grow exponentially for you.
High yield, tax shielded, with rising distributions and high total return leading to a exponential compounding of both portfolio value and income.
That is why my portfolio pays hundreds of thousands of dollars per year without me doing anything with the number getting bigger every year and rising at a faster rate every year, while you are congratulating yourself on making $200 in 2 days.
A small timer is what you will r

It never fails. Everytime there has been a 10% jump, it shows up on some screens and the board gets invaded with people who just discovered it and have no idea about this company and making ridiculous statements like the above. How many times have we seen this in the last few years. After a few weeks they lose interest and move on.

Proven to be the worst survivor of the entire MLP sector, unable to pay a distribution for years now.
And it's inexpensive because it is an insignificant player. The number of barrels they produce per day is less than my 4 year old can count up to.

This companies survival has been questionable (although not imminent) for the last several years. Did you not notice how they were in a race against the banks trying to reduce their debt below ever decreasing adjustments in the borrowing base. The banks could have pulled the plug at any time but probably chose to let them survive so they had a chance of getting their money back.

There have been previous ones by the U.S. Dept of Defence as well as the German Bundeswehr which came to similar conclusions. Don't have the links handy since they were a year or two ago but you may be able to find on the internet.

If it gets hot in summer? Well that would be normal, wouldn't it?
So it would not change the situation versus the 5 year average.
Or do you mean what if we have a once in a century record busting heatwave?
Agreed, that would help prices.

That is the record date.
You have to buy before the ex-date which means 3 business days before the record date.

"Of course, when a field that contains 500 million barrels isn't profitable, it's worrisome," Arctic Securities analyst Trond Omdal told the Wall Street Journal, adding that he was in line with Wood Mackenzie's break even-estimate. "It's a warning call about the sector's cost development."

fp and others need to think about this before crowing about how oil resources are higher than ever. If the oil cannot be produced without ever higher prices then you either have high prices or you don't have the oil (which leads to high prices anyway). Oil discoveries that are not economic to produce at a price the economy can afford will stay in the ground.

The logic is simple.
It has grown much more expensive to find and produce oil. The price has to go up to compensate for that otherwise they won't produce it. Is that really so hard to understand?

And with the earth's population doubling every couple of decades there is an ever growing number of people who both want to use energy and who increasingly aspire to a western style middle class lifestyle. Thus demand continuously grows. Yet we live on a finite planet where the easy resources have been produced first leaving ever more difficult and expensive resources available to extract with that more expensive oil supplying the marginal barrel which sets the price.

Are these concepts really beyond your understanding?