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Inergy, L.P. Message Board

marklibera 411 posts  |  Last Activity: 2 hours 4 minutes ago Member since: Aug 14, 2007
  • Reply to

    the deal!

    by chettahey Sep 17, 2015 3:39 PM
    marklibera marklibera Sep 20, 2015 12:24 PM Flag

    Wrong. There have been plenty of takeunders. The previous prices of each stock are really meaningless because the Board has to deal with the here and now, and the future projected value. If they think the Company can get there by itself, they will reject the offer. Besides all the Board needs to approve the deal is a "fairness" opinion, not a "this is a more than fair opinion." And forget about an injunction. The shareholders have a right to reject the deal and no judge is going to not let them vote, unless the disclose in the proxy is deficient. Any damages for accepting a deficient offer would be monetary, and when monetary damages are available, you can't bring an injunction. So unless you are a takeover lawyer, you should not venture into opinion on takeover law.

  • marklibera by marklibera Sep 19, 2015 12:08 PM Flag

    We have discussed the strategy of selling some dividend paying stocks. Here's a real life example. I just sold my wife's Apple at $110. Bought at $95 and held for just over one year. So that's a $15 gain. I'll assuming the tax hit is 20% bringing the net gain to $12, but in reality, I have a few losses this year that will more than offset this gain. I would re-enter the stock lower, which I believe there's a good chance it will be. They pay an annual divy about $2, so I might miss 1 -2 quarter's worth, or about $1, or 85 cents after tax. So I think the analysis is that I gave up $3 of my gain for taxes and may miss 85 cents of divies, meaning the selling strategy is profitable if I am able to buy the stock at $3.85 lower than my sale price of $110 or around $106. We'll see if it works out.

  • First post got eaten. Many saw that NYMT just cut their divy. Some time ago, I took some heat on their board for pointing out the risk in NYMT. Some investors were misreading the REIT dividend rules and were expecting a special divy because they were looking at the GAAP earnings. I also mentioned that you had to be careful with mREITs that invest in highly leveraged mezzanine loans, preferred equity securities (not the same as the preferreds that many of us buy in the market) and other products.
    Many of the mREITs have been cutting their divies and seeing their stock prices decline over time. MTGE just cut again. Many thought that the turn in mREITs would come when the Fed hiked rates and they speculated, that since no rate hike was coming, that mREITS' divies would be safe. They weren't because as I tried to point out, their spreads were shrinking and they were already using high amounts of leverage. WMC seemed to be the outlier, but I expect they will be cutting too and their stock is down.
    This ties to the discussion about buying and holding high yield stocks. I don't think there's an answer to the question until we have gone through both a bull and bear cycle in these types of stocks. The answer may be different depending on which type of high yield stocks one is invested. Preferred stocks tend not to be that volatile. I'm a big holder of muni bond closed-endfunds, and I have mostly maintained my positions. The arguments proposed against trading out are: 1) taxes, 2) timing, 3) opportunity cost. On taxes, this applies if the position is in a taxable account, but the long-term rates are relatively low. On timing, this is the best argument because it is very difficult to call the tops and to know when to get back in. On opportunity cost, the argument is it's better to keep getting divies, even if they are reduced then to be parked in cash earning 0. Empirically, I would like to see real-life examples, but suspect no one has run the experiment.

  • Reply to

    BS sell off on Fed comments

    by chegerar Sep 18, 2015 2:17 PM
    marklibera marklibera Sep 19, 2015 10:59 AM Flag

    If you don't get it, then you haven't been looking at the right part of the equation. The punch bowl is not the level of interest rates. The punch bowl is QE because QE goes directly into the big banks pockets where they can bet it in the market and push up asset prices using leverage. Stop the QE and the "flow" stops. If there's no flow, the money stops going into financial assets. At these low spread levels, you can't make money unless you use even higher levels of leverage.
    So things start to reverse. Then you add in China and their moves and essentially you have reverse QE.

  • marklibera marklibera Sep 19, 2015 10:38 AM Flag

    Well uniformed posters like you may equate revenue with earnings and think everything is rosy and that there is no problem with them meeting their debt covenants. Yea, there I go again mentioning their debt covenants because so few people remember that that was what caused a distribution cut in March.

  • Reply to

    Hey gracie what happened to your outlook?

    by lenloc Sep 17, 2015 7:40 PM
    marklibera marklibera Sep 19, 2015 10:32 AM Flag

    Len, I suggest there is no correct answer by viewing our problems exclusively through a blue/red prism. As someone once said, all of that wasteful spending is somebody's income and while I share some of your points from a liberty/freedom perspective, others would argue the first job of the govt is to defend the country. There can be plenty of disagreement as to how much to spend (and in what areas). You have stumbled on to the main issue -- we can't spend our way to economic growth and no country has ever done that. Not to be outdone, the left has said that we can't "tax cut" our way to growth. And so there we have it, what is the appropriate amount of spending (and in what areas) and the appropriate amount of taxation (and on who).
    Back to the Fed, it shouldn't be their job to save the economy. Their job should be to defend the value of the currency. Great interview on Charlie Rose in which one guest questioned what exactly is the Fed watching --first they said the unemployment rate, then its inflation (which measure?), then its asset prices (which ones?) then its wages, then its world events, then its just time. How can you have a monetary policy that keeps switching what it watches? They say they are trying to avoid a policy error, but they may very well be committing one by watching too many variables.

  • Reply to

    Gloom and Doom - Don't Believe it!

    by todadamson Sep 18, 2015 9:33 AM
    marklibera marklibera Sep 18, 2015 1:22 PM Flag

    There should be a message board rule that whoever quotes the Realtors loses the argument. Really, when have you ever heard the Realtors say "it's a bad time to buy real estate." At the top of the market in 2007, they were saying people should keep buying because real estate always goes up, and pointed to the gains to support their view. It's like going to a barber and asking if you need a trim.

  • Reply to

    Hey gracie what happened to your outlook?

    by lenloc Sep 17, 2015 7:40 PM
    marklibera marklibera Sep 18, 2015 1:17 PM Flag

    len, I think you are missing Gracie's point and mixing up many of the apples and oranges. I agree the economy is still weak. I disagree about your point that you can't have a bubble without inflation in everything. We currently have a bubble in govt bonds, stocks, and high end homes in NYC, SF. Even Miami has come back. There are bubbles in subprime auto loans and student debt. Gracie's point is that the Fed set out to stop the so-called death spiral and save the banks (BTW, they only saved the big ones and some 400 community banks failed). But it took them 4 rounds of QE and ZIRP for 7 years and look where we still are. This means their program didn't work, or to be more clear, their program was to save the big banks and raise asset prices, but if it was (as they said) a program to save the economy, not so much. So the Fed and the Keynesians would reply that we need to continue it for longer. But more debt doesn't lead to more growth for everyone, and it even takes more debt and more QE to produce smaller amounts of gains.
    BTW, the same policies did not work in Japan either and they continued them far longer than the Fed did.

  • marklibera marklibera Sep 18, 2015 1:05 PM Flag

    Please clarify your post. The title says "hedged income" but the body says "revenue." Which is it?

  • marklibera marklibera Sep 18, 2015 9:56 AM Flag

    Gambler, the market could also have given BDC holders and other high yielders a chance to get out. Remember, many of the BDCs are down big and tax loss season is coming. Also, if the economy weakens, investors may get quesy about their holdings. I still own HTGC, but am not liking its recent chart action as it goes below its 50dma.

  • marklibera marklibera Sep 18, 2015 9:52 AM Flag

    Sarge, I agree with Gamber that it is way too early to revisit oil or MLPs. But I don't understand why he is looking at RIGP, no matter what it's fundamentals are. If it is related to oil, it will go down with oil. Similarly, high yielders are a trap. You see what happened with Bob's AI. WMC will probably cut too. We still have Bloody October and tax loss season.

  • marklibera marklibera Sep 17, 2015 5:49 PM Flag

    I've never said that I can model their numbers. There are those on these boards who can and have. But since you asked, here's my try:
    As of 6/30/15, the Total Debt is 1,491mm
    The current covenant is 5.25 times EBITDA and they said in the Q that they are at 4.5, so that would imply that the EBITDA, which is a running 4 q total, is $331mm. To stay in compliance, they would need to maintain EBITDA of 1491/5.25 = 284
    In their earnings reports, they disclose Adjusted EBITDA, and the last 4 quarters starting with 2Q 2015 were 64.7, 68.9, 87.1 and 107.4 which adds to 328mm which for me is close enough to the 331mm above.
    The covenant steps down to 5 to 1 starting after 3/16, which at current debt total means the EBITDA has to be $298mm (assuming no debt pay down). It goes to 4.5 starting after 3/17.

    As I said above, the EBITDA is a running 4 q total and the last number in the current calculation is 107.4 from 3q 2014. That number will drop out of the next calculation. So the question is how far can it drop for them to stay in compliance? 284 - (64.7 + 68.9 + 87.1) = 63.3.
    But their EBITDA has been dropping (except for Q1 comparisons) yoy. The Q2 change was from 79.2 to 64.7 or 18%. If you assume an 18% drop for Q3, that brings you from 107.4 to 88, and the 4 q total goes to 308 which is in compliance. But if that trend continues, the running total goes to 285.6 just as the covenant drops to 5 to 1 requiring $298mm in EBITDA.
    So my wilda_s prediction is for them to run into trouble with their covenant next March, which is coincidentally when they ran into trouble this year and had to cut the distribution 50%.

    I am not an analyst or an accountant, but I can't understand how longs can have such faith in a company that didn't warn or talk about the risk that their covenants presented right before they cut the distribution 50% last March. Again the same people who suspended the ATLS distribution after making projections that were not met. There's a pattern.

  • marklibera marklibera Sep 17, 2015 4:41 PM Flag

    The big dilemma was whether to quote Ralph Kramdon, ("one of these days Alice, rates are going to go bam zoom to the moon") or Gomer Pyle ("surprise, surprise, surprise, Sgt. Carter, the Fed did not raise rates again.").
    Now that the rate watch is over at least until December, who knows how the market will react. They say the first move is the false move. Maybe they might think this means the Fed thinks the economy is weakening. The tell could be Apple -- down into the close after having rallied right up to the 50 dma. You can't make this technical stuff up. .

  • marklibera marklibera Sep 17, 2015 2:56 PM Flag

    I didn't realize this was the Yahee Permabulls Only ARP message board. You guys are like those chipmunks, Chip and Dale, from the old Disney cartoon. "Oh, I think ARP has good hedges, but I think it''s going to go to $8 and that Cohen is a wonderful CEO. This is a wonderful investment. But you are a wonderful investor."

  • marklibera marklibera Sep 17, 2015 1:22 PM Flag

    What doom and gloom? I'm just responding to a post that says that ARP is going to $8 because Citi wrote a piece that said there won't be enough gas starting next year. If ARP has such great hedges, then explain why they cut the distribution 50% in March? Why is it that everytime someone mentions an issue, such as the size of ARP's debt and its debt covenants, permabulls just want to stick their head in the sand and pretend that there is no issue there?

    You say ARP did very well in Q1 -- but that's when they cut the distribution 50% and the stock was $9. I wonder what happens when they don't perform so well.

    Hey, maybe they are able to get their banks to give them more time and extend the recently raised debt ratios and maybe oil and gas prices go back up. Good for you if that happens, but don't deny they have an issue with their debt.

  • Reply to

    Bought some RIGP today

    by rbgambler99 Sep 16, 2015 12:01 PM
    marklibera marklibera Sep 17, 2015 1:06 PM Flag

    Gambler, on RIGP, it looks like it has rallied from recent lows but is bumping right up against the 50 dma. Why buy it now when the risk of oil weakening is great?

  • marklibera marklibera Sep 17, 2015 10:05 AM Flag

    Did you actually read the article? First, there were a lot of "ifs" and "mays" in the article. Second, the article was just a report of what Citigroup was saying. Now, do you think maybe Citigroup had some motive for pumping out this piece? No, not them because they have never been accused of trying to manipulate any markets (ok, except for the Libor market, the mortgage market, the silver market, CDOs, muni bonds, auction rate preferreds, did I leave any out?). Third, the article said by next year a shortage may develop. By that time, ARP's debt covenants reset. Fourth, the article equates the number of rigs with the decline in production, but this is where there needs to be a definition of the type of rig. Others know more about this. Finally, if all this is known, and it has been written and talked about constantly since nat gas started its decline a few years back, why aren't the futures curves reacting to this imminent shortage?

  • Reply to

    OT: WMB up $2

    by marklibera Sep 16, 2015 3:48 PM
    marklibera marklibera Sep 17, 2015 9:48 AM Flag

    If you were going to gamble on a takeover, I would use options instead -- maybe a spread since you know the price is not going to be near where the original offer was. The premium is probably already built into the options. You really can't trust these "leaks", but maybe I'm just gun-shy from having been burnt trying to play acquisitions previously (I let a huge profit in TRGP evaporate waiting for them to negotiate a deal with ETE). Interestingly, on a separate note, EPD increased the size of their credit line, so maybe they are getting ready to make an acquisition, but probably not WMB. Maybe GEL. Hopefully MMP as I still own some of that.

  • Reply to

    OT: WMB up $2

    by marklibera Sep 16, 2015 3:48 PM
    marklibera marklibera Sep 17, 2015 9:24 AM Flag

    If the deal goes through, ETE will become the gp of WPZ and most likely will merge it into ETP, which should have a better tax result than if WMB folded WPZ into it.

  • Reply to

    OT: WMB up $2

    by marklibera Sep 16, 2015 3:48 PM
    marklibera marklibera Sep 16, 2015 5:16 PM Flag

    I think oil was up on the weekly report of greater than predicted draws on supply. That is the difficulty following something that is in a downward trend -- there are always rallies, but the rallies are usually only technical in nature, sometimes spurned by short covering.
    Today must have been a "risk on" day driven by the currency pairs, usually the USD-JPY carry trade.
    IMO, the Fed is just a sideshow. A rally based on no hike could set up a good exit point.