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Caterpillar Inc. Message Board

minireef05 4 posts  |  Last Activity: Aug 15, 2014 10:10 AM Member since: Aug 16, 2006
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  • Reply to

    How does this help KMI holders?

    by sleepym Aug 15, 2014 10:01 AM
    minireef05 minireef05 Aug 15, 2014 10:10 AM Flag

    That model begins to cannibalize itself over time as the base value of the entire organization reaches a compounded size that no longer benefits from small projects and acquisitions. When you have $20 billion in assets, a $2 billion project makes a 10% impact. When you have $70 billion, you need a $7 billion project to meet the same impact and keep shareholders happy with the continued strength of internal metrics. However, the entire model of the MLP structure prohibits these companies from retaining enough profits to self-fund these increasingly larger projects, forcing them to rely increasingly on creditors. As such, the cash that is generated from these new projects increasingly goes to servicing the growing debt loads. There is only so much left over after the IDR's. At that point, you have reached critical mass in an opposite direction-- the more projects you build, the worse off you are because of the debt load you are carrying and growing.

    Bringing everything under the same roof does not eliminate their debt positions, but it does reverse their trajectory, whereby cash is now kept internally at one point (and debt is kept at one point) maximizing the efficiency with which they can service that debt and use "newly found" retained earnings to self-finance without one arm loaning money to another.

    Previously you had an investment that was only worth something because of the dividends it received from an entity that was running out of room to expand and thus growth those payments. You now have an entity that can pay dividends and grow itself in a sustainable manner. You get yield and capital appreciation.

  • minireef05 minireef05 Aug 13, 2014 10:22 AM Flag

    Yeah..... or it could just be an enormous gap up that needs closing while profit-takers jump out to plow their cash into other mlps, especially for the shares held by the mlp etf's that can no longer own kmp..... or what you said...

  • Reply to

    What does the Market Expect?

    by slotcar58 Jul 28, 2014 9:39 AM
    minireef05 minireef05 Jul 28, 2014 10:02 AM Flag

    Jump for joy boys-- that buyback will actually have some punch with shares down $10 since that announcement. Look for a test of the 200 averages-- roughly $142. Not much lower. Just pray that management is trying to execute all $1 billion this week!

  • minireef05 minireef05 Jul 25, 2014 4:31 PM Flag

    This has to be the dumbest thing I have read in a long time. You want to buy something, but you don't want the chance to spend less money on it? If you want to BA you should hope it goes as low as it possibly can so you can get more exposure for the same dollar amount. It's not just emotion running the show on Wall Street. Empty heads continue to prevail.

CAT
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