| MARKET ROUNDUP | |
| Dow | +16.05 to 16,569.98 |
| S&P 500 | +5.33 to 1,936.92 |
| Nasdaq | +30.43 to 4,401.33 |
| 10-YR Yield | +0.005 to 2.42% |
| Gold | -$1.20 to $1,309.80 |
| Crude Oil | +$0.32 to $97.97 |
Mike Larson, Money and Markets columnist and editor of the Safe Money Report, is out today. Mark Najarian, the managing editor of Money and Markets, is filling in …
The oil and gas renaissance has one of its first big winners!
When Money and Markets columnist Mike Larson wrote about master limited partnerships (MLPs) on July 23, it sent many readers scrambling for investor encyclopedias to learn as much as they could about the sector.
Those who did it quickly and took Mike’s advice and bought into the sector could be celebrating a major windfall today, with Kinder Morgan Inc.’s (KMI) move to consolidate its various partnerships into a single company, in a $44 billion cash-and-stock merger. It marks the largest sector deal since Exxon-Mobil in 1999 and reflects the growing excitement in the shale-drilling industry.
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“The deal highlights the new attention on MLPs and the growing excitement on the oil and gas sector.” |
Shares of Kinder Morgan Inc. (KMI) soared today after the announcement. The shares of the constituent MLPs that were under the Kinder Morgan umbrella recorded even bigger gains. The deal is complicated, but it highlights the new attention on MLPs and the growing excitement on the oil and gas sector. It will make Kinder Morgan the largest pipeline company in North America. As part of the deal, the company will consolidate the MLP entities within the parent company — Kinder Morgan Energy Partners LP (KMP), Kinder Morgan Management LLC (KMR) and El Paso Pipeline Partners LP (EPB).
Houston billionaire Richard Kinder, who has a 24 percent stake in the parent company, told CNBC that the move will help Kinder Morgan lower cost of capital, make more acquisitions and invest in more projects.
Other tax-efficient MLPs mentioned by Mike in his column were JPMorgan Alerian MLP ETN (AMJ), which was up 3.7 percent this morning; and ALPS Alerian MLP ETF (AMLP), which gained 3.6 percent. Other MLPs were picking up similar gains.
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| Houston billionaire Richard Kinder says Kinder Morgan will combine the energy MLPs under his firm’s umbrella in a $44 billion deal. |
Here’s what Mike wrote about MLPs: “If you’re looking for income, one of my favorite options is energy master limited partnerships. MLPs are companies that make money from distributing, storing and transporting oil, gas and gas liquids. … Bottom line: If you haven’t done so already, ditch your junk [bonds]! Then go shopping for some MLPs!”
MLPs don’t pay federal income tax and trade in “units” as opposed to shares. Kinder formed his company initially with Enron spinoffs in the 1990s and helped establish the MLP structure. Here’s more on the subject from Bloomberg.
Not every MLP investment will turn out so successful, but whenever excitement hits a specific area of the investment world, it’s good to be ahead of the game.
I’m interested to know if you have already been investing in MLPs. What has been your track record? Are you now looking into this sector given the low level of yields elsewhere? Join the conversation by clicking here.
| OUR READERS SPEAK |
My Money and Markets column Friday centered on two issues — how brick-and-mortar retailers can compete with online sellers, and the increased U.S. military action in Iraq. Both issues brought a lot of response from our readers with a variety of viewpoints.
First, in regard to retailing, many people said customer service was an all-important factor in deciding where and how they shopped.
Reader Jenks pointed out that seeing (and feeling) is believing: “Not being able to see and feel a product I’m buying is a big negative for me. Returning unacceptable merchandise by mail is another.” Reader Arden had similar remarks.
Thanks for your comment. I have to agree — for many products, if I can’t examine it in person, I am reluctant to buy. And, more importantly, it seems easier to go back to a store and return something than to have to repackage it and send it off for a refund. — Mark.
Reader Mary says she shops through different venues depending on the product. “I do shop Amazon, primarily for electronics and Kindle books. I was sorry to see how poorly their profit picture looks. It is hard to even imagine since the web site is huge although many sellers there are probably relatively independent vendors. For clothing and shoes, I will only buy in person after I check how it fits.”
Same with me — I buy books online, but I will only buy clothing or shoes in person. I don’t understand how people can buy clothing or shoes without trying them on. Should I try buying them online? Have you readers had success with that? — Mark
Reader H. Craig points directly at customer service: “Local retailers here in Glendale, CA, that are doing relatively well each offer quality customer service. A willingness to assist, as well as sufficient staffing to permit individual service and attention is how they can compete with online retail giants … Offering limited service and regular (high) prices for walk-in retail customers is how companies lose business. Eventually, they cut staff and hours, then employee pay, and finally, they are down to “lean and mean.”
Meanwhile, the renewed U.S. military action in Iraq brought many emotional and informative responses.
Reader Tom could see it from a personal angle. “If ISIS strikes US interests somewhere in retaliation for our air strikes then we may see boots on the ground. I have a son and son-in-law that served in Iraq and both expected to see the government collapse. Â … ”
Reader Kay sees it as a U.S. obligation to protect some of the religious minorities, given the recent historic context: “We created the problem there by attacking under false pretenses and destroying the country and its leadership. We must now continue to protect those we left defenseless and vulnerable.”
Thanks. It is a tough question. I wonder how long we should have this obligation and how far should we go. What signs would we need to see before we could finally say we’ve done our duty and we can finally leave it to a local (stable) government?
| OTHER DEVELOPMENTS OF THE DAY |
One dramatic development is on the minds of a lot of people right now, so we’ll stick to that story today.
 Good news for drivers: The Lundberg Survey reports that gas prices have fallen by an average of 6 cents a gallon during the past two weeks. The national average is $3.52 for a gallon of regular unleaded.
Other surveys provide even better news for consumers. Gasbuddy.com shows the national average at $3.47 per gallon, while AAA survey pegged the national average at $3.48. According to Reuters, the San Francisco Bay area had the highest price at $3.95 a gallon for regular; the lowest price was in Jackson, Miss., at $3.19 a gallon. …
Does the price of gasoline determine your driving plans for the summer? Add your comments here.
Are you in Colorado or Washington? Had any experience or seen anything interesting related to the marijuana business? Add your comments here.
Remember, you can comment on these or any other items by clicking here.
Best wishes,
Mark Najarian
P.S. MannKind Corp. (MNKD), one of the holdings in the Top Stocks Under $10 portfolio, jumped today after the biopharmaceuticals company said it signed a licensing agreement worth as much as $925 million for its inhaled insulin with French drug maker Sanofi. To learn how you can receive Mandeep’s next recommendation, click here.
(Mike Larson is on assignment. His regular afternoon column will return Tuesday.)
{ 29 comments }
This cheap money or global currency war is leading to corporate mergers. Most will fail. The wars are over oil and other commodities. The suffering is sad.
I have held KMI in IRA and several other MLPs in a taxable acct for some time. They have provided a nice income stream, and some, including my BLP (Buckeye) , MMP (Magellan) and GMLP (Golar) have provided some nice capital gains, despite some recent pull backs.I let my acct grapple with the tax reporting, but he seems to cope OK. For some it may be easier to use some of the etf’s One risk is of course a change in the tax code but don’t see it happening any time soon.
A nice suprise this morning with the Kinders. Made my day
I have warrants in KMI ..will they still be honored until expiration -May 2017 ?
I was in KMP and got in at $36.00 and some more at $51.00. I reinvested the dividends and came out like a champ today. I will miss the dividends and the tax incentive the KMP had going since I bought it back in 2005. I do others but not as good as KMP
I didn’t have Kinder Morgan, but have 5 other MLP’s in my portfolio including El Paso Pipeline. They all have done well, and have YLD’s of 4.33% to 12.29%.That is a pretty good income stream.
Also have some REIT’s with YLD’S of 4.22% to 8.33%. All of these are what I feel to be good investments.
Don’t forget quality preferred stocks yielding around 8%/year. These yields will be competitive for years, even after the FED actually begins raising its interest rates in the next couple of years ( Who knows when?). Some may be callable.
I had investments in MLP’s several years ago, but It complicated my income taxes and I
sold them. They may have simplified it by now.
BUY, HOLD, AND COLLECT
I have been in Kayne Anderson Total Return Fund (Closed End Fund) for 10 years. It consists of a variety of MLP’s, including Kinder Morgan, Williams, and El Paso. It yields 6% and has doubled in value over that time as well, plus the income. These are terrific investments to “keep and collect” ( dividends) vs. buy and hold or “day-traders”.
The post 2008 idea you have to keep trading one stock for another or get involved in futures and options to make money in today’s markets is simply not true. This is one perfect example. There are many others, as well. However, it is seldom quite as rewarding to buy-in after the crowd has already arrived. You have to get there first to enjoy the highest total return ( by not overpaying!!). Domestic energy in particular has been in the news for a few years with the Balkan Shale Boom in North Dakota.
I have held KMP for several years and like the good dividend; but the K1 tax form is not easy to figure out and I have considered selling it. I wonder if this buy-out will change the tax situation so that we do not have to send in the K1??? KMI pain the dividend in shares.
I bought Kinder Morgan Energy Partners LP (KMP) at about $80 because I heard the U.S. needs more pipelines to get the oil to where it needs to be. I hear all the worries about the U.S. debt. I wonder if this oil boom can ever pull us out of debt? I think Mike should write an article about it if it could.
if you need a tax-accountent for LMPs ,as they all say, then why buy them? turbo tax doesn’t have a category for them. where can i learn, simply, how to fill out thje tax-forms for LMPs?
I am investing with a Roth IRA. I understand there is a limit of $1,000 dollars per year the IRS has placed on MLP profits. Is this a valid reason to not invest in MLP’s.
I have invested in MLP’s for more than 20 years. My first endeavor was with Canadian Lakehead Pipeline Partners, now merged. I moved on to Enerplus Resource Partners and Penn West. The beat goes on. I currently own five MLP’s, all in the oil industry. I have made unbelievable profits over the years, and intend to continue making judicious investments in them. Not all MLP’s are worthwhile, but a bit of research will reveal those that have investment merit.
Just came back from Colorado. Not every City agrees with the sale of marijuana. For example the City of Golden is prohibiting shops or commercial cultivation of MJ within its City limits.
Just travelled Colorado, Idaho, Wyoming, Nevada and California and the lowest price we experienced was in Colorado, 3.459, highest 3.789 in Nevada. Wondering what States contribute to such a low national average?
I have several mlp’s in my taxable accounts and they have done well. In my IRA’s for some reason I am advised not to hold them but there are some that are recommended for the IRA’s
“Oh look, they’re legalising MJ and the sky hasn’t fallen in…”
One of the more brainless remarks I read from cocky activists. They tried all that in Holland. The councils in the south of the country begged the national government to reverse the legislation after emboldened drug gangs threatened local mayors with machine guns. We’re not winning the war on drugs but never meant to. All that is required is to keep it in check to prevent the drug syndicates from getting too much influence.
I have KMR for last 4 Yrs and they have done well.
Gas prices all over Texas are $3.19 a gallon. After being in the $3.56 range for weeks they all of a sudden..for no reason tumbled down. I bet ‘they’ raise them up in time for Labor Day weekend just like they did for Memorial Day and most of the summer. ‘They’ never miss an opportunity to fleece America.
Gas prices all over Texas are $3.19 a gallon. After being in the $3.56 range for weeks they all of a sudden..for no reason tumbled down. I bet ‘they’ raise them up in time for Labor Day weekend just like they did for Memorial Day and most of the summer. ‘They’ never miss an opportunity to fleece America.
Not a fan of K-1 forms. Sold my only MLP in March. Bought KMI in June, quite happy now…
Have avoided MLPs because most of the distribution is return of capital. Am I wrong on this?
Coincidentally, “Barron’s” ran “MLP Roundtable” (Special Section Inside, August 11, 2014). Among other MLPs, “The New Frontier for MLPs” included three of “Safe Money’s Top 10 MLPs” Targa Resources Partners LP (NGLS), Magellan Midstream Partners LP (MMP) and Enterprise Products Partners LP (EPD). Three of the 10 that have earned “A = Excellent” Weiss Ratings, Inc. as reported in “Safe Money Report” (Issue 484, August 2014).
You can’t go down the 16th Street Mall in Denver without smelling weed. While the government is bring in money from taxes on pot, I wonder how much business we are losing because a lot of weirdo’s are hanging out more than normal in the city just shouting out obscenities to no one in particular.
I believe MLPs are great, but I avoid them like the plague because of the income tax reporting difficulties. First, you receive the required information months after the income tax deadline and then have to go thru unbelievable state specific calculations to file an amended return. . Even IRA accounts are not immune from this.
I believe MLPs are great, but I avoid them like the plague because of the income tax reporting difficulties. First, you receive the required information months after the income tax deadline and then have to go thru unbelievable state specific calculations to file an amended return. . Even IRA accounts are not immune from this.
In late 2011, I opened my first brokerage account. As I had a very small budget, when I looked at how little cash I had in my acount, and I didn’t want to add to it, I bought 20 of OKS at $ 80 a share. I had seen an announcement that OKS planned a stock split, and I had bought only 20 units.
Sure enough, a few weeks later, I suddenly had in my account, 40 units@ $4o each. I don’t think it is the best of breed, but it has done well enough. Kinder Morgan was more expensive at the time
I live in Colorado. I did not vote for either medical or recreational marijuana as I didn’t agree with the studies and think it is a very dangerous drug that should not be available to the general public. I have since done research and discovered that THC is what makes you high and BCD is what heals cancer patients, for example. I now agree with the medical end of things. The recreational end is creating social problems here and people have died. Having said that, I am looking for ways to make money from this very lucrative business and from an investing standpoint, it makes sense. I’m wrestling with my morals at this point. I also think it’s only a matter of time before it’s legal nation wide as the government will not be able to turn a blind eye to the tax revenue. It’s impossible for me to just throw money at it as there are a lot of people doing questionable practices and a boots on the ground approach is the only thing that will work for me. Definitely a tough spot and right now, not sure what will happen other than I’m very excited about the medical end of things.
P.S. It is not legal to smoke marijuana in public and I HATE the smell of it, which is everywhere! Like a skunk, but worse! Edibles, made from oil, is the solution to that problem. I don’t know the price difference and I’ve heard they are very potent. I’ve also heard that the THC levels are way more potent than they were in like the 70’s in the smoking end of things anyway. I don’t think there was edibles back in the day but I was 5 years old back then and have not had very much exposure to marijuana in my entire life. All new territory for me. I also do not like telling anyone when I travel out of state where I’m from as the jokes come fast and furious. Although, it is interesting hearing from all kinds of people what their thoughts are on the whole idea.