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Old 12-08-2015, 07:37 PM   #41
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This is really more of a common stock purchase with a larger than average dividend for 3 years, which puts a floor on downside risk. I feel the value is quite good at the 33 I paid for the preferred, it really is a common play with low risk not an income play. What has happened is that KMI is now just back to being a regular old common stock yielding 3.3%, a value between 10-20 depending on what happens in the next 3 years, paying out about half of their earnings, something corporations due but MLP's cannot. Again KMI is not was not and in present corporate structure will never be an MLP. Distributable cash flow as I stated in my first post is a worthless statistic, I could care less if Richard Kinder and all the analysts on Wall Street like it, that statistic is the worst valuation metric I have ever seen proposed and right now as dividends are cut this will end the debate on this man made monstrosity.



But this indicates they will most likely be paying off the debt as it comes due instead of rolling it, a very favorable but necessary event due to the cost of capital skyrocketing for them. With the amount coming out in the next few years unless their business grows exponentially they will pay down the debt and have more room to do an acquisition if that fits their outlook.

We have been in agreement on this outfit for several weeks now. At some point, one mans loss can become another persons gain, and a successful investment. It probably wasn't really ever in my wheelhouse to begin with. It is more a traditional type of investment now which isn't what I do with comfort. I am only in things for income, and ultimately it is more a play on the common like you stated. So it probably wouldn't matter to you, but I would be ticked off if they gave me common shares instead of the cash on KMI-A.


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Old 12-09-2015, 09:09 AM   #42
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After the dividend cut, Moodys has upgraded the credit rating to stable, the common stock after dropping to 14.50 in after hours is up to 16.84 and KMI/PA is up to 40.75 a 23.5% increase from my buy point earlier this week and it appears everyone is jumping on the high dividend value of this common substitute, as a common substitute with stock trading between 15 and 17.50 KMI/PA should trade between 41 and 45 and then you earn dividend of 12% on top of that. Looks like the opportunity to avoid any losses with purchase in low 30's on preferred is now gone.
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Old 12-09-2015, 01:39 PM   #43
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After the dividend cut, Moodys has upgraded the credit rating to stable, the common stock after dropping to 14.50 in after hours is up to 16.84 and KMI/PA is up to 40.75 a 23.5% increase from my buy point earlier this week and it appears everyone is jumping on the high dividend value of this common substitute, as a common substitute with stock trading between 15 and 17.50 KMI/PA should trade between 41 and 45 and then you earn dividend of 12% on top of that. Looks like the opportunity to avoid any losses with purchase in low 30's on preferred is now gone.

Good call Runningman...If it was in my Roth and I had bought, I would be tempted to cash in the one week profit and pat myself on the back.


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Old 12-09-2015, 05:58 PM   #44
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Good call Runningman...If it was in my Roth and I had bought, I would be tempted to cash in the one week profit and pat myself on the back.


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I wouldn't be tempted, I would have already done so about 30 seconds after the market opened and I had that one day gain.

Pop and drop back is all this market does now, especially oil and gas.
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Old 12-09-2015, 07:42 PM   #45
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I wouldn't be tempted, I would have already done so about 30 seconds after the market opened and I had that one day gain.

Pop and drop back is all this market does now, especially oil and gas.

I certainly enjoy my pension so I shouldn't complain... But I was a dipsh!t and didn't fully fund my roth over the years so I have limited space in that area. So most of my money is in taxable and I have had a few quick poppers this year, but giving back 31% right off the top has forced me to keep them.


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Old 12-09-2015, 11:48 PM   #46
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Wonderful move made there, I immediately came to this thread after seeing the news about the dividend cut you had predicted.
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Old 12-10-2015, 06:38 AM   #47
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Short term trades on KMI this week have been profitable.

Two round trips resulting in > 10 percent two day gain in the position.

At 50 cents and shares @ 16 it's a 3% yield- not sure I would hold longer term, but one obvious upside thesis being a modest oil recovery could increase the share price significantly even if dividend remains unchanged at the new lower level.

Probably should put this on LOLs thread
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Old 12-10-2015, 09:24 AM   #48
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Yes, kudos to RM for catching this one in real time.
Running_man: the KMI soothsayer
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Old 12-10-2015, 11:30 AM   #49
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Thanks Mully, Sunset and hesperus. It helped me that I was a previous owner of KMI and knew what they were trying to do. I try to only post on stocks when I feel strongly that there is a something big that can occur, how I positioned this is how I track most of my stocks in trying to have a value that I think something is worth. I actually was really impressed by Mulligan how he wanted to buy KMI as he likes the yield but did what is a very hard thing to do, stopped himself because he really didn't agree with either position. You can save a lot of money by looking at what he was thinking throughout the thread.
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Old 12-10-2015, 11:48 AM   #50
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Thanks Mully, Sunset and hesperus. It helped me that I was a previous owner of KMI and knew what they were trying to do. I try to only post on stocks when I feel strongly that there is a something big that can occur, how I positioned this is how I track most of my stocks in trying to have a value that I think something is worth. I actually was really impressed by Mulligan how he wanted to buy KMI as he likes the yield but did what is a very hard thing to do, stopped himself because he really didn't agree with either position. You can save a lot of money by looking at what he was thinking throughout the thread.

RM- There is a playbook I have read about but never have really used. Just curious if that influenced your decision to buy as it proved true again. That being...A yield stock that has dropped huge over a fear of the dividend cut should be bought right after the cut is finally announced. It certainly fit this occasion. Did that influence you to buy?


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Old 12-10-2015, 12:17 PM   #51
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RM- There is a playbook I have read about but never have really used. Just curious if that influenced your decision to buy as it proved true again. That being...A yield stock that has dropped huge over a fear of the dividend cut should be bought right after the cut is finally announced.
That didn't work out so well for Seadrill. If you bought right after they announced the dividend cut, you would have paid about $20, and it is trading right now for $4 and change.
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Old 12-10-2015, 09:42 PM   #52
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RM- There is a playbook I have read about but never have really used. Just curious if that influenced your decision to buy as it proved true again. That being...A yield stock that has dropped huge over a fear of the dividend cut should be bought right after the cut is finally announced. It certainly fit this occasion. Did that influence you to buy?


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No actually I had my eye on the preferred once I saw the value it contained. First of all it made sense for common shareholders to switch to it, they could claim their loss, get a bigger dividend than what they had and participate in the upside of KMI if it were to happen. And the downside was limited to 7 percent, if it had been just the common shares I would not have purchased them. But with what I thought about the common value influenced my purchase of the preferred. I wish I had bought more, I thought there might be a big reaction down with cutting of dividend but realization it cemented financials for preferred led to the big reversal on preferred price.

Also, as I invest only in stocks that pay dividends, on elf my rules is to not buy a stock that cuts it's dividend. I deviated from this with the 6% of my portfolio I allow myself to invest in any stock I feel is of value. But I keep that to a small percentage of my total
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Old 12-11-2015, 10:39 AM   #53
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bought kmi today at 16.06
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Old 01-02-2016, 09:29 AM   #54
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I have done extensive research on the MLP model and there is a big debate on free cash flow and distributable cash flow, which is net of cap ex. KMI though a corporation has MLP traits. The market does not know how to value MLPs, or corporations such as KMI. I had a 1% allocation in MLPs, took that to 2% in July and now 3% as of yesterday. I like MLPFX, Oppenheimer, but overlayed that with AMLP yesterday so I can trade it intraday. I own a tiny bit of KMI, some WMB, and SE in my 3% weighting. Still have a profit on WMB! The better names in midstream will not only be able to maintain their distributions, but increase them. I read the quarterly commentary after the close today from the Goldman MLP & infrastructure fund and though there is a greater dispersion in projected distribution rates from GPs, the confidence in the overall rate of increase is still there. Bottom line, MLPs and corporate entities like KMI are priced as if their business model is unsustainable and the reality is there is misinformation in the market place about coverage ratios as they relate to free cash flow/ distributable cash flow. There was a prominent article in September that MLPs with less than a 1 coverage ratio would need additional capital to maintain distributions. This is misinformation. The coverage ratios include capex, so MLPs can have less than a 1 ratio, and still be in excellent shape to maintain and even increase distributions without any capital market infusions. After the tax loss selling and margin induced selling abates, quality midstream MLPs and I suspect KMI will continue their distributions, and even increase them. When the market understands this, there will be a violent snap back rally. I can't think of a asset as mispriced as MLPs are today in my twenty five years on Wall Street. If you don't own MLPs, this is a golden opportunity as the price of oil has little to do with their ability to pay distributions in the midstream space.

Just FYI. AMLP was up around 15% right before Christmas and up around 10% this last week. Someone certainly feels like MLPs are under priced and is buying. Unfortunately I have no dry powder to use anytime soon.

I definitely did not time the bottom, but I will probably do pretty well in a few years. My average cost per share is around $14.65 in AMLP. I have 18,680 shares and would like to get that to 20,000 provided I can do so while lowering my avg cost per share. No reason for 20k target other than I am obsessive compulsive and like nice round numbers.
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Old 01-02-2016, 09:34 AM   #55
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i bought and sold in and out of kmi all month . got stopped out wed.

so had 3 nice up sales and 1 slight loss .
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Old 01-03-2016, 07:41 AM   #56
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Just FYI. AMLP was up around 15% right before Christmas and up around 10% this last week. Someone certainly feels like MLPs are under priced and is buying. Unfortunately I have no dry powder to use anytime soon.

I definitely did not time the bottom, but I will probably do pretty well in a few years. My average cost per share is around $14.65 in AMLP. I have 18,680 shares and would like to get that to 20,000 provided I can do so while lowering my avg cost per share. No reason for 20k target other than I am obsessive compulsive and like nice round numbers.
With the exception of a few of the MLPs that became too levered, I fear we will look back at this panic in a year or two and be kicking ourselves for not buying more. The business model is not only sound, but necessary, i.e. you have to have heat, electricity and gas for your car and that's why MLPs are absolutely necessary.
Even taking into account the crash in energy due to oversupply and less global demand, we have are woefully behind our pipeline infrastructure needs even as soon as a few years out in a 2% GDP world. It's a classic case of the glass is half empty.

It's funny, my average cost on AMLP is around $14 as well; I swapped my AMLP for MLPFX to take the loss and also because some of the AMLP holdings do fall into the category of over levered such as Oneok. With a $154,000 position it's now 2% of my portfolio. I am curious what percentage you think is appropriate, there was a Barron's article in September where a UBS advisor said 10%. I did not take that advice at the time because I was not comfortable with the inherent depletion aspect of MLPs- at 44 it's too early to be seeking maximum income and return of capital.
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Old 01-03-2016, 10:23 PM   #57
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With the exception of a few of the MLPs that became too levered, I fear we will look back at this panic in a year or two and be kicking ourselves for not buying more. The business model is not only sound, but necessary, i.e. you have to have heat, electricity and gas for your car and that's why MLPs are absolutely necessary.
Even taking into account the crash in energy due to oversupply and less global demand, we have are woefully behind our pipeline infrastructure needs even as soon as a few years out in a 2% GDP world. It's a classic case of the glass is half empty.

It's funny, my average cost on AMLP is around $14 as well; I swapped my AMLP for MLPFX to take the loss and also because some of the AMLP holdings do fall into the category of over levered such as Oneok. With a $154,000 position it's now 2% of my portfolio. I am curious what percentage you think is appropriate, there was a Barron's article in September where a UBS advisor said 10%. I did not take that advice at the time because I was not comfortable with the inherent depletion aspect of MLPs- at 44 it's too early to be seeking maximum income and return of capital.

Well, unfortunately I don't have a lot of money. So my allocation to AMLP is essentially me going "all in" with my taxable account... My brokerage account is basically where I am making my attempt to retire early. If that fails I will be working until age 55 when I can retire off of a state pension.

I'll be 40 next year. If I'm going to ESR (i.e. switch to part-time work) it needs to happen in the next 5 years. Otherwise I'm going to give up on it and just accept that I will need to work full time until 55.

I'm willing to roll the dice and see how this plays out. If AMLP just doesn't make any significant dividend cuts then my gamble pays off.

Right now my AMLP dividend income is around $22k a year. For me that is huge... I make $60k and have been living off around $28k for over a decade. This is a very comfortable standard of living for me. About the only thing I would change is buying a house.

If this gamble pays off I'll soon have enough income to offset my yearly living expenses. My big problem then will be lack of diversification. I will need more income diversification before I can ESR or I'll need to bring in more money from working while ESR'd.

I work in IT doing server administration. A lot of this is now moving to the "cloud" which may work to my benefit. It might make it easier to get a part-time job working from home. If I could make like $20k I'd go for it even with my investment income being un-diversified.

I've got over 15 years experience as a sys admin. What I'd like is to work remotely from home for 20-30 hours a week. I think once I actually start to look that I'll be able to find something.
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Old 01-03-2016, 10:36 PM   #58
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ESR, my wife hopes to do something similar in her software developer field. She has about 25 years experience as a software engineer with several of the big boy companies but some partial work during retirement would be awesome.

I told her I would help out (maybe be her tester) if she figures out how to get a work from home short term contract.
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Old 01-03-2016, 10:49 PM   #59
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ESR, my wife hopes to do something similar in her software developer field. She has about 25 years experience as a software engineer with several of the big boy companies but some partial work during retirement would be awesome.

I told her I would help out (maybe be her tester) if she figures out how to get a work from home short term contract.

The good thing is, I know more and more former colleagues that now work from home. Its definitely a growing trend at least from my anecdotal perspective. I know three people doing programming work, one doing DBA work, and two doing support type work.

This new trend to outsource the server infrastructure, i.e. cloud, is still in the early stages. I'm feeling pretty lucky that this shift is happening as it should create a lot of job ops for me to work from home doing essentially the same work I've been doing in IT.
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Old 01-04-2016, 11:05 AM   #60
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Trading KMI options has been interesting. 15 and 17.50 calls mostly.
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