What's srv??

its a cef. I wouldnt touch this with a premium in this market and the yield same as the pipelines nothing to rave about.

 

thanks

amit

MLP's are leveraged entities that rely on financing to expand their businesses. As credit markets dry up and stock markets decline, securing financing to expand becomes problematic. Not to mention going deeper into recession that can reduce volumes in pipelines and reduced commodity prices if that effects revenues.

As for SRV, they can short MLP's as a short term strategy to hedge against declines. Investors likely see that as a positive in declining markets, hence the premium.

Tim

Thanks lionhead, this had occured to me, but the entire industry is being written down despite the management team, financing and location of pipelines.  Apparantly the entire industry is being painted with a roller.  The yields at this point are great and I realize that some will not be able to maintain their payouts. (lower volumes, hurricane damage, ect.)  If I were to pick the best of the best, it seems to me that we are probably getting near their lows, in many cases they are at 52 week lows right now.  It seems to me that there should be bargains amoungst them somewhere.  I'll wait to see the "bailout" pass and give the market a couple of additional days to react to it, then start to move on things in about a week.  If I'm missing something, I'd appreciate someone pointing out my error.

Hi judyken,

Unfortunately, modern markets do not operate efficiently to select the best companies and stocks/bonds. Too much perception vs reality and quick snap judgements. I think we all have to be aware that this credit debacle is not a once in 10 or 20 year thing, it's a once in 80 year problem that eclipses prior events substantially and rivals the 1920's.

I'm looking for yield also, and have to judge the cash flow prospects to insure that steady income stream. Somebody once said something along these lines, "More money has be lost chasing yield than at the point of a gun."  I've done that and got the T-shirt...  Good luck in the process,

Tim

In my opinion, the proper way to evaluate MLPs (actually all equity)(actually all types of assets) is the size and quality of the yield of the asset, where quality includes, among a host of things, its stability.

Given that you have chosen assets based on this, do you really care what value the market places on the asset?  That should affect your decision only in terms of when to buy, or sell, the asset.

That is, why is a MLP worth $X today, but only $Y tomorrow, if the distribution hasn't changed?

ElLobo,

The distribution hasn't changed, but the yield has in relation to the price. The price/yield is set on the perception of the assets ability to pay the coupon or dividend and as you mentioned the stability of that continuing. Again it goes back to perception vs. reality. What does the market know that you and I don't know?

Moreover, if you get into a deeper recession, then will the asset have the ability to withstand slowing revenue growth that might effect the coupon/dividend. The market sets prices daily, but it is impossible to know going forward what the outlook is for the price/yield. So, one can go fixed income and hold to maturity and as long as the asset is solvent, you'll get your principal, or go the other route and weather the economic storms as they come up. No free lunch I'm afraid...

Tim

Tim

You're missing my point.  I'm talking about the dollar/share amount of the yield, not the percentage yield.

The company itself sets the dollar amount, based on management's perception of it's recent past, and future earnings, and the overall general financial condition of the company.  It's my opinion that management knows those prospects in far more detail then the market, which actively sets the value of that income stream.

For example, a company may have a steady, stable, financial bottom line, but the 'market', that is, you and I, may value that condition at one level today, but only half that level in a month.  Why should I, or any other potential buyer of that stock, trust the market over management?

Nobody is talking free lunch today.  I'm talking about a steak dinner, at Denny's, compared to one at Ruth's Chris Steakhouse.

El Lobo,

In a perfect world you'd be right; we live in an imperfect world and the market keeps dishonest managements honest by discounting stock/bond prices. IMHO, too many managements have been lying to investors lately even with all this Sarbanes Oxly protection. The analysis of management and valuation can be done many ways; everyone has to pick their own way. If you trust the insiders, then that's your way.

Enjoy your dinner, and good luck.

Tim