February 25, 2016 1:21 AM
As I dig through the toxic debris of collapsed Ponzi-Land MLP vehicles, I keep having this recurring question; why do all these MLPs continue to have sponsors that are so aggressive in supporting the LP distributions? I’ve seen everything from; purchases of preferreds at below market interest rates, to sponsors agreeing to forgo subordinated distributions, to support agreements where they are literally gifting the MLP cash to offset its SG&A expense and maintain enough cash flow to cover... more
February 17, 2016 2:34 AM
Until early this summer, certain promoters seemed to believe that they could do a magic trick that no one would catch. A larger entity would “drop down” an asset at twice what it cost to purchase or build, add a bit more leverage and call it a “yield vehicle” that would then be sold to retail investors. Adding hubris to this whole charade of financial engineering, the “sponsor” would keep an IDR so that in addition to a huge gain-on-sale, it would also get a healthy chunk of the cash flow fr... more
February 14, 2016 6:33 PM
A few years back, I was at dinner with a British ship-owner who had just sold part of his fleet for almost $250 million (which was about $200 million more than he had paid for the ships only a few years earlier). He couldn’t stop laughing. Sure, they threw off about $50 million in cash (20% yield for the buyers) based on this year’s earnings, but he knew the cycle was turning and this would be the peak for many years—maybe even decades.
Me: “Who would be stupid enough to buy at the top?”
November 11, 2015 1:34 AM
My Buddy Tal, publisher of Beijing Perspective (http://www.beijingperspective.com) sent me the following last week. It's both prescient and obvious advice. I felt the need to share as I agree completely. If you want more of his notes, I recommend signing up at his site.
November 7, 2015
Two cents on interest rates
Cent #1) “Anyone familiar with asset markets know that it is expectations that move prices” - George Soros
Cent #2) Every action has a consequence, and e... more
November 8, 2015 9:55 PM
It has now been three weeks since CitronResearch.com accused Valeant (VRX: NYSE) of being Pharmron (Pharma + Enron). Ever since then, I’ve read a bunch of articles and tried to find an actionable angle. When there are rumors, innuendo and allegations of fraud, there’s a potential for opportunity. However, the deeper I dug; something increasingly struck me as rather odd about Valeant. At its peak, why was it so overvalued?
Valeant has spent approximately $34 billion on acquisitions after sub... more