Rich is Losing His Patience

Rich Kinder Co-Founder, Chairman, and CEO

Rich Kinder
Co-Founder, Chairman, and CEO

Rich Kinder officially reached “irked” status on Friday with the recent stock performance of Kinder Morgan, Inc. (NYSE: $KMI). The gargantuan (or mucho for my Texas friends) GP hit a 52 week low of $30.93 the day before, as analysts again raise concerns over $KMI’s ability to grow distributions from such a large base ($100+ Billion enterprise value for the family of $KMI companies) in a rising interest rate environment.  Mr. Kinder is an investors CEO, often in the market buying the stock on dips.  In the month of February 2014 alone he made three separate purchases that totaled 400K shares at a cost of $12.7 million (not bad for a guy that takes in a salary of just $1 a year) for an average price of $31.70 per share.  His open market purchases are normally enough to encourage investors to get behind the stock and establish a floor on the price, but instead it’s been the case of “how low can she go.”

KinderMorgan-Logo

The company’s Friday press release was entitled “Kinder Morgan Expects to Meet or Exceed 2014 Financial Expectations.” The presser seems to be completely market / steam coming out of Rich’s ears driven as it provides no new information.  It simply reiterates the companies $14.8 billion backlog and budgeted dividend growth of 8% over the prior year ($1.72 per share), both of which were well telegraphed back at the $KMI analysts day on January 29.  The fact that $KMI emphasizes “exceed” is also not news, as Rich is known for fully deploying the UPOD (under promise and over deliver) theory when it comes to distribution growth.

The stock reacted positively to the Friday news, up more than 2% in a down market tape. The fact remains though that presser’s alone will not solve $KMI’s tired stock performance.  Over 50% of the company’s backlog is tied to a single Canadian pipeline project and it’s also concerning that just two years after $KMI absorbed El Paso the growth story is gone.  However, investors get paid a 5% yield to wait around and if history tells us anything its to never bet against Mr. Kinder.

Why We Love the Capital Markets

One of my absolutely favorite things to read about is when companies make investments that actually work, and work very well.  A few weeks back the President and CEO of Liberty Media, Gregory Maffei, was on CNBC’s Squawk Box talking about his company.  If you have never heard of Liberty Media they are “kings of content” and own various media assets, from the Atlanta Braves, to 17% of Barnes & Noble, 26% of Live Nation, and now 53% of Sirius XM.  Specifically Mr. Maffei was discussing Liberty’s investment in Sirius XM Radio.  Here is the breakdown of the investment:

  • Liberty loaned Sirius XM $400 Million & Liberty paid $12,500 for a “convertable preferred” option to buy SIRI stock.
  • Sirius pays back the $400 million loan in full just five months later.
  • Liberty also had charged some fees for that loan and was up on the investment by $50 million.
  • Liberty excercised their preferred option and that $12,500 investment is now worth $8 billion.

This is what is so great about the capital markets.  Sirius was on bankrupty’s door and had no where to turn, so Liberty stepped in and made a bet that the business would recover.  Liberty practiced the Warren Buffett method of investing, “Be fearful when others are greedy, and greedy when others are fearful.”

Full video from Squawk is below:

Happy Birthday America

July 4th is always a great celebration in America: Baseball, Bar-B-Que’s, Parades, and just enjoying being an American.  Citizens are proud of their country and thankful for all of those that defend it to make freedom a reality.  This is the day that the Declaration of Independence was signed explaining to Great Britain that 13 American colonies would no longer be a part of the British Empire.  Our Wikipedia friends report that John Adams had written to his wife Abigail after the signing, and we think Mr. Adams had it correct:

The second day of July, 1776, will be the most memorable epoch in the history of America. I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival. It ought to be commemorated as the day of deliverance, by solemn acts of devotion to God Almighty. It ought to be solemnized with pomp and parade, with shows, games, sports, guns, bells, bonfires, and illuminations, from one end of this continent to the other, from this time forward forever more.

America has lived up to Mr. Adams expectations regarding the celebration party, but I think Ronald Reagan said it best:

Republicans believe every day is the Fourth of July, but the democrats believe every day is April 15.

Happy Birthday America.

Ledbury: Entreprenuer’s Born from 2008 Economic Collapse

My brother (a Titan of Wall Street) recently turned me onto Ledbury button down shirts for work.  Initially I thought…….it’s just a shirt right, how cool could it really be?  After wearing the gear a few times I have fallen in love.  The fabric is the highest quality, the buttons are precise, and the fit has been redesigned to contour the rugged man of 2013.

So I already liked Ledbury the company, but then I found out they did not just make the best shirt on the market today, but they also were a great entrepreneur story.  The company was founded by two MBALED students who graduated from B-school the same day Lehman brothers filed for bankruptcy back on September 15, 2008.  The founders had jobs lined up in finance after college, but those jobs were gone after the economic crash.  Unemployed and with no where to turn, the two founders decided to start a shirt company.  Today the company has over 12K customers and growing.

The irony is that if Paul & Paul (the founders) had not lost their jobs they probably never would have created this great American company.  Sometimes great entrepreneurs are never born because they always wait for the perfect time or the perfect opportunity, when in reality you have to choose your best opportunity and make your Ledbury happen.

Below is a CNBC video from a recent Squwak Box interview with the Ledbury founders, part of Squwak Box “disruptor’s” series:

$LUV Entrepreneurship

Have you seen the newest Southwest Airlines ad? 

 “We believe the American dream does not just happen, it’s something you have to work for.”  Someone please pass this along to America, because I feel like a large portion have missed this message.  Thank you $LUV for producing a patriotic (and also very accurate) marketing message. 

MLP Report: Yep, we nailed it

Good-Job-300x238

Good Job MlpReport.com

Our millions of followers here at MlpReport.com will remember that back in November 2012 we reported that New York Stock Exchange stakeholders should be outraged over the NYSE shutting down due to hurricane Sandy.  As we reported correctly (Ya for Us), the vast majority of trading occurs electronically, and a financial services firm such as the NYX should have the back up plans in place to not interpret operations. 

This past weekend Rueters reported that NYX has filed a plan with the SEC:

“NYSE Euronext is preparing to submit details of the plan to the U.S. Securities and Exchange Commission, according to the report, which cited people involved in the preparations. If activated, the plan would represent the first time the 221-year-old exchange would rely entirely on computer systems, without the oversight of floor-based traders, the paper said.  A NYSE spokesman declined to comment on the report.

The disaster plan would shift trading entirely to Arca, NYSE’s all-electronic sister market. It would replace NYSE’s current backup plan that calls for the exchange to remain open in a limited capacity while sending orders to Arca to be filled.”

We don’t always nail it like we did with this Corporate Governance item, but when we do we felt it necessary to point it out to our readers.  As we attempt to remain humble here in the newsroom, we remind ourselves “it’s better to be lucky then good.”

Documentary Analysis: Frack Nation

The oil & gas industry has fracked thousands of wells over the past 50+ years safely and without incident.  Often times the mainstream media, looking to break headlines in the 24/7 news cycle, will report allegations of environmental damage from fracking without a lot of facts to back it up.  Then after they have scarred the public and enticed government officials to act…………they move on to the next story.  A new documentary, Frack Nation, premiered last night on AXS.tv.  The documentary had a number of objectives for creating the film:Frack Nation 2

  • Research the facts about fracking oil & gas wells.
  • Interview Land Owners, Government Officials, and Scientists for their subject matter expert (SME) opinion on fracking.
  • Present an alternative point of view from the popular anti-fracking movie, GasLand.

I watched the documentary and found it to be both informative and genuinely attempting to obtain the truth.  I encourage you to view the film and make your own opinion as well.  Below represents the summary points I picked up from this quality documentary:

  • Frack Nation was funded with over $200K in donations by individuals around the world (26 countries in total) that contributed money on the entrepreneurial website KickStarter.com.  (We here at MlpReport.com think this is super cool and only ads credibility to the film.)
  • Farmers and land owners are financially impacted when Pennsylvania and New York enforce bans on fracking for land where owners want (and financial need) oil & gas drilling to occur.
  • A family that claimed Cabot Oil & Gas contaminated their water was found to have perfectly safe water by the the State of Pennsylvania and the EPA.  Frack Nation obtained a video from the EPA, via the Freedom of Information Act, displaying the family irate that the EPA found their water to be safe (you would expect them to be pleased with that result right?).
  • Anti-fracking reports would lead you to believe that fracking is unregulated.  Frack Nation interviews an engineer from Range Resources and they display the files and the volume of permits, environmental testing, and State/Federal regulations they must comply with for a single well.
  • Frack Nation presents lots of inconsistencies about the GasLand documentery, the motivations of the GasLand Director (Josh Fox), and the validity of the facts he presents.  Frack Nation attempted to interview Mr. Fox both in public and private, but he refused to answer their questions.
  • GasLand displays a water faucet in Pennsylvania catching on fire, allegedly due to methane contamination from fracking.  Frack Nation interviews other land owners that point out water wells have always produced methane.
  • Gasland uses lots of scary words describing the chemicals that oil companies use to frack wells.  Frack Nation interviews a biologist at the University of California Berkley to determine if these scary words are actually toxic to humans.  That SME on all things biology explains those are simply fancy words, you could use the same descriptions for toxins in cauliflower.  While cauliflower is toxic to the taste buds, its poses no danger to the body.  #BOOM

Random Side Note:

The channel hosting the Frack Nation premiere, AXS.tv, is Mark Cuban’s reincarnation of his HDNet Channel.  I did not even know I had this channel on DirecTv, and was interested in viewing content for the first time.  I was a bit disappointed when the same promotional video on Justin Timberlake dance moves ran during every commercial period and the best programming AXS.tv seemed to offer was Dan Rather reporting.  In a world where content is king AXS.tv picked a winner by premiering Frack Nation, but their regular programming seems lacking.

Blackstone: 2013 Predictions

With all the predictions for 2013 flaoting around I had to post my favorite:  Byron Wien of the Blackstone Group, LP (NYSE: BX).  Byron is a regular visitor to CNBC’s Squawk Box, and someone who always has a clever perspetive on the markets. 

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01/02/2013

Byron Wien Announces Predictions for Ten Surprises for 2013

 

New York, January 2, 2013 – Byron R. Wien, Vice Chairman, Blackstone Advisory Partners, today issued his list of Surprises for 2013. This is the 28th year Byron has given his views on a number of economic, financial market and political surprises for the coming year. Byron defines a “surprise” as an event which the average investor would only assign a one out of three chance of taking place but which Byron believes is “probable”, having a better than 50% likelihood of happening.

 

Byron started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley. Byron joined Blackstone in September 2009 as a Senior Advisor to both the firm and its clients in analyzing economic, political, market and social trends.

 

Byron’s Ten Surprises for 2013 are as follows:

  1. Iran announces it has adequate enriched uranium to produce a nuclear-armed missile and the International Atomic Energy Agency confirms the claim. Sanctions, the devaluation of the currency, weak economic conditions and diplomacy did not stop the weapons program. The world must deal with Iran as a nuclear threat rather than talk endlessly about how to prevent the nuclear capability from happening.  Both the United States and Israel shift to a policy of containment rather than prevention.

 

  1. A profit margin squeeze and limited revenue growth cause 2013 earnings for the Standard & Poor’s 500 to decline below $100, disappointing investors. The S&P 500 trades below 1300. Companies complain of limited pricing power in a slow, highly competitive world economic environment.

 

  1. Financial stocks have a rough time, reversing the gains of 2012.  Intense competition in commercial and investment banking, together with low trading volumes, puts pressure on profits.  Layoffs continue and compensation erodes further.  Regulation increases and lawsuits persist as an industry burden.

 

  1. In a surprise reversal the Democrats sponsor a vigorous program to make the United States independent of Middle East oil imports before 2020. The price of West Texas Intermediate crude falls to $70 a barrel.  The Administration proposes easing restrictions on hydraulic fracking for oil and gas in less populated areas and allowing more drilling on Federal land.  They see energy production, infrastructure and housing as the key job creators in the 2013 economy.

 

  1. In a surprise reversal the Republicans make a major effort to become leaders in immigration policy. They sponsor a bill that paves the way for illegal immigrants to apply for citizenship if they have lived in the United States for a decade, have no criminal record, have a high school education or have served in the military, and can pass an English proficiency test. Their goal for 2016 is to win the Hispanic vote, which they believe has a naturally conservative orientation and which put the Democrats over the top in 2012.

 

  1. The new leaders in China seem determined to implement reforms to root out corruption, to keep the economy growing at 7% or better and to begin to develop improved health care and retirement programs. The Shanghai Composite finally comes alive and the “A” shares are up more than 20% in 2013, in contrast with the previous year when Chinese stocks were down and some developing markets, notably India, rose.

 

  1. Climate change contributes to another year of crop failures, resulting in grain and livestock prices rising significantly. Demand for grains in developing economies continues to increase as the standard of living rises. More investors focus on commodities as an investment opportunity and increase their allocation to this asset class. Corn rises to $8.00 a bushel, wheat to $9.00 a bushel and cattle to $1.50 a pound.

 

  1. Although inflation remains tame, the price of gold reaches $1,900 an ounce as central bankers everywhere continue to debase their currencies and the financial markets prove treacherous.

 

  1. The Japanese economy remains lackluster and the yen declines to 100 against the dollar. The Nikkei 225 continues the strong advance that began in November and trades above 12,000 as exports improve and investors return to the stocks of the world’s third largest economy.

 

  1. The structural problems of Europe remain largely unresolved and the mild recession that began there in 2012 continues. Civil unrest subsides as the weaker countries adjust to austerity. Greece proves successful in implementing policies that reduce wasteful government expenditures and raise revenues from citizens who had been evading taxes. European equities, however, decline 10% in sympathy with the U.S. market.

 

Every year there are always a few Surprises that do not make the Ten because either I do not believe they are as relevant as those on the basic list or I am not comfortable with the idea that they are “probable.” Below are several “also rans” which did not make the Ten Surprises.

“Also Rans”

  1. Having traded below 20 for most of 2012 the VIX Volatility Index surges 33% to 30, providing a bonanza for traders. The decline in the S&P 500 increases market volatility.

 

  1. The Newtown, Connecticut, massacre finally convinces Congress to do something about gun control. As a first step they ban future civilian purchases of automatic weapons, including handguns, with clips of more than ten rounds and require more extensive background checks on all gun purchases. “It should not be easier to buy a gun than rent a car” becomes a slogan.

 

  1. Frustrated by an inability to increase revenues through raising income taxes, Congress begins to consider different approaches. There is more talk of a value-added tax as well as a wealth tax, and these ideas appear to be slowly gathering momentum.

 

  1. Congress decides that high-frequency and other computerized algorithmic-based trading practices are putting the individual investor at a disadvantage. A transaction fee designed to slow down frenetic activity and protect against “flash crashes” and glitches is imposed on intra-day trades.

 

  1. The planet finds itself saturated with technology. Semiconductor companies, software providers, social media favorites and personal computer manufacturers all report disappointing earnings and provide discouraging guidance. They lead the overall market lower. Users finally agree the present state of the art is fast enough and connected enough, and that they have more “apps” than they know what to do with. Apple bucks the trend and trades above $700 as its products continue to enjoy enormous success abroad.

Spark of an Idea

Over the holiday weekend a friend and I were enjoying an adult beverage (s) and talking up what else?  Business and Entrepreneurship of course.  My friend pointed out to me a new company seeking funding via Kick StarterSpark.  The idea behind Spark is pure genius.  This product connects all your lights to your smart phone, tablet, or computer via WIFI Internet.  Enabling the user to turn on, turn off, dim, or adjust light settings from anywhere in the world.

This follows our entrepreneurship them of finding a niche, providing consumers a product / service they never knew they needed, and executing the business plan.  Spark is currently in the process of raising $250K for development of the Spark project.  For $59 you can become a backer and receive a Spark when it rolls off the assembly line in July 2013.  See the video from the company founder for a great 3 minute introduction to the product.

Spark has opened up the development of Apps to any code writers that can come up with the best way to use the product.  This is obviously entrepreneurial of Spark, but also increases the chances of developers finding interesting ways to use Spark, and potentially drive sales longer term.

Christmas Comes Early to Dividend Lovers

Yesterday Anadarko Petroleum ($APC) filed an S-1 registration statement to take the General Partner of Western Gas Partners $WES public.  The GP will be named Western Gas Equity Partners, LP and trade under the ticker $WGP.  $WGP will own the 2% GP interest in $WES, all of the Incentive Distribution Rights (IDR’s), and a 47% limited partner interest in $WES.  Basically the GP’s only asset will be its investment in $WES and its preferential right to a larger portion of the cash distributed.

This is a great potential long term investment for those yield hungry investors.  $WES is only 5 years old and $APC has billions in midstream assets for potential drop drowns, which 2013/2014 could see significant growth in distributions.  The table below represents the “hypothetical” distributions for $WGP over the next six years.  Basically this table tells investors you can buy $WGP and if management executes on the plan in the next six years we plan to increase distributions by 60%.  That does not include the likely rise in the equity value of $WGP as the units increase in value in harmony with distribution growth.  Of course no one can predict what will happen in six years, but this is pretty good picture for investors to knaw on.

S-1 Projected Growth of $WES Distribution: LP & GP Portion

The only downside in my view in this announcement is that $WGP is not a C-Corp or an LLC, but rather an LP.  This means the owners of the GP will also receive a K-1 at year end for tax purposes, instead of the simpler 1099-DIV.  $KMI, $WMB, and $SEMG chose the C-Corp route for GP ownership.  The C-Corp route is preferred by institutional investors and friendly to tax deferred accounts.

$WGP should be a great investment for yield investors, but after last nights US election all investment decisions should be re-evaluated.  The US is likely to go over the fiscal cliff, receive another downgrade from rating agencies, and face a shrinking GDP.  All of those factors are recipe for a recession and likely put pressure on equity values in the short-medium-long term time period.

Entreprenuer: GoGo SqueeZ

I am constantly amazed by entrepreneurs that find a niche that serves a need the market never even knew that it wanted.  Last night on Twitter I ran across a Forbes article on GoGo SqueeZ.  This company markets crushed apples in a package that you can eat right out of the package and charges a huge premium.  Then they also manufacture the product in a 100% natural, gluten free, BPA packaging free, wheat free, vegan friendly, no fructose corn syrup way that makes you feel like paying that “organic” type of premium is justified.  The product is flying off the shelves, growing top line revenue from just $6 million two years ago to over $100 million a year.  I have no idea how many 3.2 ounce individual packages that would be, but my guess is a lot, like millions per year.   

This is one of those ideas that after you see the success you say, “why didn’t I think of that?!?@#$ %*&%^!!!”  Truly amazing story and an example of how the market can constantly be re-invented when entrepreneurs develop products that consumers never knew they could not live without.

Like all good start-ups (and well run businesses in general) GoGo SqueeZ followed its strategy:

1.  Identify the Niche

2.  Exploit the Niche

3.  Constantly Meet & Exceed your clients expectations

4.  Execute, Execute, Execute

Bravo GoGo SqueeZ, Bravo.

Uinta Basin: Valuation Reset

On November 1, Canadian E&P Crescent Point Energy announced an $861 million acquisition of Ute Energy’s Central Basin (CB) assets in Utah.  This represents Crescents first entry into the basin, and really its first entry deep into the US.  This transaction provides a good valuation reset for other operators in the area:  $BBG, $BRY, and $NFX.  Current Ute production is 7,800 boepd, and when you back out the $700 per acre placed on the acreage, they are paying $124K per producing barrel. 

Crescent Point Energy Operating Areas

Crescent is an E&P that falls under the radar since it only trades on the Toronto Stock Exchange, and has typically only operated in Canada.  However, it pays a hefty $.23 cents per month dividend, which at today’s price of $39.62 produces an annual yield of 6.9%.  The company has low leverage as well with just 10% debt-cap.  The bountiful dividend and monthly payout (think compounded re-investments [12 instead of typical 4]) are attractive, but the Canadians take out 15% for dividend taxes and you end up paying higher commissions to buy on the TSX.  Still, not a bad stock to add to the shopping list if the dividend where to creep higher. 

Bottom line on Uinta: 

  • Valuation has been reset with this M&A deal
  • Interesting to see if CB shale oil / horizontal drilling can become economic
  • Look for other larger independents to enter the play if successfull

NYSE: Got BCP?

Super hurricane Sandy wiped out most of the tri-state area last week.  Causing billions of dollars in damages and crippling business.  Whenever storms such as Sandy appear institutions rush to implement their Disaster Recovery Programs, or Business Continuity Plans (BCP).  The NYSE Euronext may have to dust off their BCP plan to be more prepared for the next Sandy.  Wikipedia defines a BCP as:

“identifies an organization’s exposure to internal and external threats and synthesizes hard and soft assets to provide effective prevention and recovery for the organization, while maintaining competitive advantage and value system integrity”

In this age of technology and redundancy planning shouldn’t the NYSE have plans in place to operate at another location?  If the NYSE completes 1 billion trades a day and they earn $.01 per trade that costs shareholders $10 million per day in lost revenue.  I understand that traders and other market makers need to be present for the exchange to function properly, but somewhere along the line the BCP failed for NYSE.  Why not pull all “critical personnel” out to Chicago a week prior to the storm? 

I understand this storm was devastating, but $NYX board members should be asking some tough questions to management.

Certified in “SIC” Management

$OXY CEO, Stephen I. Chasen

Every CEO should be required to obtain the “SIC” certification in management.  SIC stands for Stephen I. Chasen (SIC), Occidental Petroleum’s long term finance man, and since May 2011 it’s CEO.  Basically if a CEO is SIC certified he lays out a clear and precise strategy for investors, he reports honestly on the progress (both good & bad), and he holds his employees accountable for meeting targets.  Here are some highlights from his no non-sense statements from Thursday’s conference call:

SIC:  “If for some reason our investment plans do not result in successful stock market results over the next few months, we will return more of our retained earnings to our shareholders……we intend to raise dividends next year at a rate that will maximize returns to shareholders.”

Translation:  $OXY will appreciate in the next 3 months or we are sending shareholders more cash via dividends.  This is bullish for long term holders of $OXY.

SIC:  “If I do not see the proper returns in the coming quarters our strategy will change.”

Translation:  Stockholders will make money by either the stock appreciation or higher dividends.  Once the stock appreciates we will return to investing more capital in the business.

SIC:  “More capital discourages prudent spending……..half the shareholders think I should spend $20 billion CAPEX, the other half think I should spend $2 billion……..If they (Operations) do not get their operating cost down, which is what I am most focused on, because that translates immediately into profits, then we will continue to tighten there and their will continue to be changes in management…….especially in the Permian.  If they do not do it soon there is going to to be wide spread changes in the organization.”

Translation:  I am cutting rigs to prove to the operations team that I am serious about cutting costs. Every BU better lower costs, or they will be fired and we will get someone in there that can lower the costs.  #BOOM  #ACCOUNTABILITY

SIC:  “Oil guys can only work on one thing at a time.  So if you tell them you want volume growth, then volume growth will show up.  But if you tell them you also want something else, only volume growth will show up.”

Translation:  Like all humans, only one BHAG (Big Hairy Audacious Goal) at a time is all my managers can handle.

SIC:  “If the relative performance does not improve we will return more money to the stockholders.”

Translation:  I repeat, stockholders are # 1 priority for this company.

Their is probably another 10 examples I could share, but I think you get the point.  SIC takes his job as a steward of the stockholders money seriously, he holds his management accountable for short-medium term goals, and he is smart enough to change his strategy if market conditions warrant.  The $OXY conference calls never disappoint, but this one was classic.

Also, it’s interesting to note this was the first CC for the new CFO Cynthia L. Walker.  The 35 year old Mrs. Walker is a former Goldman Sachs managing director (from H town office) and became an executive vice president and CFO on Aug 6.  Besides reading from her prepared remarks, Mrs. Walker was otherwise silent on the Q&A portion of the call.  M&A is obviously in her wheel house, but SIC made clear on the call no significant M&A is in $OXY’s foreseeable future.  Makes you wonder if the debits and credits will keep this CFO interested.

Mail Box Money: WYNN Resorts Dividends

Steve Wynn is # 1 Shareholder Friendly CEO

Steve Wynn is # 1 shareholder friendly CEO.  On Wednesday WYNN Resorts announced an $8 special dividend and raised their regular dividend 100%, from $.50 per quarter to $1.00 per quarter.  Prior to earnings release the stock was trading for $113 in change, which equates to a 2011 yield of 8.8%.  Assuming another $8 special dividend in 2013 and the yield rises to 11%.  Did I mention that WYNN resorts is also growing bottom line earnings 4-6% and has a $4 billion Cotai project in the backlog?  Not many investments come along with significant yield, significant growth, and a pristine balance sheet.  WYNN resorts is the ultimate mail box money for stock investors. 

American Irony

I came across this message in a blast email forward I received this week.  The accuracy and honesty of the message is amazing, and I thought it was timley with the election looming just 11 days away. 

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Every now and then someone makes it obvious and simple…

 TOP-10 “Only In America” Observations – by a Canadian:

1)  Only in America, could politicians talk about the greed of the rich at a  $35,000.00 a plate campaign fund-raising event.

2)  Only in America, could people claim that the government still discriminates against black Americans when they have a black President, a  black Attorney General, and roughly 18% of the federal workforce is black while only 12% of the population is black.

3)  Only in America, could they have had the two people most responsible for our tax code, Timothy Geithner, the head of the Treasury Department and Charles Rangel who once ran the Ways and Means Committee, BOTH turn out to be tax cheats who are in favor of higher taxes.

4)  Only in America, can they have terrorists kill people in the name of Allah and have the media primarily react by fretting that Muslims might be harmed by the backlash.

5)  Only in America, would they make people who want to legally become American citizens wait for years in their home countries and pay tens of thousands of dollars for the privilege while we discuss letting anyone who sneaks into the country illegally just ‘magically’ become American citizens.

6)  Only in America, could the people who believe in balancing the budget and sticking by the country’s Constitution be thought of as “extremists.”

7)  Only in America, could you need to present a driver’s license to cash a  check or buy alcohol, but not to vote.

8)  Only in America, could people demand the government investigate whether oil companies are gouging the public because the price of gas went up when  the return on equity invested in a major U.S. oil company (Marathon Oil)  is less than half of a company making tennis shoes (Nike).

9)  Only in America, could the government collect more tax dollars from the people than any nation in recorded history, still spend a Trillion dollars  more than it has per year – for total spending of $7-Million PER MINUTE, and complain that it doesn’t have nearly enough money.

10)  Only in America, could the rich people – who pay 86% of all income taxes –  be accused of not paying their “fair share” by people who don’t pay any  income taxes at all.These top 10

observations may be worth sharing…

John-L Johnson
President
Silent Majority

  USA

Black Gold near Sin City?

Could it be that miles below sin city is a vault full of black gold?  Noble Energy announced on Thursday that they believe a significant oil resource resides in north eastern Nevada.  Noble has acquired 350,000 net acres in the tight oil play at less than $200 per acre.  In the investor presentation Noble points out this play was overlooked and under explored by the industry.  Noble plans initial production in late 2014, ramping up to grow production to 50,000 bpdoe. 

It is refreshing to know that Noble was not out chasing the hottest new play.  They were taking their geologic knowledge and applying it to a new play.  This demonstrates the entrepreneurial spirit that is embedded in the oil & gas industry, and a reminder for us all that it’s better to lead than to follow, it’s better to be lucky than to good. 

Increased exploration from companies like Noble, and consistent improvement in technology, will eventually make America energy independent.  Not too mention creating value for shareholders, additional American jobs, and increased taxes paid to the government.  I love big oil.

Distribution Growth Defined: Western Gas Parnters (WES)

Lot’s of MLP’s talk about consistent and significant distribution growth, but Western Gas Partners, LP (WES) actually delivers.  Exhibit A:  On Friday the partnership declared a cash distribution of $0.50 per unit for the third quarter of 2012, representing a 4-percent increase over the prior quarter (yawn) and a 19-percent increase (WOW) over the third quarter of 2011.  Where else can you buy an income stream that increases 19-percent a year?  Bueller?  Anyone?  Did I mention that income stream was also tax deferred? 

The distribution increase does not come cheap though, the units are up 45% YoY, and even with the increased distribution yield only 3.9%.  WES had projected 15-20% distribution growth over the next two years, and the market has priced in that growth buy rewarding unit holders with higher equity value.  If you missed jumping on the WES distribution super high way (your not in the stock), than you are probably kicking yourself.  If you have a longer investment time frame, it may be time to take another look at WES.

WYNNing with American Jobs

Steve Wynn is already an iconic American businessman.  He is a proven entrepreneur and a visionary in the hospitality and gaming industry.  American workers have been WYNNing with Steve Wynn over time as well, he has estimated to create over 250,000 jobs over his lifetime in the State of Nevada.  He has provided healthcare to his employees for 45 years.  In today’s world of political correctness though, Mr. Wynn’s best characteristic is his candid analysis of politics, grounded in facts and reality.  This was on display this past Friday on CNBC.  Here’s my favorite exchange from the video:   

Joe Kernen (CNBC):  “When you create a job suddenly your also creating market cap for your shareholders.  I tried to add up Mirage + Wynn, then I think all those employees are paying taxes to the government, and I look at the multiplier of a private job versus what the government can do, and it’s just mind boggling.”

Steve Wynn:  “It sure is.  It would be wonderful if you could repeat that to President Obama, because his lack of experience in the real world is causing this problem.  Anybody that had any experience in business would immediately understand these fundamental relationships and they would behave accordingly.”

Investing in CFA

If you ask the general public (or even a business professional) to define a certification for excellence in financial markets, you probably would get a variety of answers:  Certified Public Accountant, Certified Financial Planner, or perhaps Certified Management Accountant.  The truth is that all of those are on the B team of certifications, the gold standard of financial markets certification is the Chartered Financial Analyst (CFA). 

This “gold standard” endorsement was validated by the recent CFA survey of June 2012 exam takers.  When asked “about how many hours did you spend preparing for the June 2012 CFA exam,” the average was 291 hours for those that Failed the exam, and a wopping 309 hours for those that Passed.  That equates to 12 complete days of studying, or equivalent  of 15% of the annual average work year. 

Investing in the CFA is a costly investment of time and resources, but this certifcation creates knoweldge that pays dividends for decades to follow.