Tag Archives: KMI

Kinder Morgan: More Downside Risk Than Upside Potential

By 2015, KMI had become a personal cash piggy bank for Richard Kinder. Kinder owns 234 million shares. Before the dividend was cut 75% in late 2015, he was raking in dividend payments at a rate of $468 million per year. Basically he was running the Company like a Ponzi scheme in order to fund his massive personal dividend payout. – Excerpt from IRD’s Kinder Morgan Report

I started working on this Kinder Morgan report in early January.  I have taken my time in assessing the Company’s financials and I wanted to make sure that my thesis about the Company was credible because it is very rare to find anyone who is willing to issue contrarian analysis on KMI

One of the first big red flags for me was raised after I had sent several emails to the Company over the first four weeks of the year in my effort to gather as much information as possible. I also left several voicemails for the investor relations representative. Neither my emails nor my voicemails were returned. There is simply no excuse for this and reflects poorly on the Company. In close to thirty years of involvement in the financial markets, my investor inquiries to a company were ignored only one other time.

I wrote this research report “piece-meal” over time. Interestingly, every time dug deeper into the financials and related available public information, I discovered more problematic aspects than I would have had I written this report in a couple of marathon sessions. Similar to Amazon.com, this Company is complex maze of accounting, propaganda and hype. Each time I peel away a layer of veneer, I find more cracks in the facade.

I’m not necessarily recommending shorting KMI, although I think there’s money to be made on the downside if the price of oil continues lower, which I believe it will. This report explains why you should not buy KMI if you are thinking about it and it explains why you should sell it you still own it. This stock could easily go a lot lower.  Click on image to access this report.  Short Seller Journal subscribers will receive a 66% discount – contact me about this.

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The Credit Markets Are Starting To Collapse

I kind of wish Alan Greenspan were still the FOMC Chairman.   He makes a great “Wizard” figure.   Bernanke looks more like an unethical elf – a spineless pansy who couldn’t bluff his way out of a paper bag but viciously vindictive when no one can see him.  And Janet Yellen…well, she just looks like Aunt Bea on the Andy Griffith show, only with a much lower IQ.

I mention this because it’s become glaringly apparent that the credit markets are starting to collapse behind the proverbial “curtain.”  Several analysts point to the Merrill Lynch triple-C junk bond yield index and remark that “something” blew up:

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But it’s not “something.” “Something” is a general melt-down of the credit markets.  The C-rated high yield index reflects this reality.   If it were just one or two names blowing up, yields on related paper might drift higher, but not spike up like this.   This is the market’s realization that it has been overpaying for its risky investments not by a little bit, but by a gargantuan amount.   Add to that the well-publicized dearth of liquidity to accommodate general selling and we have the perfect recipe for the collapse of the entire credit market. The spike in the graph above is the market’s way of saying, “I want out.”

The unraveling of Kinder Morgan is another indicator of the malaise prevailing behind “the curtain.”  When KMI announced its earnings on October 22, it increased its dividend and projected growth over the next year of 6-10% in its dividend payout.  Seven weeks later, it slashes its dividend by 75%.

What the heck happened?  What changed?  If you look at KMI’s statement of cash flows, over the last three years KMI has funded both CAPEX and its dividend payout by issuing more debt every year.   How many Wall Street or Seeking Alpha Einsteinian analysts pointed out that fact?   Zero.   This is just speculation on my part – as it would be on anyone’s – but I suspect that Kinder Morgan was informed by its investment bankers that any continued debt issuance would be extremely expensive and conceivably not possible, especially given the collapsing price of oil and gas.  Yes Virginia, contrary to the popular myth of CNBC La La Land, KMI has business exposure to the directional movements in the price of oil and gas.

There are plenty of other market signals but perhaps the one that reflects the most desperation by the insider elitists to keep  a pretty cover page on the horror story unfolding is the daily price beating administered to the price of gold.  In a Groundhog Day scenario, every night the price of gold rallies while the physical gold buying heathens and NATO foes of the east feast on the cheap gold that the criminals of the west provide for them every day once the paper gold markets are in full swing.

If you don’t want everyone to run out of the coal mine when they see the dead canary, remove the bird before it dies.

As this unfolds, there is a lot of money to be made shorting all of the hideously overvalued stocks.   My new subscription service will be rolling out at least one idea per week that will help you find ways to exploit the gross price distortions and sector bubbles that have developed after 6 years of extremely reckless monetary policy by the Federal Reserve and U.S. Treasury.    You can subscribe by clicking here:   SHORT SELLER’S JOURNAL.

It’s a weekly report delivered to your email inbox with:  1) a brief comment on the previous week’s trading action plus any thoughts on the upcoming week;  2) I will feature 1 or  2 short-sell, trading, or investment ideas – the investment ideas will be primarily junior mining stocks; 3) trading recommendations, charts and put/call option ideas.

Kinder Morgan: Dead-Cat Bounce Coming – Sell, Do Not Buy

It was inevitable that Kinder Morgan stock was going to bounce at some point.  Nothing goes straight down without a dead-cat bounce.   There has been a lot of money made on the short side of this stock and prudent traders will take at least 70% of it off the table for now.  This catalyst alone could stimulate a $3-4 bounce in the stock.

Untitled1As you can see from this graph, the RSI/MACD momentum indicators are deeply oversold and need to bounce for a bit.  Retail investors “doubling down” and professional short covering will fuel most of the bounce.  Additionally, I am expecting a short bounce in the price of oil, which will help push KMI stock higher.

Again, I am not recommending shorting this stock yet.  I need to complete my research and will be publishing a full-blown report.   I will say that the more I dig, the more I find highly troublesome red flags with its accounting and its business.  To say the least, the idea that this company is strictly a fixed, fee-based revenue model with no risk on either end of its pipelines is completely misleading, if not a fraudulent claim by analysts.

I have introduced a new subscription-based newsletter service called SHORT SELLER’S JOURNAL.  It’s a weekly report delivered to your email inbox with:  1) a brief comment on the previous week’s trading action plus any thoughts on the upcoming week;  2) I will feature 1 or  2 short-sell, trading, or investment ideas – the investment ideas will be primarily junior mining stocks; 3) trading recommendations, charts and put/call option ideas.

Here’s what Enron’s stock did before it completely collapsed.  To reiterate, I am not making a strictUntitled comparison between Enron and KMI.  However, I will suggest there is a strong possibility that the intrinsic value of KMI’s business is below $20, if not $10.  Furthermore, in this era of insane liquidity and insane valuations being paid for anything that moves, there’s always a possibility that KMI will be bought by private equity firm before the U.S. systemic bubble bursts.

A reader left this comment on here last night.  It illustrates perfectly the thought-process of the typical retail investor, reinforcing my assertion that the story-line being pimped by Wall Street that the sell-off is from the irrational behavior of frightened retail investors is pure misleading propaganda:

Dave, good stuff here on Kinder Morgan. My Dad is way overexposed there and he will not sell…..He has rode the market up and now riding it down and downer. Swears he will not sell this cheap.  Oh well…

 

Is Kinder Morgan The Next Enron/Bear Stearns?

I’m not saying that Kinder Morgan is a bundle of fraud, like Enron, and I’m not saying that KMI is about to impale itself on subprime mortgages, like Bear Stearns, but this graph is almost identical the graphs of Enron and Bear Stearns before they they went belly-up:

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A stock does not have the chart pattern because it’s being attacked by short-sellers. It has the price pattern because there is something extraordinarily wrong with the business model and/or the balance sheet.

KMI has $40 billion in debt on top of $35 billion of stated book value.  That book value in no way can possible reflect the plunge in the price of oil.  KMI’s asset values have to be written down to some degree, at the very least.  There’s is something else going on.  I recommend getting out this stock ASAP.  I may be wrong, but it’s not worth taking the risk on a stock with a graph that looks like that.