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July 13, 2011

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This Day in MLP History

July 13th is significant for the MLP space.  On this date in 2007, the MLP index closed at 342 and a yield of 5.37%.  At the time, 342 was the all-time high for the index, and the yield was the all-time low.  What started almost immediately after July 13, 2007 was the longest and deepest drawdown in the index’s history (dating back to 1996).

MLP Index - 5 Year Chart

The MLP Index reached its low point in November 2008 at 152 for a yield of 15.25%.  MLPs have since recovered sharply, and now sit well above the previous all-time high.  However, we have not come close to seeing the 5.37% yield and the 26 basis point spread to the 10-year treasury rate we saw 4 years ago today. Below is a chart with some statistics over the years.   Notably, if you didn’t panic and held your MLPs throughout the downturn, your total return since July 2007 would have been approximately 44%.  Not bad.
Comparable stats from July 13 over the years.
Also of note, after going more than a year with no IPOs, the MLP IPO market has ignited again, with 7 MLP IPOs in the last 12 months.   There are 2 more MLPs that will likely price in July, Oiltanking Partners this week and American Midstream Partners later this month.  Interest rates have consistently dropped since mid-2007 and sit right below 3% at this point, making the spread to MLPs more than 300 basis points currently.
With demand for oil, refined products and NGLs stabilized and growing, with huge MLP infrastructure projects underway around new supply sources, with limited yield alternatives out there and with M&A activity picking up, I believe the MLP index will reach 400 at some point in 2011.  That will probably happen right before distribution ex-dates either this quarter or next quarter.
As noted here at, a few other items have happened on July 13th over the years, such as:
1930 – the first World Cup soccer game ever
1943 – Largest tank battle ever ends (6,000 tanks and 5,000 aircraft involved in battle)
1960 – John F. Kennedy nominated for president
1978 – Henry Ford fires Lee Iacocca
2010 – George Steinbrenner dies
Disclosure: The information in this article is not meant to be financial advice, we are not your financial advisor and I am posting my comments for informational purposes only.

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