Thursday, November 20, 2008

Jim Cramer on the MLP Asset Class

What you really need to worry about are dangerous members of a third kind of MLP: the gathering and processing MLPs that are unsafe. In general these companies collect the natural gas that comes out of a well, dehydrate it, treat it, make it worthy of long-distance pipeline transmission, and sometimes convert it into natural gas liquids, which are the feedstocks like ethane used in chemical plants.

A company like Kinder Morgan Energy Partners has a safe business because it just gets paid for pretty much running a toll road-for the volume of gas that goes through its pipes. Not so for these other, more dangerous MLPs.
Cramer's targeted sells are Duke's MLP and Williams' MLP. Personally, I think he is crazy and wrong. Fractionation is fee based - similar to pipeline ownership.

Decide for yourself. See his full "Sell Block" column here.

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