This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with David Bahnsen, founder, managing partner, and chief investment officer at The Bahnsen Group.
Speaking shortly after the cyberattack on the Colonial Pipeline, Bahnsen says the news speaks to the need for a robust, voluminous, highly effective, and technologized pipeline system to transport oil and gas in the U.S. He notes that the publicly traded pipeline owners are catching a bid on the Monday morning following the weekend attack - and this follows on the best quarters in years for those operators.
Bahnsen says that those interested in clean energy should also be pipeline fans, reminding that most of the product that flows through pipelines is liquified natural gas. To the extent that pipelines allow the use of natural gas instead coal, that lowers carbon emissions.
Getting to investing in pipelines, Bahnsen says many of the weak operators have been weeded out in recent years, leaving a more high-quality field today. His two favorites are Enterprise Product Partners (EPD) and Kinder Morgan (KMI). Both are among the larger pipeline players, offering not just dividend growth, but also excellent dividend coverage, i.e. payouts are easily covered via free cash flow, rather than the balance sheet. For those who prefer ETFs, Bahnsen is a fan of the recently-launched USCF Midstream Energy Income Fund ETF (UMI).
Turning to interest rates, Bahnsen recently warned about the Japanification of America. That means a number of things, but mostly that the government’s policy of loading debt on top of more debt to keep the economy afloat is not a recipe for an overheating economy and inflation, but instead is a recipe for continued sluggish growth, deflationary conditions, and a continuation of the secular bond bull market.
Bahnsen expects the Fed to continue with ZIRP and other extraordinary measures for years to come, but Bahnsen doesn’t anticipate that to be any more effective at breaking the deflationary trap than the BOJ’s efforts of the last three decades.
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