A major oil baron contends oil fears are overblown and the sky is not falling on the U.S. economy.
Rich Kinder, co-founder and executive chairman of the energy behemoth Kinder Morgan, said the apocalyptic undertone of recent market anxiety is unwarranted and lacking a basis in long-term fundamentals. Kinder pointed to his own company as evidence, which is down roughly 65 percent in value despite having positive cash flow of billions in 2015, reports Business Insider.
“The fundamentals don’t seem to matter in this Chicken Little, the-sky-is-falling market, but they should to long-term investors,” Kinder said in the company’s fourth quarter earnings call. “It’s just if oil prices go down, sell everything in the energy sector. I think that’s a very wrongheaded short-term view, but the market is what the market is.”
The former Enron executive said the price of oil is acting as a catalyst for broader reactionary actions in the market. He argues that investors are getting ahead of themselves and need to look at individual cost cutting measures in the energy industry before they bail on the sector all together.
“I think as far as the overall market is concerned, I said in the opening remarks it seems like a Chicken Little, the-sky-is-falling market,” Kinder said. “There seems to be no discrimination based on quality or based on virtually anything.”
Kinder Morgan has remained surprisingly resilient during the current global glut in oil, posting annual positive cash flow of roughly $5 billion. Warren Buffett’s firm Berkshire Hathaway bolstered the long-term outlook for Kinder Morgan adding nearly $400 million to its holdings in the company. Shares responded to the U.S. Securities and Exchange Commission filing released Tuesday, jumping up 9 percent in mid-day trading Wednesday, reports CNBC.
“KMI has many of the qualities Buffett looks for in his investments, including stable, fee-based assets which generate significant amounts of cash flow,” Peggy Connerty, analysts at investment research firm Morningstar told CNBC.
Federal Reserve Chair Janet Yellen echoed Kinder’s optimism on economic fundamentals, telling a Senate hearing in February the U.S. central bank plans to raise interest rates again and the chance of a recession in 2016 are low. General market anxiety seems to be waning, with stocks finishing Tuesday well in the green and continuing their upward climb Wednesday. The optimism came on news the European Central Bank (ECB) is likely to engage in further expansionary policies, potentially bringing their already negative interest rates down to new lows.
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