Master Limited Partnerships

[DaveBB]

I just know enough about this subject to be dangerous.  Master Limited Partnerships are an investment vehicle (a security?).  They only cover the transportation of energy (pipelines, oil tankers, trains carrying coal, etc).  They have a surprisingly high return rate (7%-27%) for several reasons.  A company that is set up as a Master Limited Partnership pays no income tax, but must pass on 90% of it's profits to it's unit holders (same thing as share holders).  A unit holder of an MLP pays no capital gains tax, just income tax on the profits each year.  However, selling the MLP results in a tax.  A special tax form, the K-1, has to be used to report income on MLPs.  This is a pretty complicated form and can cost several hundred dollars to have a tax preparer fill out.

So that is about all I know of Master Limited Partnerships.  Anyone care to share their knowledge of them?

[Curval]

Sounds like someone is trying to tak you into an investment,  The minute I see 27% as even a possibility of a return I get very very suspicious.  I know you gave a range.  Inevitably people ignore the low end of that and focus on the high end.  But, it is TOUGH to even get 7% on your money today.

[DaveBB]

No.  I ran across this by chance when doing research on pipelines.  Part of my job is to inspect them. 

[pembquist]

As I understand it these partnerships are good for people with lots of money. The taxes are complicated, you get tax losses to offset against other income, your distributions are exposed to certain liabilities of the partnership, if you invest more than $1000?? (can't remember) on them in an IRA you have to pay taxes because of unrelated business income.  I get the impression they are a little like REITs but more complicated for the investor. I imagine they work out exceedingly well for the General Partners though

There are mutual funds of these things and they are starting to make ETFs out of them, that gets around the tax, liability, ira part. And then there are things like KMR which isn't the MLP but the manager of it so I assume you get around the stuff that is bad for the less rich but is probably the only reason the things exist anyway.

[pembquist]

Here's a link to an explanation of map based stocks http://seekingalpha.com/article/209467-how-to-buy-stocks-in-mlps

[pembquist]

Wanted to bring this back because wall street doesn't believe in history and tries to help us forget.

Yesterday it seemed so promising but today's news is a sad tail: http://www.wsj.com/articles/oil-rout-accelerates-selloff-in-master-limited-partnerships-1449594051

I hope DaveBB didn't get sucked in, and reading my own post I don't think my skepticism came through strong enough.  Remember: on Wall Street stocks are sold, they're not bought.

[NatCigg]

I dont know much but oil is low, maybe oversold, could be time to jump in. been watching kmi last few days.

[Brooke]

I think that oil is quite low, but things might get worse before getting better.  It's hard to say.

At some point, I will be buying some oil stocks, but I am not in yet.  I think that there will be a large (2008-style) stock-market crash between now and about 1.5 years from now, possibly accompanied by a huge crash of the gigantically bloated bond market.

[BaldEagl]

MLP's like General Limited Partnerships, 1031 Real Estate Exchanges an Real Estate Investment Trusts are not traded publicly on the exchanges and are therefore highly illiquid, meaning you may not be able to sell your holdings.  REITs generally don't offer liquidity events for 7-10 years.  LP's have no timeframe, therefore you may never be able to sell except to a third party discounter who will offer you pennies on the dollar if anything.  In addition, returns are not guaranteed and are subject to change.  Certain LP's may also require you to "invest" further to cover operating losses.

Unless you have a lot of money to throw around I'd skip this idea.  Even if you have a lot of money I'd be very very careful to fully vette the investment although a solid investment can produce a very nice fixed income.  Even at that these types of investments should never exceed 4% of your total portfolio and, like everything else, diversification across types, categories, etc will help protect you from losses.

One last thing; you have to meet specific income and/or liquidity standards to even be able to invest in these types of vehicles.

[Chalenge]

Here in America we are about to change leadership. I can think of a few ways to make heaps of honest money, but they all require sweat equity. It always has been and always will be the best way to make money and stay out of jail.

[zack1234]

 

Oil prices are dropping due to the Yanks exporting oil for first time in years

I bought a 17th century snuff box.

Daft rich people always have coin to waste on trinkets.

You all know WWIII is around the corner, everyone was adamant two weeks ago it was on the way.

Your investments may go up or down

Free market economies 

The moon landings are real

Posting on a flight sim thread because you have too much coin and cannot decide what to waste it on.

I can give you a 500% return if you give your coin to me.

I have a batch of Moon Dogs for sale $1200 each.

Moon dog milk is $50 a sniff.

Moon dog milk is the new mouse milk

[DaveBB]

Nope, I didn't get sucked in.  Though as an inspector in the petrochemical field, I am quite keen on keeping my finger on the pulse of the oil industry.  Though I think the mechanism keeping oil prices low is not the export of U.S. oil, but the over production of OPEC oil.  About two years ago, OPEC announced that they would attempt to keep oil prices below $80/barrel (I believe this was the number).  North American oil is much more difficult and expensive to extract and refine.  Compared to Saudi Arabia or Kuwait, which has something like a 50 to 1 return on energy gained vs energy expended, oil in North America is around a 10 to 1 ratio.

So, what is the major failing in MLPs? Won't they simply go back up in price and return once oil prices go back to normal?  I can't view the full article.

[zack1234]

Production of oil is dictated by the US.

OPEC like the IMF and the EU do what they are told.

[DaveBB]

Production of oil is dictated by the US.

OPEC like the IMF and the EU do what they are told.

Go eat a pie.

[NatCigg]

i read yesterday opec oil is much more profitable 80 to 1 where american oil is 10 to 1.  opec sticks it to america by keeping price low.

i also read refineries are doing great because the price for oil is relatively low versus the price of gas and diesel and they feds started putting more corn in the gas.