Aces High Bulletin Board
General Forums => The O' Club => Topic started by: DaveBB on January 27, 2014, 01:54:09 PM
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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?
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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.
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No. I ran across this by chance when doing research on pipelines. Part of my job is to inspect them.
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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.
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Here's a link to an explanation of map based stocks http://seekingalpha.com/article/209467-how-to-buy-stocks-in-mlps
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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 (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.
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I dont know much but oil is low, maybe oversold, could be time to jump in. been watching kmi last few days.
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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.
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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.
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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.
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:rofl
Oil prices are dropping due to the Yanks exporting oil for first time in years :rofl
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 :rofl
Free market economies :rofl
The moon landings are real :rofl
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. :old:
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 :old:
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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.
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Production of oil is dictated by the US.
OPEC like the IMF and the EU do what they are told.
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Production of oil is dictated by the US.
OPEC like the IMF and the EU do what they are told.
Go eat a pie.
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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.
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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.
OPEC's idea is backfiring. It is true that US needs oil to be at about $100 bbl to be profitable. it is also true that OPEC wanted to continue production at it's current rate to make prices drop. The thought was that if it dropped below $80 bbl that the US production would drop. It has not dropped as much as OPEC had calculated. Now the OPEC countries are at each others throats. The smaller countries are needing cash flow and want to get the oil prices up. The larger producing countries do not want that to happen. OPEC is imploding. Only time will tell what will happen. So far OPEC's plan is shooting their self in the foot.
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Moon dogs! Awesome!
In the US, we have things called "Moon Pies". I will buy one for Zack if he comes for a visit. They are not made of meat, though.
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"Moon Pies".
should we share with him star crunchs?
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Production of oil is dictated by the US.
OPEC like the IMF and the EU do what they are told.
Production of oil is dictated by camels
When camels travel in groups, they are scared and the price of oil increases
When they travel by themselves, everything is calm and the price drops
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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.
Well the first thing is that if you want to read a WSJ article online and you don’t have a sub you can do this: Copy the article title, paste into a google search window, click on the resulting news citation.
As to your question about the major failing of MLPs I’d like to first interject that this is amateur hour here when it comes to finance, (I count myself among the amateurs BTW,) already baldeagl said MLPs aren’t publicly traded which is simply not true, (no offense intended,) so the information you get here from me or anybody else is definitely suspect. With that out of the way I would say that as a class of investment MLPs don’t have a major failing per se but that with the oil boom and the shrunken treasury yield the MLP market got really stupid and inflated. Stupid and inflated are ideal conditions to create crap and sell it. They are also the ideal conditions for stuff that is not crap to become crap by being overleveraged. More generally it is when stuff is by definition overvalued.
Price wise and yield wise eventually things will go back to “normal” as you say, but that doesn’t mean that any particular MLP will be around by then nor that a “normal” price will be anything like it was last year or this fall or even now. An important feature of these things is that since they have to pass on 90% (i think that is what it is) of their earnings, they have to borrow in order to grow. The mystery now is how dangerous is the credit situation for any given MLP with incomes falling as they are.
I might be being simplistic but it seems to me that situation is as basic as an oversupply of capacity, (pipeline, storage, shipping, processing,) that was paid for with borrowed money at premium prices coupled with a yield environment that encouraged investors to pay too much for yield thereby driving the need to grow in order to keep the yield up causing the need to buy more capacity etc. etc..
Picture it this way: An MLP has 3 new oil tankers worth 300 million bought yesterday with borrowed money on the basis of them producing 30 million of revenue, say 5 million of that eventually was paid as a dividend and say the interest cost is 15 million, and 10 million went to operations. Now today let’s say those tankers can only produce 15 million in revenue, the interest expense today is barely covered and there is an operating loss of 10 million and no dividend. As collateral the tankers no longer meet the covenants of their financing, (there only worth a multiple of what they can make,) so that’s not good, who is going to lend you money for operations? Hang on long enough so that those tankers can earn their keep once volume climbs or supply shrinks you’ll be ok in the long run in the sense that you’ll still be in business but miss a year or two of dividends and what does that do to the yield for your limited partners? And what does that do to your price? If you don’t hang on, those assets that you paid a premium for get sold at today’s prices or you negotiate for a healthier entity to eat you up. So how do you pick out the eaten vs the eaters and anyway this isn’t supposed to be a high risk speculative investment anyway. And then, what does THAT do to your risk premium and price in the future? (The idea being a higher risk investment should cost less for the same yield as a less risky investment.)
The numbers above have nothing to do with reality and I am really stating my suspicion rather than a deeply researched analysis so take it for what it’s worth.
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Production of oil is dictated by camels
When camels travel in groups, they are scared and the price of oil increases
When they travel by themselves, everything is calm and the price drops
They play a game like checkers with camel kak, its true :rofl
Lots of big paragraphs means you have nothing to say except your special :old:
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No Zack, not only am I "special" but I also have lots of Very Important Things to do that I am avoiding doing. It's one of my secret talents.
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I can sleep standing up
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Yes, demand is lower but prices are manipulated also via Saudi production, designed to crash Russia and Iran's economy ; won't last long, we'll see 200-500$ barrel soon, won't take long before Persia strikes Saudi Arabia, they are already in proxy war/Yemen.
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Iran going to attack Saudi's? :rofl
The oil crisis in the 1970's was caused by OPEC
The African oil producers regimes broke OPEC by sellin cheap oil.
The Western powers did nothing in the last 40 years to manipulate world events,.
The wars and natural incidents are caused by marsh gas.
The west is not to blame for anything.
North Korea and China are to blame for everything :old:
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North Korea and China are to blame for everything :old:
And Liechtenstein!
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Yes!
:old:
They sit there are think we dont know!
They are aliens!
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Iran going to attack Saudi's? :rofl
Well ,still a proxy war but can blow up open anytime; Yemeni houthi's are armed by Iran maybe.... Russia/ China with sophisticated gear, ballistic, antitank, anti ship missile; I don't know if main media reported today, they killed over 150 Saudis in an air base with a Russian OTR-21 Tochka missile and already sunk 7 Saudi warships;
"Twenty-three Saudi, nine Emirati, and seven Moroccan forces, including a number of commanders, were also killed in the attack. Other reports said the attack left nearly 150 casualties among the Saudi-led forces.
The surface-to-surface missile also destroyed two Patriot missile systems, three Apache helicopters, more than 50 military vehicles, all belonging to the US Blackwater Worldwide security services company. The report added that two Saudi warships were damaged while fleeing the incoming Katyusha rockets that were fired spontaneously due to the missile impact.
- See more at: http://en.alalam.ir/video/1769109#sthash.nAyhlvJY.dpuf
http://www.reuters.com/article/us-yemen-security-idUSKBN0TX0FW20151214
https://www.youtube.com/watch?v=1HlBTQljlBM
Yemeni firing russian missile vs Saudi tank; https://www.youtube.com/watch?v=tqK6XHydn-I
12.12.15 Saudi bombing of port in al-Khokha, #Yemen. https://www.youtube.com/watch?v=HvW1XGv5iI8
12.05.15 "Yemen's army and Ansarullah fighters targeted another Saudi warship in Ta'iz province early on Saturday, the seventh Saudi vessel sinking in waters offshore Yemen in the last three months."
(http://en.abna24.com/cache/image/2015/12/05/b3ae08238f3ef8e1f7279b591b997122.jpg)
http://en.abna24.com/service/middle-east-west-asia/archive/2015/12/05/723167/story.html
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The Saudis are actually fighting a war instead of funding one?
Black water? mercenaries ?