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Enterprise Products Partners L.P. Message Board

  • factoids2002 factoids2002 Jun 30, 2011 7:41 AM Flag

    Why we want UBTIs [part one]

    The UBTI effort is - on the surface - a collection of data which provides evidence of which MLPs can be held in an IRA without much fear of generating high and positive UBTIs and thus generate taxes while still being held inside an IRA. But as the data has come in over the years, the data has shown that there are specific behaviors [DRIPing and secondary purchases] that lead to lower per unit UBTIs. Also, UBTIs have tended to go from negative to positive over time - so there are apparent limitations to ones 'safe' holding period. An 'IRA safe' MLP becomes less safe over time. And given that UBTI numbers tends to be very similar to Line 1 numbers, this data is of worth and interest to those owning MLPs outside of IRAs. This is information that both the brokerages and the MLPs have failed to provide - possibly due to legal limitations placed on them. This is data that only we - the MLP investing retail public - can gather via a collective effort. And this is information that we need.

    As we approach the July 4th holiday, let me make a seasonally appropriate response in which I will paraphrase some of the language on The Declaration of Independence to make a few points. I am writing this as a plea to Liza - but the offer is open to all.

    There are some truths which are becoming more evident as data and other evidence is being collected over time;
    [1] That you have spent some time on the Yahoo MLP boards assisting your fellow investors - so there is evidence of your willingness to assist others;
    [2] That a strong case can be made that the one act that you could do to most assist others might be to add you UBTI data to the InvestorVillage based data collection efforts;
    [2] That your prior message responses here on the Yahoo boards have been based in facts and well reasoned - so as the market's truths are revealed to you, you have the commitment and the ability to share those with your fellow investors - so if the truth wants to be broadcast, then the truth needs to get in touch with you;
    [3] It is highly probably that anyone who owns a "30 and growing" number of MLPs has already passed the point of where diversification meets diworsification;
    [4] As the data base of UBTI information grows, there is increasing evidence that there is a significant tax benefit in buying more units in MLPs to which you already own units - so your prior actions of continued diversification have hurt both your pre-tax total returns and your after tax total returns;
    [5] The fact [or let's call it a strong possibility] that reinvesting in existing MLPs holdings holds significant after tax benefits has not been revealed to you in your existing sources of MLP information [like in the brokerage updates you probably read] indicates you need a better source of info. The fact that you own 30 MLPs is evidence that your information sources are insufficiently providing you with the data to discern which MLP are the betters alternatives - so you feel the need to own them all - also indicates that you really are in need of a new and better source of MLP information.

    I see this as synergistic. Your multi-year UBTI data can assist in revealing the positive tax attributes of reinvesting in existing holdings - and my MLP valuation metric spreadsheets can assist you in selecting the better MLPs in which to invest - and which MLPs are good candidates for weeding out. We are the perfect match. And here I am, flowers and candy in hand, 'courting' you with as much intensity as decorum will allow.

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    • This offer is open to others who will join I.V. - and also open to those who do not. It would be great to see three data entries purchased in the same week at close to the same price - with one of the persons DRIPing their shares, with one who makes a secondary purchase, and one that only held the original units and kept the distributions. But for even the MLPs where we have lots of observations [the largest number of submission is for EPD at 71], we still lack that degree of submission of data. So we really want data. Your data could provide the key to answering some big questions.

      As for my updates . . . . The use of valuation metrics combined with long holding periods is a recipe for investing success. For those with shorter time horizons, or those wanting hot stock tips, I offer nothing of value. But even for those with shorter horizons, a good UBTI data base should be of substantial utility. Given the high seasonality of MLP profits and the high variability of UBTIs from MLP to MLP, a short holding period is no guarantee of having small UBTIs.

      But the key point is not how good or useful the data in my 'updates' might be. The key point is that the collective UBTI data base contains information that will influence our future MLP investment decisions and can be used to generate better after tax total returns. For example, we know in general that DRIPing and secondary purchases leads to lower per unit UBTIs - but does this activity lead to better tax efficiency equally across all MLPs, or are there MLPs where there is a greater or lesser effect when secondary purchases are made? Weighted average purchase price has an effect on UBTIs - so are there MLPs that specially one would want to purchase at such times when MLPs are fully valued - but you have the money to invest and are going to make an investment anyway?

      If you are willing to participate in the project without joining InvestorVillage, please send an email to UBTI.data@gmail.com. Abter1 will get in contact with you with instructions exactly what is needed. The UBTI project team will never release your email address (or any other personal information that they may end up getting from you) in any form to anyone. Abter1 will also send my updates to non-InvestorVillage members via email - and share the link to the data.

      • 1 Reply to factoids2002
      • The last public post at I.V. containing multi-year UBTI data can be found at http://www.investorvillage.com/smbd.asp?mb=5028&mn=14463&pt=msg&mid=9113333

        Tax year 2010 data has yet to be put into the multi-year format. While those submitting data do have to take some time in gathering the information - it takes a heck of a lot of time for those processing the data to get it into a usable format. Also, the spreadsheets with the UBTI output need to be read slowly. There are stories and lessons in the data - and they are not quickly revealed.

        CPA rock_n_rent has written on the UBTI issue - and his posts can be found on the IV board. Those interested in why some UBTIs are higher vs. lower should check out his writings.

        Let's take a second to count just some of the acronyms: UBTIs, DRIPs, IDRs, CAGRs, DCFs [important], price/DCF ratios [important]; EPS [not so important]; P/E's [not consistently important]; distributions/DCF ratios [very important]; distributions/EPS ratios [strangely enough - also very important]; RRRs [there are big differences in this sector]; IDRs; GPs; G&Ps; E&Ps; etc. It is a good thing that their are MLP primers at www.naptp.org [the web site for the national association of publicly traded partnerships] for newbies to get some information - because MLP investing requires a brand new lingo on some brand new concepts.

        Why do MLPs sell at attractive yields? Because they are a bit too hard for the average investor to understand. [Like now can MLPs pay out more in distributions than they have in EPS? I took me months to be convinced that I needed to un-learn the importance of an EPS. And it took me years to realize that RRRs also matter.] And that complexity is a good thing for those of us willing to do the due diligence.

        I am guessing that a lot of you have depended on the gray beards of MLP-world for info and guidance from time to time. I am glad to help due to there being gray beards that helped me when I was a newbie.

        You will find me mainly posting at Investor Village. Link to that board - http://www.investorvillage.com/smbd.asp?mb=5028

        Link to my most recent message - http://www.investorvillage.com/smbd.asp?mb=5028&mn=20230&pt=msg&mid=10664045

        Well . . . us gray beards are needing your UBTI data in order to answer questions that are still yet to be posted. We need your help - and I hope that you respond with your data to UBTI.data@gmail.com.

 
EPD
34.91+1.37(+4.08%)Dec 17 4:03 PMEST

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