The entire market is over-due for a sizable correction. We have not had one in almost 7 years. It's inevitable. The only question is WHEN?! Election years are historically up for the market, but this election is different from any I've ever seen before. Even the most devout hard right-wing conservatives are predicting an unmitigated, cataclysmic disaster of biblical proportions if Trump wins.
The much anticipated surge on the approval of 4Kscore has definitely not materialized. My urologist was correct on this one. If it were not for Dr. Frost's heavy, consistent buying, OPK would probably be selling for half what it is now. Tax-loss selling might be partly to blame, but where did the losses come from in the first place? As long as Dr. Frost continues to support the stock, OPK probably doesn't have a lot of risk, but if he steps back and curtails his buying the stock will likely collapse. Don't trip on the escalator; it will take you straight to the bargain basement.
Many MLPs are not covering their distributions. That's one of my many concerns with the whole group. EPD has decent coverage, but MMP is better. Those that are continuing to pay unsustainable distributions are a potential problem for the whole group down the road. KMI did the responsible thing. Others need to do the same.
Everyone and his brother has been recommending MMP. As far as MMP being "under the radar," not so. Yes, EPD gets somewhat more attention, even though it has under-performed MMP, but I see them recommended together consistently. If anything, MMP is now getting more attention because of better performance. MMP (8000 units) and EPD (4300 units) are the ONLY two MLPs I presently own. I've traded others, but I wouldn't touch any of them now. I have never owned KMI, because I try to avoid anything Cramer recommends. For tax reasons, I'll probably hold MMP and EPD until I die regardless of what they do.
CAT will eventually turn around, but when? Commodities looks as if they'll continue to head lower. Crude oil could easily break $30. Some are saying $20. I'm waiting for CAT to cut the dividend before buying.
Yields of 11% and 17% should be a warning sign. If the return looks too good to be true, it probably is. Anything over about 6% should be treated as suspect. I'd much rather get a "safe" 5% than 17% that goes up in smoke. IMO, MMP and EPD are the safest MLPs available. They have the huge benefit of no GP to skin the cream from the top. When the group recovers, whether it's in 5 months or 5 years, they'll be the first to benefit. The pipelines are the "skeleton" that supports the whole U.S. energy business. MMP is less dependent on the commodity price than is EPD, but neither company appears to be over-leveraged as many of the other players clearly are. I'm presently holding 8000 units of MMP and 4300 of EPD. I'm on the side of the longs and have no interest in bashing either company. If investors understand the risks, they'll be better equipped to deal with them.
As more and more electric producers switch over to nat gas, the glut could turn into a shortage. It won't happen anytime soon, but it seems like a real possibility. EPD could be a huge beneficiary of that.
Those "long-term fixed rate contracts" are only as good as the companies behind them. Unfortunately, there are many producers that are in serious financial trouble and might not be able to fulfill the contracts they've committed to. If they default and go bankrupt, there's little hope that the pipeline will be able to collect their fees. On paper, EPD looks rock solid, but that could change if producers run for cover under the bankruptcy laws. This whole picture reminds me of the "credit default swaps" that nearly destroyed the mortgage industry in 2008/09. They were rock solid..... until they weren't. I sincerely hope you're right, but this story is far from over if the price of oil continues to plunge from here. The Saudis are determined to destroy the U.S. oil industry, and they're in this for the long haul. They can afford to sell oil for $10/bbl of less; U.S. producers will go bust with oil way higher. (Crude was as low as $8 as recently as 1998.) The pipes were all built with borrowed money, and the ability to repay those loans depends on the oil continuing to flow. Even if EPD gets through this unscathed, the unit price could suffer enormously if a wave of bankruptcies sweeps the rest of the MLP sector. EPD and other strong MLPs might be able to buy failed competitors' assets for cents on the dollar before this whole thing is over.
Thought about buying RH until I heard Cramer tout it. That changed my mind. Based on Cramer's record, this is probably a better short than a buy. Cramer is THE KISS OF DEATH!
The Forbes 2016 Investment Guide Issue (12/28/2015) has a fairly good but brief explanation of the tax treatment of ETFs on page 119 in the chapter entitled "Pay Less Tax."
"Master limited partnerships, most of which are in the business of schlepping energy via pipeline and barge, tend to pay out fat dividends. Examples: Enterprise Products Partners (EPD), Sunoco Logistics Partners (SXL). At least in the early years of your ownership most of that payout is likely to be an untaxed “return of capital.”
But when you sell, you get hit by a tax boomerang. Some of your sale proceeds, potentially the full amount of your previously untaxed dividends, will be considered ordinary income. To that extent the MLP has not shrunk your tax bill. It has only deferred the day of reckoning.
MLP accounting is tricky, since it hangs on when you got in and how much new business the MLP takes on. But let’s create a simplified case in order to zero in on the value of pure tax deferral.
You put in $10,000, we’ll suppose, and get a 6% dividend, not currently taxable. The dividend and share price don’t budge for a decade. At that point you sell. The IRS comes after you for tax, at ordinary rates, on $6,000. You pay the same $2,520 tax on your dividends as if they had been taxed at ordinary rates all along. But you have the luxury of paying later.
If the payouts had been taxed immediately, you’d be clearing $350 a year, for a 3.5% aftertax annual return. The deferral kicks that number up, but only to 3.9%.
Of course, you could do a lot better–if your MLP delivers growth. Also, if you can hang on to the shares your heirs will do well: They can duck the boomerang with the “step-up in basis” conferred on inherited assets. But don’t get carried away by the tax sheltering that MLPs promise. If the company displays meager growth and if estate planning is not part of your thinking, the MLP is not the terrific buy you may think it is."
For now, the demand for EVs and hybrids will be held down by relatively cheap gas, but this will change dramatically when gas becomes expensive again. BMW has an EV that is available with a small, 2-cylinder "mileage extender" engine that holds the battery charge at 5%. The generous tax credit makes EVs a lot more attractive than the advertised price would indicate. Many cities, shopping centers, super markets and parking garages offer free parking and recharging stands. The Whole Foods near me does. Even my BMW dealer gives free charging (along with free breakfast, lunch and snacks.) Electric is definitely the wave of the future. Burning natural gas to produce electricity is vastly cleaner and cheaper than coal or oil. It doesn't have to be delivered by truck. Once the wires are in, delivery cost is minimal. In western Europe, CNG has become a common fuel offering at service stations. Not so here, yet. That's likely to change in the near future. All of our new buses run on CNG, and the air quality is noticeably better already.
Keep a close eye on the DCF. It's not as safe as you think. The last quarterly report was a disappointment. The next report will give a better indication of how safe the distribution really is. Credit downgrades are coming soon across the whole MLP sector. I just hope EPD isn't among them. There's a much closer connection between the price of oil and the viability of MLP distributions than most people think. The two safest MLPs appear to be MMP and EPD, but even those could be vulnerable if the price of oil continues to decline further.
There's no direct correlation between the price of oil and the price of EPD. This much I know: If oil producers can't make a profit, they won't drill and ship oil through the pipelines that EPD owns. If they default on their contracts to ship the oil, EPD won't get the income they depend on to repay the money they borrowed to build the pipelines. In the end, EPD is only as good as the contracts they have with oil producers. The lower the price of oil, the less secure EPD is as a going concern. That's where the connection between the price of oil and the price of EPD comes into play. Keep in mind that the Saudis are determined to put as many U.S. oil producers out of business as they can. This applies to all of the pipeline companies. Hopefully, EPD is somewhat more secure than most. If the producers meet all their contract commitments, EPD will be fine. If not, then all bets are off. It's substantially more costly to use fracking to extract oil, and that's how most U.S. domestic oil gets out of the ground. The Saudis don't use fracking. They can pump oil out of the ground for a small fraction of what it costs to get the same amount of oil here. If a barrel of U.S. oil costs $50, and it's only worth $35, guess how long that oil will keep flowing. Get the picture???
Your confidence is admirable. I agree that there's no need to cut the distribution under present circumstances, but that could change. This is a fairly conservatively run MLP, but they don't control the oil market. It will all depend on the soundness of the contracts they have with producers and how many of them survive intact. A big wave of contract defaults will hurt but not as badly as it will hurt the lesser pipelines. EPD is one of just a very few MLPs that are strong enough to come out the other end of the present rout unscathed. The list of MLPs that are still solidly above water is getting shorter by the day. It all comes down to how many contracts go into default.
Hogwash! There are many MLPs that should cut their distributions rather than jeopardize the whole company. Using borrowed money to sustain the distribution, as many are doing, is totally irresponsible. EPD is not one of those. They presently have enough distributable cash flow to keep the present rate, but that won't necessarily always be the case. Oil appears likely to go lower, perhaps substantially lower. $20 is not out of the question, nor is $12 or even $8. To go back to the 1998 price of oil is a real possibility if the Saudis want it there. The Saudis are determined to break the back of the U.S. oil industry regardless of what it costs them. They're in this for the long term. I just hope that the management of companies like EPD and MMP have the discipline to resist the temptation to buy distressed assets just because they look cheap. What looks cheap today could easily become worthless garbage tomorrow. Keep in mind that contracts with producers won't be worth the paper they're printed on if the producers go out of business.
I very strongly urge you to get your tax information and advice ONLY from a qualified tax professional and NOT from a Yahoo message board unless you want to get yourself in big trouble. Some of the information here is totally wrong, wrong, wrong. You can also call the IRS and get free information on the K-1 return filing requirements. Again...... THIS IS NOT THE PLACE TO GET TAX INFORMATION!!! Do yourself a bug favor and play it safe.
Wrong. The whole world is awash in more oil than it can possibly use. Selling oil in any form on the world market will only drive the price lower. When Iran starts exporting oil, the price will accelerate on the downside. The Saudis are flooding the market in an effort to bankrupt the US shale producers and drive them out of business. So far, it seems to be working. Enjoy the cheap gasoline, but don't expect to make any money on rising prices. The picture will get a lot worse before it gets better.
Cramer is THE KISS OF DEATH! Oil is headed to the low 30's or high 20's before the trend reverses. The bear market in oil is far from over. Cramer has been wrong on this group and continues to be wrong. The whole premise for buying the MLPs is seriously flawed. This is one of the biggest hoaxes ever foisted on investors. It's way too late to get out, but it's still way too early to buy. If you're long, you better just hope for a miracle.