Roaming Returns

015 - Why MLPs Are Worth Owning Despite Their K-1 Tax Forms

October 17, 2023 Tim & Carmela Episode 15
Roaming Returns
015 - Why MLPs Are Worth Owning Despite Their K-1 Tax Forms
Show Notes Transcript

Most people avoid MLPs because of the "dreaded" K-1 tax forms. But once you really understand the tax advantages that come with investing in these types of companies, you might change your tune.  

Yes, K-1 forms are a pain in the butt, but that's what tax preparers are for. Some of our favorite stocks are MLPs. One of them is managed by Carl Icahn who's considered to be one of the great investors just like Warren Buffet.

Tickers we discuss in this episode:

  • NEP
  • MMP 
  • ARLP
  • IEP
  • UAN
  • KRP
  • NRP
  • DMLP 


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Ticker metrics change as markets and companies change, so always do your own research. The content in this podcast is based on personal experience and is for educational purposes, not financial advice. See full disclaimer here.

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Welcome to Roaming Returns, a podcast about generating a passive income through investing so that you don't have to wait till retirement to live your passions. 

Today's episode is all about the masters of limited partnership. These babies are completely misunderstood because of their tax implications. And many people avoid them like the plague. Once you understand what an MLP is and how it works, they're a great asset to add to your portfolio to tune in, we're going to go over all the details. So you guys might start looking at MLPs with shiny eyes of optimism instead of dreading the crap out of a k one. So I was shy ne
prevents peeps of P bats get the shit right. Oh my god, Timothy. If I sound bad, I'm sick super sick. So we're both sick we both got like congestion and the COVID cold. I don't know if it's the COVID or the flu or just we're just under the weather from the temp changes or what the deal is. But we both have throat issues that we might sound like men. Do you deep voiced men
show see well, I always found deep voice
I know but even more deeply as you sound like a hawk in black man. Y'all doing all right, so to day,
since we've covered like most of the other things like rates and BDCs and bonds, bonds and CDs, our chairs for today we're going to do MLPs and LPs and LPS but lps on kind of data that really matter. But MLPs for the most part,
I will tell you why here in a second. But the letters for those Stanford masters have limited partnership and LP obviously it's just limited partnership. So what is an MLP?
MLPs are publicly traded partnerships, designed to combine the tax benefits of a limited partnership with the liquidity of publicly traded securities, which is a fancy way of saying they're just like stocks. They just are taxed differently, but they're just like stocks. Yeah,
so most of these like BDCs and perhaps was another one reads, they're just in different categories. But
they're kind of similar because they both have to do that 90% of their income after taxes distributed to the shareholders,
but just similar to these, but each one of the categories category is different.
They have a 90% threshold when it's completely different than 90%. MLPs refers to they have to get derive their income from natural resources in some way. It's something that Congress established in the 80s because they were worried that MLPs were going to take away corporate income tax and they set this thing up or they thought they couldn't actually follow it. And once the once the because the MLP what happens is there's like one person that runs everything. And then they have silent partners that just contribute money but like once the one person that ran things realized, hey, if I just do an oil or gold or stuff like that, then I can get away with doing whatever I want according to the law, so they figured a way around it so Congress wasted their time. But again,
this sounds absolutely like the the record break of the same thing that we talked about with Rory it is and the other thing where they had a special weird category where they created a specific type of equity, and MLPs are no different than that.
I mean, when you have an MLP you're actually referred to a unit holder and not a shareholder. And with that comes, what a lot of people perceive as a con con, unit and negative is when you're a unit holder,
unit holder. I really am picturing something inappropriate. You
don't have voting rights, whereas you're a shareholder. You do like they'll send you a like if you if you've held stocks long enough you'll get like emails or actual physical ballots in the mail asking you to vote on proposals for the stock that you own. As someone that invests in MLPs you don't get that you have no say it's all up to the top honcho you just kind of follow what they do, and collect money. So I kind of prefer that because I literally could give a rat's ass about what they're doing. I will
say I'm probably gonna say shareholder even though it's technically unitholder unit holders I just have so weird
I hold my unit in the morning. Says MLPs are required by law to distribute a significant portion of their income to unit holders, which can be high yield, but they didn't really specify what a significant portion of their income BDCs
is 90% and there's an ri Rei T's is also the 90% This one didn't actually have a number so I don't know I don't know what's
your guess like because legally they could just say well, it is significant amount of our income because
that gray area of like ambiguity fantast there's
some nonsense again, up to the the will of the primary master of everything, how much they actually distribute as income to their shareholders or unit holders. I'm sorry.
But MLPs have like another differentiating factor with taxes. So they're in a
developer you talk to any accountant before we get a segue to the tax board. If you talk to any accountant, they're like, Oh, my God, K ones are horrible are the worst things ever. or
individual people we usually get more of that where they're like, oh my god, I hate dealing with the K ones. Okay,
but that is a segue here. We're gonna talk about taxes. For a second.
But basically MLPs and LPS have something that's very differentiating with taxes where they actually get around paying taxes corporately, and that gets passed down to the individual shareholders. In order
to pay the income tax from the company. The master partnership person pays all the taxes for the for the company for their company income taxes, at their income tax and then to tax for the like, like when you normally have stocks and you have capital gains, and you have dividend, stuff like that, that's taxed at a capital gains tax rate. Whereas with me, with MLPs it literally is just your income tax, right. So like if you make less than 40,000, you're taxed at that rate, regardless of how much do yield you got from your dividends,
they call it pass through taxes. So
all you have to do then is you have to determine what tax bracket you want to fall into the woods to determine what tax percentage that you want to pay. In income tax and then you just withdraw that much per year like our takeaway is like 41,000 is a good range because you're getting taxed at the lowest rate 12% 12% So like like if you compare MLPs to regular stock at 40,000 gets a from herkes Catholics I bring it up all the time. I guess dividends from them. They are taxed at the capital gains tax rate, which is like 22% or whatever it was a matter of I'm only pulling 40,000 out that's actually an accurate if you're taxed that 12% No you're not. dividends are taxed differently the MLPs it's at a different tax bracket
to say capital gains, capital gains is that your normal brown that will never the dividend tax,
capital gains a dividend tax. Whereas MLP I can make I can literally have four MLPs and get $40,000 in dividends and I'm only paying the 12% Regardless, it's a minut difference, especially at the 40,000 range, but like once you're up to like 100,000 That's that's a huge difference between paying 12% and 22%. Right.
So switching over to LPs, the Limited Partnerships they're very similar to the MLPs and structure but they aren't just in the what was the energy stock mineral there they can be in any various initial
LP what you want to think of when you think of LPs is think of like the venture capitalism, sketchy stuff, sketchy stuff, you just invest in different businesses
I know but that's usually the stuff that people make big bad decisions and early on and then they're like oopsie put all my eggs in one basket and totally got hosed. I'm sure there's good ones
I don't know holder
holders. Oh my gosh. So apparently, LPs are typically used for real estate, private equity and venture capital investments,
but they're mainly venture capital. Yeah, probably. Because already all the times they invest in real estate the real estate at some point either becomes public in a Rei T fund of some sort, or it becomes public and something like Fundrise or another entity like that, like generally it becomes public. So that whole parts, whatever, it's just venture capitalism,
and they have the same tax type setup. So I mean, we're not going to dig too deep into LPs. But the difference is, so the common LPS private
MLP is public. That's the huge different segue from that. And doing an LP you literally have to go through an entity that says hey, we're offering so many investors a chance to get in on this this business. Venture. You're part of a private club, where as MLPs you can go on the stock exchange and you can do it by and
so no peas are available through stock exchanges, whereas LPS typically are not just like by party, so I invite only or someone else and we actually got a bunch of the ones we were in because the the name of the title is actually said LP but when I actually dug into it, they're all MLPs so I don't know why they just can't add that one. Extra letter their thing I don't know what post
is, this episode of Sesame Street is brought to you by the letter M P, Li, P Melby. That
we just talked about how MLPs are specific to the energy sector while LPS they have really no limitations for this specific industry.
MLPs may be subject to specific regulations that compliance requirements related to that industry, unlike LPS who encompass various industries that apparently is just
so I would assume that they have weird specific regulations and energy fancy
way of saying hey, you have to abide by these specific energy rules.
I don't even know if you want to go but like
if you think about like that, if you think about like whenever certain politicians are in power, though, like institute like drill, outline drills, certain areas and stuff like that. So MLPs are actually held to those standards like if they say you can't drill on the Permian Basin you can do on the Permian Basin. So the MLP would then have to because majority of the MLPs have some footprint in the Permian Basin in Texas. What that is, is it's a huge oil field in Texas, like every energy company that's part of the American Stock Exchange has some sort of people in the Permian Basin.
I literally have never heard of this. So that's fascinating. I don't even know if we need to overcome an industry since LPS aren't traded on the market, but in the energy sector, what Tim just said oil, natural gas pipelines, I guess the storage of energy stuff on
the sidebar, if you're researching these and you come across a couple and you're like I don't know which one to go into, like anything to do with pipelines. It's like we brought up last time when we did that REIT one with a cell towers pipelines. What that means is like for the companies that drill for oil, they have to ship the actual crude to the refinery, and the only way to get there is through pipelines. If you can find companies with pipelines that's literally like the cell tower or the like Chevron and Exxon Mobil will actually have to rent space in their Poplock pipeline to transport their transports crude oil from their drill site to the refinery. Yeah, we'd
rather go upstream to the pipelines or maybe the processing facilities but not actually the oil distribution people
or stores is another big one. So like I like the pipeline storage LPs.
So I think what we said before LPS encompass real estate, private equity, blah, blah, blah, pulling capital, venture capital, I guess agriculture, like farming. Yeah. I think renewable energy should fall under MLPs when you think
I don't think it's quite reached the legal status of energy yet. They're still working on it. Well, maybe we'll
see some stuff pop up for like wind and solar later within
there's a couple of MLPs that have a lot of their fingers in the renewable storage like NDP is one that was in the news recently like it got shut on because it said it's not going to grow its dividend by 12 to 14%. It's going to be like seven to 9% which is dividend has nothing to do with like income or like revenue. It's literally that their dividends not going to be 14% next year, it's going to be 9%. And it's the stock without like,
growing growing at that percent. Yeah, like that
literally had nothing to do with the fundamentals or like the revenue production of the company was literally the dividend going forward was only gonna be like 5%
Was that because they just wouldn't have a big enough profit margin or like they were just fine.
Maybe they're refinancing their debt. Maybe the interest rates on their debt caused them to actually they can't afford that 14% That's
what I was gonna ask them whether you're
productive, like the production or the fundamentals, the company was literally just to do with it. And so
that, to me, sounds like a very responsible company preemptively planning for either a bigger expenditure or maybe less demand or something to be able to continue to pay dividends without actually having to do a
dividend. I don't really recommend stocks very often in the podcast, that's one that you should do your individual research on and look into because that one, the way that renewable energy is growing and will continue to grow and the fact that it's like literally 40 to 50% underpriced is a pretty good one to start looking at NTP NTP
Alright, so let's cycle into the taxes because this is like a big the whole thing with MLP is and we're not tax professionals, like I would definitely check with an accountant. We
have an accountant for this crap. Yeah. So
we don't have issues with the k one thing because we basically just hand it over to you Sir William and let him
charges like $100 Extra but it's worth
I don't even know if he charges this extra
for it as they all do. Okay? Because it takes like three times as long I
still don't think that I really pay that much considering how much crap they had yesterday for my taxes. So
with the k one that by the way, the what the way the k one differs from the 1099 that most people get the 10 Nine and I will say you got X amount of dividends per year. So like say you got $1,000 in dividends. So they'd say you have $1,000 in dividends. Here's your tax rate. It's simple. It's like a 10 1040 easy form. Well,
it's so anybody who's done random work, whether you don't Instacart or GrubHub or any of that stuff, you'll get a 1099 private contractor. So I guess dividends and stuff get reported.
But it's it's very simple, simple form. Okay, one's more complicated
one has so much stuff on it. And actually we thought this was a bad thing, or we everybody talks like it's a bad thing, to be honest now that we dug deeper into this. It actually is a tax benefit, in my opinion. MLPs
are actually taxed
in several different ways. So you have the fact that the company can actually make more money because they don't have to pay taxes twice. What not twice the lake. There'll be they're able to pay out more because they don't have to pay taxes to the shareholders. So then you actually assume the responsibility of paying the tax on urine, but that can actually work in your favor as well because what happens is, so they do that pass through thing, but if they do something a little wonky when they do your payout, so when you're getting your dividend payouts they don't act like normal dividend payouts though actually put some kind of I guess clause or differentiator in
there. Whereas MLPs are taxed they they take in depreciation and length of holding and all this other stuff. So you can get like $3,000 in dividends and then but they can say that the each share each unit that you hold depreciated $1,000, you're only going to be taxed on the $2,000 differential instead of the 3000. You're talking
about the depreciation aspects. Okay, so how that part works, Germany by prefers, okay, we'll do whatever. So let me go back to what I was talking about. So when you get your distributions, that piece of those can actually be tax deferred, because a portion of the distributions that come from the MLP is going to be considered as return of your original capital, which reduces the immediate tax liability for you as an investor, unit holder. You as a unit holder? To me, that's really cool, because then they like, I don't know, I guess it's like a play on things, which everything in the accounting world is kind of like planning and moving stuff around. So I think that's actually really neat. And when he was just talking about the deductions, so because you're investing in, say, these pipelines and you're investing in storage facilities in your start investing in this other stuff, and you're technically a partial owner of these things, as a unit holder, you actually are allowed to claim deductions on the depreciation of the assets of the company. And much like when you own a property, I think rental properties. So anybody who has a rental property, you actually incorporate depreciation of the property as a tax deductible item. So your k one paperwork that you'll get will actually have items if you are able to actually claim any of those depreciation deductions, which again, reduces your taxable income, which is really cool.
The part that I find most fascinating about MLPs is the longer you hold them, the less taxing power on how's that? Let's this capital gains treatment. As long as you don't sell your units. Any capital gains may be subject to provincial per format perf preferential preferential preferential capital gains tax basically means to say you hold one of your MLPs for five years, we're gonna have five years of numbers to actually lower your income
tax. I guess they do have a special bracket of capital gains, which is really interesting because normal capital gains are your normal tax bracket.
Normally when you sell like say you buy something in 2020 and you sell it in 2023, the difference between the 2023 price and the 2020 price is your capital gains. So if it's 6000, this year, there's a tax on the $6,000 capital gain with MLPs because you held it for that three years, they'll actually take away it'll be they'll take away three years worth of depreciation or something along those lines where you get every year you hold that you have less capital gains tax.
The other potential benefit that you'll get tax wise with the k one is sometimes you'll actually get tax credits, when the company that you're invested in is involved in things that qualify for these taxes and like the renewable energy realm or different projects like that, so that'll again further decrease your the amount of your taxable income
and the last, the last part, that's super, I think important is because MLPs are taxed for your your state income tax based on every state that the MLP operates in. So say you have one that originates in Florida, but it operates in Georgia, North Carolina, like in the south of the southeast, it'll do that you will get actually have to pay income tax and all those all those states in the southeast that actually require you to pay income tax but that can be a negative MLPs do is they generally will set up their their their states that they use as ones that don't have a state income tax like South Dakota and Texas and so a lot of
them will be smart and they actually help you in that incentive. Like I think Delaware is one top Dakota is definitely going to try to set up their orders of operations and states where they don't have state tax so that's gonna benefit them
that'd be horrible. You get to the income tax. state income tax from say like Ohio reminds
you the Amazon FBA crap where to hire like why don't remember
doing any business in Ohio. You're like, well, you owe us like $40 for your Ohio.
Right? I don't think we've gotten one of those letters. All right. So why reasons why you'd want to invest in MLPs. So diversification in general is just always a good thing to have different assets of different types of stuff.
And what you will find with a lot of MLPs, even though 90% of their income has to be derived from natural resources and oils. Minerals, whatever. What they generally will do is they'll actually have a lot of break even companies and other things like he looked at iKON for example, they have like automotive they have like fertilizer they have like health care, but those those portions of their business don't make a lot of money. So the MLP like their energy part. Excuse me, their energy part. Like they get 90% of income has to come from that so like but they are very well diversified almost every MLP.
So that's how they can pay those higher yields to investors. And then even though everybody thinks the k one thing is bad, there's a lot of tax advantages, like the passing through tax thing to avoid double taxation. You got those deductibles you got all that other stuff we just talked about? And Tim came across this little nugget right here where because you own them in a different way you can will them to your kids.
Yeah, because you're not actually a shareholder. You're a unit holders. You're actually a you've invested in actual property like we've all invested in a pipeline or you invest in oil refinery. You literally can will the shares to your kids and then it does like from what I was reading like it the way they do it when you will from generation to generation is they upped the price for the the willing of it and then when your kids get it, they automatically get a tax break because of the price and so So this
to me actually sounds like the people who want to invest in like physical ownership of stuff. The REITs might not actually be the right, the right asset for that it might actually be the MLPs which is pretty cool. And then there's a couple of reasons why you may want to actually avoid buying MLPs is if you're if you don't have a tax accountant and you really are overwhelmed or whatever with the k one forms. They are unformed garbage. They're a pain in the ass. Like I just did the thing. So if
you plan to do the research is accurate. If you've ever gotten a k one, you know this is not fun.
And people usually don't realize that until it surprises them one year and then they're like, oh up shit creek. They're not happy about it. Another
aspect which I have a problem with is that you have no control. Like there's no balance literally it's the one person that's the master partner running things. I did literally don't care as long as they're competent. I don't care. Yeah,
I actually think that's a pro in my opinion, but for the people who want to be more involved and invested in voting in the companies they invest in, I was sick, that can be a negative. All right, Sam, you want to talk about the
actual tickers. MLPs that we are currently in our AR LP, which is a coal one that's like they get the majority of their income from coal. Depends how you feel about coal. Like I don't think coal is going anywhere. So that's why I invest. Other people think coal is on its way out. So again, you have to do your own research, but IRLP is pretty awesome. But ever since I've been in it and things literally just went straight up as someone we were talking about a couple a couple of weeks ago at a podcast I said ARP is the one that we are up like 27% and we're up 23% For some reason, some reason that it's a yields a lot I'm trying to find it hold on I thought I had this all set up and apparently I didn't because
we just went out to eat from a PJs birthday. Okay, so ARP Yes, Papa Joe
currently yields 12.3%. So that's a pretty good, pretty good dividend yield on the ARP. I like it. I like it. And I don't think coal is going anywhere. So if you think like I do, I put a couple $100 in that one. current dividend they give you 70 cents a quarter. So that's what is that that's 20 substances share per month.
That's pretty good. And I kind of agree with Tim on the whole coal thing. We're up in the northeast and it's just I don't like the fact that it's pollutive. But until energy, like alternative energy really has a lot better infrastructure. I think it's gonna be a lot bigger of a transition phase. So I don't think coal and oil was really going to be on its way out anytime soon.
The next one that we're in is one that we were talking about that I forgive has the first or second podcast.
It's an IEP, this icon icon, that's the one we couldn't pronounce properly.
It has a 22% yield right now it's $1 per share. So that's 33 cents a month per share.
It's looking even better now than it was before.
It's it's undervalued. Like no matter what report you read, it's undervalued. It should be like the worst case scenario should be like 25 $26 a share and it's an 18 right now so you have like 33% increase come in at some point, Kramer would say bye bye bye. Oh, the one I just found recently I think it was a month ago as KR KR P. It's Kimball. Realty partnership. It's a really good oil one that is under the radar because no one knows about it. Like dude, literally no, I don't know anyone has ever said anything about therapy or even how I came across it. I just think I was tinkering. And I was like, what it's what is what is this one that one yields 10% That's pretty good for an under the radar 139 cents a share. So 13 cents a share a month and it actually I really like the only problem with that was liquidity because like so few people know about it. And then another really, really good one is UA en si something some partners it's a fertilizer one and literally is all about fertilization for farming. And that one it says 20% but like it's a variable one to be honest, like sometimes it's $4 a share. Sometimes it's $8 a share. Sometimes it's like 60 cents a share. It's a variable one but it generally is in the upper teens to low 30% per year and we own all four of those and then when we don't own them we've owned in the last I want to say two years ago is MMP Magellan, and it's currently 24% undervalued and it has a 14% five year cage for growth. You remember the cage or discussion we had? That's basically compound Automatic Renewal some another I forget what the G's compound Automatic Renewal growth. That means when you can't when you take the dividends and you compound you put it back in to your original principal compounds this project projection to be 14%. So that means if you buy it now every year for five years, you should be making 14% with your dividend included. They'll has a 7.7% yield but it's very well covered it has raised its dividend as 22 straight years so it said it's on its way to being a dividend king I think it's 25 years Okay, aristocrat, aristocrats 50s
is better no we break that down because obviously that's your boy I was reading
something today like I was one of the publications that I subscribed to they came out with the end of the month beginning of the month where everyone called Reading List and one of them was where to invest money if you've never invested before, and like literally all seven of the stocks were like 3% dividend aristocrats. We got me thinking less stupid. Why would you Why Why would you recommend that whenever there's so many out there that are I think dividend aristocrats for more than 25 years and there's a lot of there's a lot a lot of companies that have been 15 to 24 years. They're not quite a dividend aristocrat they pay like double and triple what the dividend aristocrats pay so why would you have new investors start on like Coke when you could? Literally there's like a company called coke co ke which does the bottling and the shipping distribution for Coke which is K Oh, but they pay like so I want to say four or five times the dividend that Kayo does. Now my question is the same freaking company.
Do they bottle for other startup or whatever they do? They
cook they do like for Dr. Pepper and some some other one Yeah.
So to me if we're looking at you go second second tier thinking where you go upstream to the things that they need to do this stuff coke could not actually package and ship their stuff on zyk all good god Paul jeez. That makes me laugh. I'm sick.
But like my my point would read this it was that I think that's bad instruction to have you limit your self to dividend aristocrats
when it goes back to my whole theory that like you get all these news articles and I really do believe that the people who invest in these companies pimp it to those that are guess what they consider the peons those of us down below after they've gotten their profits or gotten their shares in and the price is either pushed up or they didn't like you know what I mean? I really do feel like they're like the bond thing was a really good example of that where Tim saw that bond prices had dropped significantly. Was it six months before anybody started writing about it in your news article or what do they call publications yet? No.
There's still like trying to talk people into buying bonds like what right now I wouldn't buy bonds because they went up from their lows whenever I started buying them like months and months and months before they started right about them. They're still depressed so you still can make some money in bonds if you get the right one with the right credit.
But don't buy blind you gotta buy with the right criteria, make sure they're under par. But what happened
is I'm pretty sure that all these quote experts got in the same time I did because they saw it down 2030 40% And they said oh, everyone should get into bonds. It's the year the bond 2024 is gonna be the year of the bonds. And so like we bought it at like say 78 cents on $1 That'll shoot up to like 9293 94 cents $1 which is still appreciate it's still a 6% gain
was down to a lot of game for what we got versus what you guys get in if you follow those people's recommendations,
plus the interest, double digit return, probably on the bonds but like they were up 1820 to 25% of bonds that literally not done much that maybe went up $1 Or two, but because I got him so low that it's awesome. And what timeframe
is that? Six months?
Yeah,
so there you go, guys, like we are making it a promise to basically tell you guys about stuff when we know about it. Like we're
gonna invest in a thing which I actually haven't prepared anything for. I may do an email for for the subscribers at some point is it looks like 2024 more so than bonds is going to be the year of international markets like the Chinese market and then the Venezuelan market and the Indian market are all are projected to grow by like their GDP is by like, between four and 10% whereas America is at 2%. So looks like international funds and companies that invest in international businesses. Whatever the way to go.
My question would be How would somebody start in researching what types of asset should people start researching to then get maybe a jump? Or just tuned into us because we'll give you the whole download when it happens. I would like there's any funds or they are they are
normally funds but I find like stuff that I don't know. I don't know. 100% I generally look at closing it and open in funds right away because they generally have a good breakdown of what the fund is invested in what the objective of the fund is. And they have a premium versus discount. Let's do the fun so I can tell a flex there's a say there's an India fund. It's whatever it's like I think 17% under undervalued right now. So you're going to make 17% At some point whenever it gets back up to the par value.

That was my question. I'm sure we'll do that coverage of an actual episode when that comes around because I kind of want to discuss more of the foreign market thing in general because there's a taxation thing to consider because there's sometimes extra taxes if you're out of country
but big international but not Canada would be my guess are UK, Canada, UK they're projected to grow about the same rate as America so why deal with the taxes and accompany that? Send another country that you can get the same dividend with less tax hassle? Or think like China, like Ali Baba might be a good one to look at because you know, that's Chinese or Chinese. The Chinese Amazon ruku or some nonsense is another Chinese Facebook
one. Yeah, it's the Amazon. It's the Chinese.
There's a lot of funds that deal specifically with India and there's a lot of funds that like they're literally called the International Fund like they deal with countries, obviously countries outside of America, they have a breakdown like it's 30% Netherlands which Netherlands is worse than America from what I'm reading. They're projecting like grow at 1% whereas America is projected to two so but I'm thought I think it's going to be is it's going to be these countries that people have been Pooh poohing because like China, for example, like we're at war with China, all the time in China. But China and India are two huge ones. Probably men as well. Right? But Brazil,
really back when we get too far off topic because we'll probably do a whole episode on that. We have anything else in the MLP realm MLPs
are vastly misunderstood. And I think that's part of the we were just having a discussion about, like, what's people's initial hesitation in getting into the markets and I think that knowledge, I think it's knowledge and we discussed it back and forth, but because people don't know anything about MLPs they're afraid of MLPs all they hear is MLPs are a pain in the ass because of the k one typically what you fear you
tend to villainize? No, they just avoid like,
I'm gonna avoid it but like if you do any research at MLPs, you might not be getting that say 12 to 16% dividends you can get with other companies, but you're getting a say nine to 10 to 11% dividend for less taxes, which in the long run actually will be the 14 to 16%.
So and that's actually another episode we'll probably do at some point where sometimes you have to look behind the scenes to calculate everything out because your end of the day like yield has other factors in the plan. Now the only
hesitation I have about MLPs and that would be I don't know what oil is going to do. Because it's all up to the cartels basically the OPEC cartel. I think oil is gonna go up to like $100 a barrel. I don't know when it's gonna be. So I think you have a few months left but MLPs you generally want to hold for larger durations of time. Like if you mess up on a say a closeted fund you can sell it real quick and not have any implications but within within an LP even if I'm reading the taxes right even if you sell it for a loss, you don't get a tax break for that loss with an MLP you say you're still gonna have to pay taxes on the dividends at your state your income tax level, but you don't get to with you right off the say I lost $2,000 In this bad investment. You don't get to write that off.
Again, I would consult a tax tax turning a rental thing to boy
like the mile because his hesitation would be the energy ones like unless it's renewable energy, or coal energy like a RLP because we don't know what oil is going to do. You could always just put a couple, a couple $100 Maybe $1,000 into different really good MLPs that deal with oil because oil is going to be around no matter what people say it's going to be around until we exhausted like and I
like the infrastructure aspect versus the actual oil pipeline ones are better because Tim we've been actually bitten in the butt quite a few times where oil do like a weird stock split and then it like what did it like completely jacked us up. You remember
20 Right right after the pandemic oil was trading at like $20 a barrel and then it went down to like negative $20 A barrel I bought into an Oil Fund when it was at like $12 a barrel. And then it went negative. I was like oh crap, this is not good. But then it did it shot up to like $60 I was like well, I didn't theory I should have 500% Right. So that should be 5x It wasn't what happened was once the once the oil companies saw that the oil price oil going up, they did a reverse stock splits, they took my 100 shares or give me 10 So it was a 10 to one reverse stock share. So I went from having 100 shares where would have been 500x in order to buy their next
one garbage. Yeah, so they do some weird, wonky. Exactly what they do with the oil prices like they manipulate. They're like, Oh, we want the prices to go up. We're just gonna like pull back availability. It
is like there are a few natural resource MLPs out there that like North Dorchester, I don't know what it is, but I know it's like one of the biggest mineral MLPs and that pays like 11 or 12%. And I do believe like gold and silver and palladium and things like that are going to be big because of the electronic vehicle strike. I look into the big one. So if you can find a good natural resource MLP I totally put money in that.
You have not found on Dorsetshire
I think it was called. We have it. We put it in the bio I slipped the notes in this I'll put it down there to look it up.
I think we own it.
We did for a while. But then I got fixated on bonds and preferred shares so
he saw a better deal so he went for the wrong one.
This is the problem that you may encounter. If you're like me, you don't have a ton of money. We don't have a lot like we don't have like hundreds of $1,000 in our portfolio we have like 100,000 Sometimes Sometimes 85,000 Sometimes 9000 It's not a lot so when I find a better deal for a higher discount with more room for growth with it with a good with a good dividend yield 10% or higher dividend yield I have to pick and choose like okay, well I know this is going to grow more than one that I currently have. So I know I pay more in capital gains tax anytime I take a profit on one but I'm getting a better deal with more potential for growth. So you have to do like the musical chairs type of thing whenever you don't have a lot of money in your portfolio. If you're like me, yeah, kind
of sucks. But it is what it is. So you have to come up with your look
at the show notes at the end of this. We'll definitely put down the natural resource MLP that literally doesn't deal with oil at all. It's all gold and silver shot like that.
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