Articles Tagged with MLPs

In early 2016, oil prices bottomed out and a wave of North American oil producers continued to file bankruptcies at record and alarming rates.  Where are we a year later?  Oil prices have increased, generally the result of an agreement by OPEC members to reduce output, which based on longstanding distrust among its members, may change at any time.  With potential uncertainty amidst, the formalities of Brexit, and President-Elect Donald Trump taking the reins as President on January 20, 2017, the world is unpredictable!

The market’s overall appreciation more than likely positively impacted your overall investment portfolio in 2016, unless of course you happen to own securities (i.e. Boeing or Ford) that were subject to one of Trump’s famous tweets.  However, if you were an investor of securities linked to the oil, gas and energy sector in the past couple of years, chances are your account statements still show that many of these securities lost a substantial portion or their entire value of your principal.

In many investments, your principal investment is gone, and depending whether these investments were Master Limited Partnerships (“MLPs”), you have or very soon will receive a K-1 indicating that you may still owe additional taxes – yes, on that same investment that you lost all or most of your principal.  This has left many investors simmering!

As most individual investors now understand, oil and gas securities, including common stock, bonds and master limited partnerships (MLPs), can be extremely volatile, high-risk and lead to substantial losses.  Over the last few years, certain financial advisors and stockbrokers, and the financial institutions for whom they worked, fell in love with oil and gas securities, particularly for their high-yield dividends in an otherwise low-to-no yield market environment.

As a result of this reckless infatuation by some trusted financial advisors, throes of conservative individual investors, many retired and elderly, sustained major financial losses in their nest-egg portfolios when the oil and gas markets nosedived.  Given their advanced age and life-stage, this class of elderly, conservative investors simply does not have the ability to replace these losses.  The effect has been devastating — ruined retirements, a down-size in quality of life, and a theft of a sense of financial security that took decades of hard work to achieve. Unfortunately, we are seeing this far too often these days.

The truth is that this should never have occurred in the first place.  Had financial advisors, and the securities brokerage firms obligated to supervise them, ensured that such conservative investors were never over-exposed to, or over-concentrated in, such unsuitable and inappropriate oil and gas investments, these life-changing losses would not have been realized.

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