First, I have a few thoughts on energy-transport MLPs, then a few more on market commentators.
Energy-transport master limited partnerships have taken a brutal beating in the latest selloff and for obvious reasons. With the latest talk of a fiscal cliff deal hanging out there, and with few revenue increases proposed (yet talk of a balanced approach being the only acceptable path), there are going to be several targets drawn on anything that can be perceived as tax-advantaged. Expect that the $5 million estate tax exemption will be shaved substantially, or that capital gains taxes will be adjusted from their current 15% -- perhaps not to represent ordinary income, but certainly higher. Leases and franchises on energy rigs and pipes are another tax-advantaged part of many of these MLPs and affect their distributions and their real yields. Consequently, many investors are running for the hills, waiting to see how it all plays out.
I own a ton of these MLPs, and even though I imagined this might happen and sold many of these holdings in early September, I still own far too many. And I'm not going to sugarcoat it: I don't think they're done being sold. Far from it. If you pull up a chart on some of these MLPs from 2009, you'll see just how far they can drop when they go out of favor. If you're still holding a lot of these, you need to lighten up, as I am doing, even though they've already had a bad time. You can buy them back cheaper in 2013.
A Word on Commentary
I'm getting mad -- drop a thousand points in the Dow Jones Industrial Average and that's likely to happen. That's because I've got my own skin in the game, a lot of my own money that I need for me and for my children's future. That's right, I own stocks. Lots of them.
So, what you do when your portfolio is taking a beating, like now, is really important because you've got access to so many people who claim all kinds of expertise -- money managers, hedge funders, newsletter providers, TV pundits and self-promoters. I'm not saying that any of their opinions can't be right, or that they might not have a good idea or entry point or prediction for the next several days or even months. But when really negative signs are swamping the positive signs for your portfolio and your numbers are dropping, you've got to know who's talking and, even more so, why they're talking. And the best reason for you to take anyone's advice is because their money is at risk too.
Luckily, you have some of the best people with their own money invested in their advice here at Real Money. You know who they are; they're the ones who make a living trading or have substantial personal assets in the funds where they work.