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No Longer Masters Of Their Domain?

Wednesday, 12 May 2010 | 5:44 PM ET

If you were lucky enough to discover master limited partnerships or MLPs you had returns of more than 40% last year.

These securities, which pay out more than half their earnings as dividends, have been on fire in this turbulent market.

But don’t call your broker just yet; they took a turn for the worse last week.

Fears are growing that newly proposed taxes combined with the expiration of the Bush tax cuts may take these names down.

Here’s why:

In an MLP, instead of paying a corporate income tax, the tax liability of the entity is passed on to its unitholders.

Once a year, each investor receives a K-1 statement (similar to a 1099-DIV form) detailing his or her share of the partnership's net income, which is then taxed at the investor's individual tax rate, writes the website Investopedia.

Inside Alerian MLP Index Now
Discussing whether MLP's are no longer the master of their domain, with the Fast Money team and Darren Horowitz, Raymond James.

Seems like a sound reason to steer clear of these names.

Except Raymond James analyst Darren Horowitz doesn’t buy it. He tells the desk, tax increases won't have a disproportionate impact on MLPs.

"It's going to impact everyone the same. It's not going to have any greater impact on MLPs versus any other yield based equity and that includes utilities and REITs," he says.

Horowitz suggests any a dip presents buying opportunities: He’s bullish on two MLPs and they follow:
Enterprise Products Partners
Plains All American Pipeline

*It’s worth noting that MLPs may not suitable for retirement accounts due to other tax implications.



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Trader disclosure: On May 12, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (DRYS), (INTC), (TIE); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Kelly Owns (FXE) Puts; Kelly Owns (FXB) Puts; Terranova Owns (PFE), (GLD), (XCO), (SWN), (TER); Terranova Owns Gold; Karabell Owns (GOOG), (AAPL), (IBM), (CSCO), (TIE), (GS), (C); Levy Owns (GS), (GS) Calls

For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (AMKR)
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Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (DRYS)

For Brian Kelly
Kanundrum Capital Is Short (IBM)
Kanundrum Capital Is Short (DB)
Kanundrum Capital Is Short (BCS)
Kanundrum Capital Is Short Yen
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short British Pound
Kanundrum Capital Is Short Swiss Franc
Kanundrum Capital Is Short (FDX)
Kanundrum Capital Is Short (DE)
Kanundrum Capital Is Short (XLK)
Kanundrum Capital Is Short (XLI)
Kanundrum Capital Is Short (XLY)
Kanundrum Capital Owns (TLT)
Kanundrum Capital Owns (GLD)
Kanundrum Capital Owns (GFI)
Kanundrum Capital Owns (AUY)
Kanundrum Capital Is Long U.S. Dollar

For Jared Levy
Peak6 Investments is Long And Has An Options Position In (GLD)
Peak6 Investments is Long And Has An Options Position In (IBM)
Peak6 Investments is Long And Has An Options Position In (INTC)
Peak6 Investments is Long And Has An Options Position In (CSCO)
Peak6 Investments is Long And Has An Options Position In (VZ)
Peak6 Investments is Long And Has An Options Position In (AAPL)
Peak6 Investments is Long And Has An Options Position In (MSFT)
Peak6 Investments is Long And Has An Options Position In (BA)
Peak6 Investments is Long And Has An Options Position In (BEAV)
Peak6 Investments is Long And Has An Options Position In (GS)
Peak6 Investments is Long And Has An Options Position In (JPM)
Peak6 Investments is Long And Has An Options Position In (C)
Peak6 Investments is Long And Has An Options Position In (BAC)
Peak6 Investments is Long And Has An Options Position In (WFC)
Peak6 Investments is Long And Has An Options Position In (M)
Peak6 Investments is Long And Has An Options Position In (JCP)
Peak6 Investments is Short And Has An Options Position In (GOOG)
Peak6 Investments is Short And Has An Options Position In (HPQ)
Peak6 Investments is Short And Has An Options Position In (DELL)
Peak6 Investments is Short And Has An Options Position In (SWKS)
Peak6 Investments is Short And Has An Options Position In (TIE)
Peak6 Investments is Short And Has An Options Position In (XLF)
Peak6 Investments is Short And Has An Options Position In (DB)
Peak6 Investments is Short And Has An Options Position In (GILD)
Peak6 Investments Is Short And Has An Options Position In (LPX)

For Mike Khouw
Cantor Fitzgerald & Co. Is A Market Maker In (XLF)
Cantor Fitzgerald & Co. Is A Market Maker In (GS)
Cantor Fitzgerald & Co. Is A Market Maker In (MS)

For Stephen Weiss
Weiss Owns (GS)
Weiss Owns (C)
Weiss Owns (HBAN)

For Darren Horowitz
Raymond James & Associates Co-Managed A Follow-On Offering Of (PAA) Shares In May 2008, September 2009
Raymond James & Associates Co-Managed A Follow-On Offering Of (EPD) Shares In January 2009, January 2010, April 2010
Raymond James & Associates Received Non-Securities-Related Compensation From (EPD), (PAA) In Past 12 Months



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