• There has been a recent cluster of spammers accessing BARFer accounts and posting spam. To safeguard your account, please consider changing your password. It would be even better to take the additional step of enabling 2 Factor Authentication (2FA) on your BARF account. Read more here.

What stock would you buy and why?

Aluminum

Schlitz_OML.jpg
 
mercurial said:
I would also take a look at MLPs and other partnership/trust vehicles, these are typically found in the oil/gas pipeline/storage/production business. the taxes are a bit strange, but once you read a little bit its not that difficult and many yield 8-12% per year, are low beta (low correlation with markets and generally lower volatility) with the majority of distributions DEFERRED from taxation (because it is treated as a depreciation against your initial investment) until you sell your shares.
Click to expand...

Whoa, be careful. Although publicly traded, MLPs are flow thru entities. Required quarterly distributions of earnings will be taxed at the limited partner's highest marginal rates. The manager/limited partner contract determines the required distibution (earnings or not). Even though the distribution has many characteristics of a dividend, it cannot be "qualified" to enjoy LTCG rates. Additionally, any gain from disposition of MLP units is ordinary income, losses are passive. A major drawback for a retail investor. :thumbdown

From a tax perspective, MLPs are best suited for an entity (individual, partnership, certain trusts and estates) that has unusable losses from other endeavors that are suspended by the IRC "at risk" [§465] and/or "passive activity" [§469] rules. For those MLP partners, distributions of *earnings* will be absorbed by suspended losses and thus tax free. :party

The deferral you refer to requires that the MLP make a distribution in excess of earnings (e.g. a return of basis/capital). A fine idea in principle but unusual in practice. An associated risk is running afoul of IRS "tax shelter" disclosure and reporting requirements. These penalties are steep.

This investment vehicle is not for amateurs.
 
Last edited:
plumber said:
Don't buy a single share until you are sure everything else is in order. Do you carry a balance on your CC? Are you making payments on a car or motorcycle? Go to Vegas if you want to gamble.
Click to expand...


Never have carried a balance on my credit cards. I don't believe in revolving credit.

Never had a motorcycle payment. Toys are not to be financed. I pay cash in full or I don't buy.

Both cars are paid off.

Both boys education savings have been funded.

For a MAJORITY of the money I'm going to invest I plan on being very conservative. That's why I was thinking about index funds. I'm in it for the long haul.

For SOME, I plan on being a bit aggressive. It's all about diversification.
 
Owensdad said:
Whoa, be careful. Although publicly traded, MLPs are flow thru entities. Required quarterly distributions of earnings will be taxed at the limited partner's highest marginal rates. The manager/limited partner contract determines the required distibution (earnings or not). Even though the distribution has many characteristics of a dividend, it cannot be "qualified" to enjoy LTCG rates. Additionally, any gain from disposition of MLP units is ordinary income, losses are passive. A major drawback for a retail investor. :thumbdown

From a tax perspective, MLPs are best suited for an entity (individual, partnership, certain trusts and estates) that has unusable losses from other endeavors that are suspended by the IRC "at risk" [§465] and/or "passive activity" [§469] rules. For those MLP partners, distributions of *earnings* will be absorbed by suspended losses and thus tax free. :party

The deferral you refer to requires that the MLP make a distribution in excess of earnings (e.g. a return of basis/capital). A fine idea in principle but unusual in practice. An associated risk is running afoul of IRS "tax shelter" disclosure and reporting requirements. These penalties are steep.

This investment vehicle is not for amateurs.
Click to expand...

Thanks for the comments, good to hear it from the source. So my understanding was since they are flow-through, it would make sense that asset depreciation (which is very large for a energy pipeline/storage/production company) would be flow-through as well. As a substantial amount of cash flow should be offset by depreciation charges, this portion would constitute a return on capital and would be tax deferred.

For example, here is a faq for PVR resources (I know nothing about this company) where they explain how 80% of their distributions constitute a return on capital. This is not uncommon for many of the MLPs I have looked at. The other 20% obviously would be taxed at your marginal income tax rate.

http://www.pvresource.com/pages/faqs.html#Question6

Granted, there is alot of misinformation out there re: MLPs but I am curious as to why your explanation is so discongruent with this perspective.

I am also curious about how you state that gains from the disposition of MLP units would be ordinary income; most sources said that appreciation of the unit itself, with an appropriate holding period is LTCG. The caveat here being that, if over 5 years, you hold the unit and it appreciates by $5, but you also receive $5 in tax-deferred distributions over said period, you would have LTCG tax for $5 and $5 in immediately taxable ordinary income. Is this completely wrong?
 
Squidly McSmearstain said:
For a MAJORITY of the money I'm going to invest I plan on being very conservative. That's why I was thinking about index funds. I'm in it for the long haul.

For SOME, I plan on being a bit aggressive. It's all about diversification.
Click to expand...

This is the smart way to invest. Don't go crazy like the gamblers on this board(you can tell which ones are gamblers by their stock selection).

Domestic and foreign index fund. A bond fund. And a small amount for your funny money. There's a lot of interest in lazy portfolios lately which you can google.


Taking a step back, an approach which I use, is to figure out how much money you want in what time frame.

I have at least a 30 year timeframe and based on my savings each year I need much less than a 5% real return. You can calculate the confidence of reaching this goal; I think mine was something like 99% confidence level.

This means I can use a conservative dividend investment strategy to reach my retirement goal/nest egg.
 
Indexed etf's if you want to buy and hold.
Stocks US
OEF
SPY
MDY
IJS
International
EFA
EEM
Bonds
AGG
IB
EB
 
As always, any and all plans go askew. For the fifty year old who invested in the last five years in equities or real estate, the losses may be lifetime, in the sense that retirement may necessitate the sale of assets for income or fixed income purchase. The stock market is a gamble. Cash is a gamble. In a very real sense, the stock market is the biggest and longest term Ponzi scheme ever invented, and depends entirely on new money to keep stock price up. Diversification is your friend. It turns out my best, in terms of annual return, investment in the last decade was an interest annuity. And, of course, if the underlying company has problems (USAA) then it too will.
 
mike23w said:
This is the smart way to invest. Don't go crazy like the gamblers on this board(you can tell which ones are gamblers by their stock selection).
Click to expand...

I generally agree that active trading is not for the faint of heart or people who don't/can't pay close attention to details. Penny stocks are for idiots unless you have insider knowledge. However, I will note that a few months ago, Dubbington posted a thread asking how to invest his spare $10k. I suggested a far out of the money call option on AIG, that would yield tremendous profit if AIG tripled in price. IIRC, AIG subsequently did triple in price and Dubbington probably would've been a millionaire if he had followed my advice :laughing:laughing
 
Last edited:
OP, you should read a couple of books on investing in stocks before jumping in. I know I will get chastised for this, but Jim Cramer's Real Money is a good book to start with. I wouldn't recommend watching his show or taking any advice he has on a particular stock for multiple reasons. But his book has a lot of good advice for amatuer investors such as doing your own stock research, not buying stock all at once (dollar cost averaging), when to take profits, diversification, etc..

I would also recommend Peter Lynch's One up on Wall Street. It's a bit of a classic, and stands the test of time. One major take away of the book is don't invest in a company if you don't completely understand what they do.

If I had to pick one stock "long term", I would pick Intel (even though I just sold all of my shares to lock in some profit). It's got a decent yield (~2.7%) and good cash flow and plenty of cash on hand so you know that dividend is not going away anytime soon. Do your own homework before buying.

I would wait to see if the dow closes above 10,030 and stays above 10,030 for a three days before buying anything.
 
I wouldn't recommend index funds (I also don't recommend taking advice from me) because you tend to get the bad with the good and it isn't actively managed (although most actively managed funds can't seem to beat the index they are trying to beat). I see index funds more as trading tools and/or hedging strategies, not long term investments.
 
mercurial said:
For example, here is a faq for PVR resources (I know nothing about this company) where they explain how 80% of their distributions constitute a return on capital. This is not uncommon for many of the MLPs I have looked at. The other 20% obviously would be taxed at your marginal income tax rate.

http://www.pvresource.com/pages/faqs.html#Question6

Granted, there is alot of misinformation out there re: MLPs but I am curious as to why your explanation is so discongruent with this perspective.

I am also curious about how you state that gains from the disposition of MLP units would be ordinary income; most sources said that appreciation of the unit itself, with an appropriate holding period is LTCG. The caveat here being that, if over 5 years, you hold the unit and it appreciates by $5, but you also receive $5 in tax-deferred distributions over said period, you would have LTCG tax for $5 and $5 in immediately taxable ordinary income. Is this completely wrong?
Click to expand...

I have serious objections to how that FAQ point is drafted.

A partner's initial basis in a partnership is what he paid for it, the "units" in this case. Basis is then increased by income, gain allocated to you; decreased by allocated losses and distributions. Distributions in excess of allocated income/gain are treated as a return of basis (a distribution of capital). This is a tax free event. Distributions in excess of basis are a mix of capital gain and ordinary income, depending on the types of assets owned by the partnership.

However, these types of distributions impair capital. If a company distributed 80% of its capital every year, there'd be no capital left after the first quarter of year 2. Their FAQ is quite misleading in this regard. It probably also makes them a "tax shelter" within the meaning of the Treas. Regs.

Upon selling a limited partnership interest, the selling partner is treated as selling his share of each class of asset owned by the partnership: capital property and ordinary property. Depreciated capital property is subject to depreciation recapture (as ordinary income) and ordinary income assets generate, you guessed it, ordinary income.

A liquidating distribution by the partnership to the partner yields similar results: a mix of ordinary income and capital gain (CG to the extent the sale is allocable to capital assets in excess of purchase price).

This is very tricky stuff and deals with the most challenging part of the IRC: Subchapter K, §§701 et. seq. The FAQ page you linked is pretty shaky IMO.
 
Last edited:
Investments with very complicated tax structures seem exceptionally risky.

You have to offset any possible gain with the cost of dealing with audits and penalties. Unless you're looking for a cabinet appointment, you might want to keep it simple.
 
personnally I prefer crew cus tube bunches up and mek my feet feel funny
 
mercurial said:
I generally agree that active trading is not for the faint of heart or people who don't/can't pay close attention to details. Penny stocks are for idiots unless you have insider knowledge. However, I will note that a few months ago, Dubbington posted a thread asking how to invest his spare $10k. I suggested a far out of the money call option on AIG, that would yield tremendous profit if AIG tripled in price. IIRC, AIG subsequently did triple in price and Dubbington probably would've been a millionaire if he had followed my advice :laughing:laughing
Click to expand...

So you took your own advice and are a millionaire now?!?!
 
mercurial said:
I generally agree that active trading is not for the faint of heart or people who don't/can't pay close attention to details. Penny stocks are for idiots unless you have insider knowledge. However, I will note that a few months ago, Dubbington posted a thread asking how to invest his spare $10k. I suggested a far out of the money call option on AIG, that would yield tremendous profit if AIG tripled in price. IIRC, AIG subsequently did triple in price and Dubbington probably would've been a millionaire if he had followed my advice :laughing:laughing
Click to expand...

GE bonds have done well over the year too. They were down a few rungs of ladder and AFAIK they are par now. It wasn't a bagillion dollars but it was a nice 25% return and still paying 6.75%. My only regret was that I didn't buy more.
 
The buzz from my buddies in the mortgage biz - July/August was the peak month and then things have curtailed quite a bit. A new wake of foreclosures are coming onto the market and they anticipate a very bad winter, or a double dip in the recession, if you will.

Just another :2cents into the pot. Buying opportunities may present themselves soon enough:dunno
 
plumber said:
GE bonds have done well over the year too. They were down a few rungs of ladder and AFAIK they are par now. It wasn't a bagillion dollars but it was a nice 25% return and still paying 6.75%. My only regret was that I didn't buy more.
Click to expand...

You old guys and your damn bonds :laughing

I've done ok with CA munis but am not sure I am holding them.
 
You must log in or register to reply here.
Back
Top