The Securities Litigation Expert Blog

Uh-Oh. Master Limited Partnerships Continue to Go Mainstream after 10 Years of Outperformance

Posted by Jack Duval

Oct 18, 2012 3:57:00 AM

This blog post continues our expert analysis of complex investments and their regulation.

The New York Times has joined the drumbeat of MLP coverage, noting how the relatively high yields and tax advantages of MLPs are drawing investors. (NYT)

Here's some facts that should give everyone pause before investing in these complex products:


    • They have an average 16.7 percent annual return for the past 10 years

    • This return is roughly 2x the S&P 500 over the same time period


I fear a lot of investors will be chasing the "hot dot" with MLPs and get in right at the top.  Remember, commodity prices can be volatile in the extreme, and these are almost exclusively energy plays.  The chart below shows the year-ending values of the Alerian MLP Index and the percent change from the previous year.

Click on chart for full screen version.

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Topics: Master Limited Partnerships, MLP, Data Analysis, S&P 500, investments, Complex Investments, Complexity, NYT

Warning! Finra Arbitration Filings Down, S&P 500 Up

Posted by Jack Duval

Oct 17, 2012 3:52:47 AM

Below is a visualization of  annual Finra Arbitration Filings as compared to the S&P 500 annual closing value.  Since 1999, there is a significant negative correlation of -0.594 between the two.  When arbitration filings have peaked it has been a buy signal, and vice versa.

On the lower pane of the viz, I have plotted the annual Finra Arbitration Filings and colored the marks by the number of claims involving suitability.  Clearly, as suitability claims have waned, the market has topped out.  (Note the 2012 data is through September.)

Two clear take-aways:


  • This is a sell signal for investors

  • Broker/Dealers planning legal and compliance budgets for 2013 should take note


 

Feel free to share.

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Topics: FINRA, litigation, S&P 500, arbitration, SEC, filings, Compliance, regulation.

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