One doesn’t have anything to do with the other, of course — the yield is constantly moving inversely to price, while the most recent record high is just one of many possible reference points, and one inherently biased to the negative.

Still, it’s possible to say that, before accounting for future price movements and tax consequences,  MLP investors will now need to collect more than a year’s worth of distributions to be as well off as they would have been had they sold in July. And even though the tax consequences are significant enough to make nonsense of that statement, and even though the potential for future capital appreciation may be high, there’s no getting away from the fact that a 7 percent loss in two months is an incontrovertible fact, while the rest is speculation.

Summer Bummer

Even so, any fair-minded review of longer-term price action must acknowledge that it’s been a minor and overdue pullback so far. Prices are back to the level that constituted a record high only in the first quarter of this year. Anyone who’s found the last two months really tough probably shouldn’t have bought MLPs in the first place. Because the bulk of the market-beating appreciation these vehicles have delivered over the last decade has come not from the considerable income they throw off but from the unpredictable and volatile capital appreciation.

Yet it’s more than likely that on the way to this year’s record this-and-that, MLPs picked up some fellow-travelers whose conviction doesn’t extend beyond the next distribution. I’ve been researching Oaktree Capital for this month’s Best Buys (more on that in a bit) and came across a telling quote from a commentary by its widely respected chairman, Howard Marks.

“…Recently many investors have been holding riskier positions than are natural for them, largely because, thanks to the Fed’s low-rate policies, the lower-risk things they might have preferred offered so little return. Thus their investing actions were coerced, rather than being undergirded by confidence in the fundamentals.”  

How might such coerced investors act, in the absence of such fundamental confidence? For one, it’s certainly possible they might flee the largest master limited partnership in droves the first time someone tweets that it’s a “house of cards,” even if that someone offers no proof and resorts to the sort of hyperbole that can really test one’s credibility.

This could be the reason we saw $4 billion of market capitalization wiped out in the course of a single trading session last week by scaremongering about Kinder Morgan (NYSE: KMI). Or maybe it was the people who believed everyone else was a weak hand that sold. I really don’t have better theories.

On the other hand, as Marks makes clear in that essay, this sort of nervousness is seldom seen at market tops. It is in fact suggestive that we’re in that middle-stage of a bull-market where people are still nervous about the gains already made, and not yet irredeemably greedy. As Marks writes, it’s hard to navigate this uncertain middle ground (unless, of course, you’re busy cashing in big profits like many of Oaktree’s funds.)

It’s easy to get caught up in arcane claims about accounting, where anyone can find something to quibble with. (Recall that both General Electric (NYSE: GE) and IBM (NYSE: IBM) have been notorious manipulators of quarterly earnings numbers in the past, yet their very real businesses haven’t collapsed like a house of cards all the same.)

But one thing every investor ought to do is consider the credibility of the source and the alignment of financial interests. For instance, Kinder Morgan founder Richard Kinder bought 500,000 shares of KMI today, and while that’s a lovely symbolic gesture more importantly he already owned 230 million shares accounting for perhaps 85 percent of his $10 billion personal fortune. Kinder’s interests are very closely aligned with those of his shareholders.

As mentioned in last week’s story and again in this month’s Portfolio Update, KMI now offers an excellent risk/reward ratio in the wake of the attack by Hedgeye. Other large partnerships have also been discounted this summer and are worthy of your attention.

In fact, if you own the shares of Enterprise Products Partners (NYSE: EPD) or Energy Transfer Partners (NYSE: ETP) do yourself a favor and enroll in their Distribution Reinvestment Plans (DRIPs), which deploy distributions into purchases of additional units at a 5 percent discount and without brokerage fees.

Another rock-solid portfolio holding that offers an excellent profit potential, Magellan Midstream Partners (NYSE: MMP) doesn’t offer a discount or a DRIP but advises that it may be possible to arrange automatic reinvestment through one’s broker.

Once we acknowledge that we’re all still after capital appreciation and that the track record of an particular manager or investment can save investors valuable resources, chiefly time, this month’s Best Buys will make perfect sense.

Carl Icahn has done himself proud over a lengthy investment career, and by depositing much of his portfolio in a yield-bearing vehicle he’s offered a valuable opportunity to benefit from the savvy investments he’s already made as well as future targets of his shareholder activism.

Oaktree and Marks have also done well for themselves and their clients over a variety of market and economic cycles. Their partnership is currently inexpensive despite the fact that some of the brightest and wealthiest investors already own big stakes. This is a chance to invest in, and with, the best at an attractive entry point.

This month’s Sector Spotlight surveys some of the other private-equity partnerships using MLP status to avoid corporate taxation, alongside others invested in timber, cemeteries and amusement parks.  Of those, amusement parks operator Cedar Fair (NYSE: FUN) is probably the safest, while Stonemor Partners (NYSE: STON) is more of a recovery play after the latest spate of claims about its accounting unearthed no buried bodies, as it were. But I’d rather own Oaktree, frankly.

Or any of the energy MLPs we recommend. It can’t have escaped the attention of all the critics that crude fetches $110 a barrel, and junior drillers are in rally mode, especially those buying additional acreage. These fast growing companies will need someone to transport their booming output somewhere where it can be sold most profitably. It’s hard to expect MLPs to roll over while their prime customers are gearing up to boost production in response to high prices. Invest accordingly.