Dow Jones & Alerian MLP Index - 2008

Dow Jones Industrials started the year in the 12Ks, mostly going sideways with a modest downward bias. Then it ran into the large sell-off from mid May to mid July falling from 13K to below 11K with financials leading the sharp decline.

Dow Jones 2008

S&P 500 FINANCIALS INDEX

The Financial Index (courtesy of Bloomberg) started the year at 382, falling to a low of 232 on July 15, followed by a 1 week sharp recovery & then leveling off under 300. Their chart performance is similar to the Dow Jones & the Financial Index remains in the dumps. Last week large losses reported by Fannie Mae (FNM)/Freddie Mac (FRE) were reminders the credit crisis, or whatever it is called, drags on.

I follow MLPs because I like their prospects & high yields. They have had a different ride as shown below, but, like the Dow, are also dealing with an unclear future:


Alerian MLP Index






3 years ago, the Alerian MLP Index had a sideways run for about a year. Then 2 years ago, it had a beautiful increase going from 250 to 330s, followed by a bumpy few months barely attaining new highs. Then came the rapid sell-off to 300, a level it has gotten used to living under.

Reasons for the moves are difficult to understand. The sell-off a year ago may have been related to hedge fund guys panicking, selling off a lot of units quickly & not caring about the price declines. More recently, the 2 month decline for the Dow starting in May, dragged the index down to the 52 week low where it trades today.

At present, the Dow chart looks more optimistic after bouncing off its low under 12K while the MLP index is clearly on defense. Both face serious but different challenges & I feel each one will be going through tough times in the short term.