September - October review

The last 2 months have been nothing short of brutal for stocks. But the Dow Jones Industrials have recently settled down a bit even if the VIX, Volatility Index, soared to unimaginable records from high territory in the 20s to an eye popping close of 79 on Fri.


Dow Jones Industrials --- 2 months




The Alerian MLP Indexed with low beta characteristics, crashed in Sep as did the DJI, but recovered a bit in Oct, remaining above a support line of 200. The sharp sell-off below 160 was probably aggravated by the demise of Lehman resulting in many MLPs sold indiscriminately. That would account for its flattish performance this month, bringing back relatively lower beta characteristics:


Alerian MLP Index --- 2 months




REITs did not fare so well. The chart shows they held pretty well for much of Sep, followed by a brutal crash in the last 4 weeks. Brutal, over 100 points!!


Dow Jones REIT Index --- 2 months




Yields for MLPs & REITs are at record levels, but high yields haven't provided much support recently. The MLPs are expected to have yields about 200 basis points over the T-bond, not 700 points. Yields for the REIT Index would show a similar large premium over the T-bond yield at 3.69%. I wish there was an index for high yield bonds, but sadly none is available. It would show the disparity between their dividend yields & T-bonds would be even greater, probably about 1500 basis points. Panic selling in today's markets creates buying opportunities for brave souls who want to lock up high yields for many years going forward.

Last night, my friend who doesn't follow the markets closely, asked me about buying stocks at these low prices. I told her a month ago, while prices were low they have fallen another 25% since then. Sadly many aren't even bothering to ask about buying, they just sell. High yields have become more important to help ride out terrible times. Even ordinary industrials & service companies yield 3, 4 or even 5%. Dividends should be welcome & will help investors ride out one of the most brutal sell-offs in market history.