Stocks crash again to new lows

Chairman Bernanke gave a speech at lunch time trying to explain this new world. Dow dropped 200 while he spoke, more later on. Dow plunged to close at 508 (a 4-5 year low), decliners ahead of advancers 7-1 and NAZ declined 108. This is just another one of those ugly days we've gotten used to in the last couple of weeks. It's hard to remember but the day started with Bank of America (BAC) cutting their div in half, seems like just another back-burner story now! I guess this is what they call, "spinning out of control." I remember that 11.3K close for the Dow a couple of weeks ago, that was a big relief rally. So much for that:


Dow Jones Industrials -- 2 months





Dow Jones Industrials -- 4 years





S&P 500 FINANCIALS INDEX dropped 28 to 215, another yearly low (breaking the July 15 close level of 232!). The Alerian MLP Index dropped 13 to 177, a 4-5 year low (believe it or not, MLPs are low beta securities). The Dow Jones REIT Index fell 16 to 195, a 4 year low. There is no specific index for junk bond funds & their yields, I checked. But they have been in a super bear market for a few months. Their yields have climbed to record levels, 16+% is common producing a yield spread over the Treasury bond of a whopping 1300 basis points. Those investors & sellers are clearly listening to Chicken Little!

There was some good news in commodities. Oil was up 2¼ while gold rose only 16! That's about it for good news. Back to dreary reality.

Here are just a few of the headlines causing investors to throw in the towel.

•Bernanke Signals Fed Is Prepared to Cut Interest Rates as Crisis Deepens
•U.S. Consumer Credit Drops $7.9 Billion, Most on Record, as Loans Dry Up
•Brown's Government Said to Be Planning Capital Injection for British Banks
•FDIC May Let Banks Hold More Fannie, Freddie Debt to Free Cash for Lending


Enough of this dreary reality. Bottom line, financial problems aren't going to be solved anytime soon. Even when they are taken care of, we have to worry about restoring housing, autos, general retail sales, etc.

I still like MLPs, just wrote the latest update which SeekingAlpha should post shortly. These boring pipeline companies have gotten beaten up something fierce, especially in the recent weeks (hard to believe the brutal damage in just a few weeks). They own pipelines with expected lives of 50+ years, which require very little annual maintenance. Their high yields have gone thru the roof, 11+% is common today (and most is not taxed in the current year). Long term financing for capital expenditures is in place.

OK, going forward they will have to struggle harder. Q4 distributions to unit holders will be declared in the next couple of weeks (they all operate on the same schedule). Chances are many will leave distribution rates flat, trying to hang on to a little extra cash. However starting with an 11% yield, that's easier to take. Their assets (pipelines) are very hard assets which should allow them to get more capital even if they have to pay a little extra. These are long term investments with astronomical yields which will be looked on with fondness 5-10 years down the road.

Alcoa (AA), in the Dow, reported after hours lower earnings. Stock was up 1.22 after hours. Let's see if Asian markets sell off following the lead in the US.

Alcoa profit cut in half as aluminum prices fall