Sunday, November 30, 2008

MLPs in November

November was another down month, but markets recovered strongly off their lows in the last week as was the case for the Alerian MLP Index. It's hard to remember, but these securities traditionally have low betas (forgotten this year). They started the month trying to push thru the 220 ceiling which would have carried the index to territory last seen in early Sep. But they were caught up in the market sell-off taking them to a little under the 160 lows following the Lehman demise in early Oct. They were swept along in the rally in late Nov, ending the month at 183.

Alerian MLP Index --- November 2008

Their story is similar to the ones for REITs & high yield (junk) bond funds. All are selling at very depressed prices offering extraordinarily high dividend yields for the brave. At the same time, the 10 year Treasury bonds yields less than 3%.

Even though their fundamentals remain quite good, they are facing more selling pressure in Dec (along with the rest of the stock market) from tax loss selling, year end adjustments (a kind way of saying selling) & more fund redemptions.

Blackfriday retail sales came in a little above last year, but margins could be lower. An analyst on Bloomberg TV said she saw Wal-Mart customers were focused on getting presents for kids (with an emphasis on electronics) & necessities. Other purchases were deferred & they were not continuing on to other retailers. Apparel is having one tough year, most merchandise is reduced 60+%.

I am now an Amazon Affiliate, hosting 3 of their ads in my right column. I'm also looking to get one of the new netbook computers for practical reasons. Amazon is among the vendors I'm checking with because they have good prices & many of these products have free shipping. There is one widget for their deal of the day & another to search all their merchandise. Amazon is one of the largest retailers in the world hosting a wide variety of products at excellent prices.

This week I'll be in & out but will work hard to keep market posts current. Retail sales along with the fate of the auto companies are 2 of the major stories to follow. Combining them, the auto companies should be reporting Nov sales shortly & they are expected to be dreadful.

Friday, November 28, 2008

Market gains for 5th straight day

Stocks had another good day, stretching the winning streak to 5 days. Dow rose 102, advancers ahead of decliners 2-1 (not exceptional) while NAZ was up a tepid 3.

Dow Jones Industrials --- 1 week

Dow Jones Industrials --- 1 month

S&P 500 FINANCIALS INDEX went up 5 to 170 The Alerian MLP Index was up 6 to 183 (a 7 day high) but the Dow Jones REIT Index slipped 3 to 131. High yield (junk) bonds were flattish, but up 25% from the overly depressed prices just a few days ago. The VIX was flat, but down from 80 at the start of the week. Markets settled a bit as buyers clearly won the day ahead of the weekend.

The 10 year Treasury bond had a super rally in Nov driving the yield to 2.96%, a record low. The 90 day Treasury bill yields only 3 basis points, rounding we can call it zero. After dipping to the 51s in early trading, oil rebounded to flat at 54.43.

First glimpses for retail sales today look to be sluggish. Next week we'll learn more about sales results & the future of the 3 auto companies (among other news stories). Autos already had their biggest 2 day rally in 28 years (i.e. General Motors rose about 70% to 5.24 in the 2 days).

Stocks mixed

After a 4 day monster rally, stocks are taking a breather. This is a shortened, semi holiday kind of day & not a lot is expected. Stocks are down slightly with decliners a little ahead of advancers. Even after the giant rally, Dow remains down 600 for the month.

Here is a wrap up for MLPs:

Alerian MLP Index --- 1 month

At the start of Nov the index got into the 200s, trying for a breakout which failed. Later it broke thru the lows (under 160) after Lehman's demise, but rallied nicely (along with other stocks) off that bottom.

Oil is pulling back. OPEC is meeting in Cairo, maybe trying to set production cuts to help the price of oil. But not a lot is expected from the meeting.

CLF09.NYMCrude Oil Jan 09..52.66.......Down1.78 (3.3%)

Today should be a good take to break from the markets to go shopping. Retailers need all the help they can get.

Wednesday, November 26, 2008

Markets extend winning streak

From the lows in the early AM hours, stocks rose steadily for nice gains on an otherwise quiet day in the markets. Dow ended up 247, advancers over decliners 4½-1 & NAZ was up 67.

General Motors stockholders were among the joyous today. GM popped more than a point on hopes about a possible bailout (also helping the Dow). In its pursuit of $5 price for its shares, it rose 1.27 to 4.83.

Other indices joined in. The S&P 500 FINANCIALS INDEX had another great day (rebounding from depressed levels, the 125 low was made last week):

% Change

The Alerian MLP Index rose 9 to 177 & the Dow Jones REIT Index was up 6 to 134 (& a sharp rise over the sub 100s just a few days ago, shown below). The unloved high yield (junk) bond funds had a mixed day, some up & others down from their very depressed prices. The VIX pulled back another 6 to 55, signaling some relaxation in the markets.

Dow Jones REITs --- 2 weeks

Stock market enthusiasm spread to commodities. Oil jumped 3½:

CLF09.NYMCrude Oil Jan 09...54.33 ..Up 3.56

Fri will be a half day of trading, major changes are not expected until next week when traders return in full force. Then they will digest the report of retail business for Black Friday, among others, an important indication of how well the holiday season will go.

Speaking of holidays,

Happy Thanksgiving to all

Markets waver

Stocks keep waffling in what looks like it will be a day when little is decided. Dow is up 58, advancers ahead of decliners 3-2 while NAZ is up 31. The S&P 500 is up 6 but the FINANCIALS INDEX & other indices I follow are flattish.

This is a good time to look at stock performance. The S&P 500 has had one of its worst years, not to mention its worst Nov. These are rough times.

26 Nov 2008.....863 (midday)
31 Oct 2008......969
31 Dec 2007....1468

General Motors (GM) bonds are trading around 20¢ on the dollar. Bond holders such as Pimco may have to endure huge losses as part of a potential bailout plan for GM, one more huge headache to deal with.

Pimco, Franklin GM Debt May Lose 75% of Face Value in Government Aid Deal

This week stocks have been absorbing very well the ugly economic news being reported. Dow is on a 3 day winning streak, trying to make it 4 in a row. However they are coming off extremely oversold markets. Markets close at 1PM EST on Fri, not a lot is expected then.

Tuesday, November 25, 2008

Dow barely extends winning streak to 3 days

Markets tried to figure out which way to go today as they were trying to make it 3 days in a row for gains. Dow rose 36, advancers over decliners 2-1 while NAZ pulled back 7. The buyers have clearly run out of steam, maybe it's a holiday thing.

S&P 500 FINANCIALS INDEX managed a gain of 4 to 157, the other indices had only modest changes. However, junk bond funds rose again as those 20+% yields were just too attractive for the bargain hunters.

Oil sold off taking it near its 3 year lows achieved a couple of days ago:

CLF09.NYMCrude Oil Jan 09...51.02 ..Down 3.48

Cisco (CSCO) announced it will close 5 days at the end of the year to save $1B, just one more indication of how tough this economic slowdown has become. .

Cisco Plans First Year-End Office Closure in More Than Decade to Cut Costs

I just noticed an old time favorite, Walgreen (WAG). They're gotten clobbered in the last 3 months like most other stocks. This is an old line drugstore chain my mother used to like shopping in. They are an S&P 500 Dividend Aristocrat. While their dividend yield is only 2%, they can be counted on raising it every year with the low payout ratio. Walgreen's has a P/E of 11 which provides excellent coverage. They're an example of a number of excellent companies whose stocks has been punished badly in the bear market but don't deserve this kind of treatment.

Walgreen --- 10 years

Holiday malaise looks like it's setting in. Even the VIX pulled back 4 to under 61, but remains in very high territory. With limited trading for the rest of the week, there may not be a lot of wild price swings helping to bring the VIX lower even if it's only for a brief period.

Stocks lower on profit taking

After stocks surged again on the opening, Dow was up 150, markets are settling back. Dow is down 38, but advancers are ahead of decliners by 25% & NAZ slipped 28 or 2%.

S&P 500 FINANCIALS INDEX started strong but selling is kicking in:

% Change

Markets are trying to make it 3 days in a row, the first time in a couple of months. But other indices are pulling back, probably related to profit taking following the monster 2 day rally. Even the VIX pulled back 1 to 63½ but remains in very high territory.

Oil dropped sharply nearing the recent low (& lowest prices in 3 years) as traders are weighing gov efforts to shore up a sagging economy:

CLF09.NYMCrude Oil Jan 09...51.70 ..Down 2.80

The Federal Reserve is spending more money buying loans & making credit available to small business. They are supplying $800B which used to be thought of as a tremendous amount of money. The number of problem banks rose to 171 in Q3, up from 117 in the prior qtr. This is part of the make it up as we go along approach, hope it works out. The FED also said problem loans rose sharply in Q3 which helps explains why banks continue to be shy about making loans.

Fed Commits Up to $800 Billion in New Programs to Unfreeze Credit Markets
`Problem' Banks Climb 46% as Credit Crisis Takes Toll, U.S. Regulator Says

Revised figures for the economy shows a worse performance in Q3. The economy shrank at an 0.5% rate versus the 0.3% estimated last month. This data dovetails with the comments about demand falling off a cliff around Sep 15 when the original bailout plan was first discussed. The report showed disposable income fell at an annual rate of 9.2% in Q3, the largest quarterly drop on record (going back to 1947).

You know times are tough when Tiffany (TIF) & Saks (SKS) are getting pinched. TIF is down 1.20 but SKS is up pennies (it's a $3 stock). The recent stronger dollar may be may cause foreigners to pull back on their purchases in their stores.

Saks, Tiffany Sales May Slump as Dollar Keeps European Vacationers at Home

My article on MLPs paying divs was posted at SeekingAlpha. Click on the button in the right widget to read it & other articles.

This is short trading week, not sure when some of the guys take of for a long holiday. Looming in the near term are reports on Black Fri retail sales plus the dark cloud over the 3 auto makers.

Monday, November 24, 2008

Dow races ahead, 900 in 2 days

Early gains held pretty well as stocks had one of their biggest 2 day gains in history. Initial gains were followed by a fairly flat line near 8400 with a surge at day's end only to give back the extra froth in closing mins (shown in the Bigchart widget on the right). Dow ended up 397, advancers over decliners 7-1 NAZ rose 87. In the Dow, only Hewlett-Packard (HPQ), posted a decline.

S&P 500 FINANCIALS INDEX had what was probably their biggest gain in modern times as strong buying continued thru the close of trade. Of course, banks were coming off 10 or 20 year lows, but the news about bailing out Citigroup brought back buyers:

% Change

Other groups participated in the broad rally. The Alerian MLP Index (shown in the Yahoo badge in my right column) popped 17 (11%) to 170, one of its biggest days ever. The Dow Jones REIT Index popped 19 (18%) from vastly oversold levels, again one its biggest days ever. Buyers even came out for junk bond funds, typically up 10% or so (but still offering 20+% yields).

Oil rose almost 10% off its 3 year lows. Buyers were encouraged by gains in the stock markets related to the rescue of Citigroup & talks of production cutbacks at next week's OPEC meeting:

CLF09.NYMCrude Oil Jan 09..54.54 ..Up 4.61

This rally was needed to flush out negative thinking which has been taking over the markets & dragging them down. Tomorrow a sense reality should return. The next major dark cloud to deal with will be the auto makers.

Markets soar on Citigroup bailout

Stocks rallied strongly, Dow shot up 324 & other indices tagged along. Advancers were over decliners 6-1 while NAZ shot up 51. Dow is now up almost 1K during the last hour of trading on Fri & the first couple of hours on Mon. On the Citigroup (C) news, the S&P 500 FINANCIALS INDEX was up 16 but still remains at a very depressed 146.

Citigroup, still a Dow stock, soared to $6 after the gov agreed to invest billions in them, averting a global financial disaster. All banks found buyers today along with about everybody else including MLPs, REITs & even junk bond funds. The $25B invested today follows $20B last month, all aimed at avoiding a run on the bank. Their key problem is their $306B of troubled loans, they need protection.

Citigroup Gets $306 Billion U.S. Rescue From Toxic Assets, Cash Infusion

Meanwhile economic news keeps coming. Home sales tumbled badly last month. Sales plunged 3.1% while the average price per sale dropped 11.8%, the largest decline since record keeping began 40 years ago. Increased foreclosures are driving the sharp decline, the current inventory of homes is estimated to last 10.2 months.

U.S. Home Resales Tumble as Foreclosures Push Prices Down Most on Record

Economic misery is not confined to the US. The UK is estimated to shrink by 1.25%, the worst performance since 1991.

U.K. Economy May Shrink by the Most Since '91, Darling Says in Budget Plan

Oil rsponded well to the Citigroup news, bringing back its buyers:

CLF09.NYMCrude Oil Jan 09....53.03 ..Up 3.10

This will be a holiday shortened week of trading, adding a little extra to volatility which is already at astronomical levels (the VIX plummeted 9 to 64). Black Friday retail sales will give an early signal of how the important holiday selling season is starting out.

Sunday, November 23, 2008

Dividend yields in troubled times

Stocks have been going thru some of the toughest times in memory. In Nov alone, Dow has declined more than 1K even after the huge rally in the final hour on Fri. During these times, dividends take on a growing importance.

Falling stock prices have raised yields sharply for all div paying stocks. Many ordinary stocks which used to have yields of minor importance, maybe 1-2%, have seen their yields shoot up to 3, 4, 5 & even 6%. Over the long run locking in these yields should prove very rewarding. A few of the stocks I think of with well covered divs & good track records of continuous div increases are: Caterpillar (CAT), Chevron (CVX), Kimberley Clark (KMB), McDonalds (MCD), McGraw-Hill (MHP) & VF Corp (VFC). Of course the very venturesome can get extraordinary yields from MLPs, REITs & high yield bond funds. It's hard to believe that yields of 15, 20 & even 30% are available.

I've been posting ads from Google & Amazon. These are 2 of the largest players on the internet, the ads should be of the highest quality. The content of the Google ads are dropped in by Google based on the written material in the blog. However I choose the ads from Amazon, trying to use ones you might enjoy. One features a daily special, another is a search button for their site & the last is a photo charm I think is cute. Hope you enjoy them.

Back to the markets, it's hard to take a 500 point rally in just hour very seriously especially when markets are so greatly oversold. This week will feature Black Friday when retailers are supposed to have such good sales they can break into the black, I don't know about this year. The following week will include sales for autos in Nov which probably will be dreadful. There is just too much negative thinking overhanging the markets along with year end tax & portfolio selling to see major gains coming before year end.

Friday, November 21, 2008

500 point Dow rally in last hour

Obama named Tim Geithner, a widely liked professional, as the new Treasury Sec bringing out buyers in the last hour. Dow had been not far from break even during the day but shot up 500 in the last hour after the announcement taking it over the magic 8K line. But enthusiasm was limited. Biggest winners in the Dow were Exxon Mobil (XOM), Chevron (CVX) & 3MM (MMM).

Tim Geithner of New York Fed Will Be Obama's Choice for Treasury Secretary

Dow Jones Industrials --- 1 week

Advancers were ahead of decliners 3-2 (rather meager all considered) & NAZ rose 68. Indices I follow had more muted responses. The S&P 500 FINANCIALS INDEX rose 4 but remains at a very depressed 129, the Alerian MLP Index slipped another 1½ to 152½ & Dow Jones REIT was up 7 (the last hour was worth 14 points from what was shaping up as another ugly day). Some junk bond funds were up maybe pennies, for them that's a big deal.

Markets breathed a sigh of relief with the announcement about the Treasury Sec. The last hour rally limited damage for the week. Dow started the week at 8497 & ended at 8046, down but a lot better than being down 1K for the week. Sharp moves powered by gut reactions are always suspicious. Next week, the Treasury Sec announcement will be history, back to corp & macro economic announcements.

Greatly oversold market is up

The Dow started out strong, up 150 from a greatly oversold market. However there was no follow thru so it has bumping along with a gain of 83 currently. Citigroup (C), another Dow stock struggling to remain in the group, has become a $3 stock. Nobody knows what's going on with them, but most thoughts are gloomy for what used to be the largest bank in the world.

For a change of pace, let's take a look at a list of 10 members of the Standard & Poor's 500 Dividend Aristocrats:

__________________________Price......Div...EPS (trailing 12 mon)

Caterpillar (Cat)..................32.84.......1.68........6.07
3M (MMM).........................56.79.......2.00........5.29
Coca Cola (KO)....................41.07.......1.52........2.57
Exxon-Mobil (XOM)...............65.00.......1.60........8.08
Johnson & Johnson (JNJ)........55.35.......1.84........4.42
Kimberley Clark (KMB)...........54.07.......2.32.........4.10
Procter & Gamble (PG)..........59.33.......1.60.........3.64
Stanley Works (SWK)............25.38.......1.28.........5.01
US Bancorp (USB)................22.12.......1.70.........1.90
VF Corp (VFC)....................39.96.......2.36.........5.83

Prices for 11/20/08 close

In all fairness, Caterpillar is not a member of this class. They don't have the track record of a minimum of have the 25 consecutive years of higher divs. However, they are a Dow stock which has paid divs since 1914 & I like them. OK so maybe I prejudiced about CAT, but these companies are in good shape with excellent long term track records of paying increased divs. Hopefully this list will give you ideas of companies worth checking out.

Any investment in these issues requires further analysis to check out how appropriate they are for a portfolio. For example, USB has only modest coverage for its div, but has not been clobbered with massive write-offs so common with other far larger banks. However new days bring new information, care is always needed before making an investment decision.

More selling in the markets will probably drag on for the balance of the year due to year end selling & more negative news about the economy. January may bring a relief rally producing large gains in greatly oversold markets. That rally could be followed by selling from continued negative macro economic news. Now is a good time for research to determine future buying points aimed at locking up high yields to help a very smart investor get thru a very difficult period for investment. These stocks should be excellent to keep your eyes on for future buying opportunities.

Returning to reality, Toyota (TM) is cutting back its workforce preparing for grim times. No point droning on with more dreary stock news, but it looks ugly out there. At these levels, Dow could have a 1000 point loss for the week making it one of the worst weeks in history.

Toyota Will Cut 3,000 Jobs in Japan as Car Sales Fall

Money from stock sales is still going into Treasuries. The 90 day note yields only 3 basis points annualized & the 10 year bond has a 3.21% yield.

Thursday, November 20, 2008

Dow plunges 444 to multi year lows

Stocks waffled in the first half of the session, but bears came on strong in the 2nd half taking the Dow down 444, decliners were over advancers 10-1 while NAZ plunged 70. S&P 500 is down to 752, what looks like an 11 year low. Other indices I follow sold off in similar fashion.

Amidst the carnage on Wall Street, oil continues in its bear market, crashing thru the 50 barrier with ease:

CLZ08.NYM..Crude Oil Dec 08....48.90 ...Down 4.72

The interest rate on the 90 day Treasury bill has fallen to 2 basis points. Translated, that means the interest discount on it is essentially zero because of all the buyers. The 10 year Treasury bond yields 3.13%. Frightened investors are buying Treasury paper taking their yields to record lows for our times.

Congress will not be helping the autos makers until next month, supporters of aid tried to work out a compromise for help which failed. Next month auto makers will get one more chance to beg for money. Unfortunately for them, while this drama drags on their sales have to be plunging which could be sealing their fate.

The short term outlook for the markets is bleak as buyers have gone on strike. Dow is flirting with the lows set in 2002. If those do not hold, I just don't know. A few months ago, some technical guys had been talking about 11.7K being an important line to hold. Whatever they were thinking, they were proven right:

Dow Jones Industrials --- 10 years

The damage in the last 3 months is difficult for anybody to fathom, a drop of almost 4K (i.e. 1/3) in less than 3 months:

Dow Jones Industrials --- 3 months

Speaking of damage done, MLPs (along with REITs & high yield bonds) have been punished badly. As bad as the selling was in early Oct, partially related to the demise of Lehman, the punishment is being dished out again. The index is down over 40% during the last 3 months to new multi year lows:

Alerian MLP Index --- 2 months

After hours Dell (DELL) reported earnings down from last year but beat forecasts, common theme among company reports. The stock dropped 54¢ during trading hours, but rallied 38¢ (it's now a $10 stock) after hours based on gut reactions. Their report says nothing new, times are tough for everybody including Dell.

Dell posts revenue that misses estimates, profits that beatat

The other indices got clobbered badly, no point dragging out more ugly charts. I just saw one of my junk bond funds has a yield of 30%, 2700 basis points above the Treasury yield. Sadly this selling will probably drag on thru year-end with tax loss selling, frightened investor selling, fund managers selling to meet redemptions. I will check to see if Chicken Little left any messages about "The Sky is Falling." For the time being, he may be on to something!

Dow testing 8000

After a 200 point drop on the opening following the ugly jobless claims report, Dow climbed back in an overdo rally of an over sold market. But that did not hold, it's slipping back again, down 69, decliners over advancers 3-1 while NAZ is even. Nice rebound!

S&P 500 FINANCIALS INDEX hit another new low. As recently as 2 months ago, this index "rose" to 300 (still far below 500+ reached in June 2007):

% Change

The Alerian MLP Index dropped 12 to 162, nearing the sub 160 multi year low region while the Dow Jones REIT Index is down pennies in its vastly oversold market. VIX shot up another 2 to the 76s, nearing the 80 high close achieved a few weeks ago. Fear runs high.

Yields on Treasuries keep plunging. The Treasury 10 year bond yield dropped to only 3.21%. All Treasury yields are at or near all time record lows, this is where frightened money is flowing.

Treasury Yields Drop to Record Lows as Investors Seek Safety of U.S. Debt

Oil (as with other commodities) keeps getting hammered by global recession news. After falling thru 50 this AM, buyers brought it back above 50 but still down sharply. Oil's bear market continues:

CLZ08.NYM..Crude Oil Dec 08....50.75 ...Down 2.87

The big news was jobless numbers are uglier & uglier. Last week, jobless claims jumped 27K to 542K (much more than feared). The number of people on benefit rolls rose to 4MM, the highest number in 26 years.

Bush to Back Jobless-Benefit Extension as Claims Rise to Highest Since '92

Leading economic indicators fell 0.8%, worse than was expected, just another sign of being in a recession:

Congress was stunned yesterday to find out that the auto execs begging for more aid flew to the hearings in corp jets. Each company has its own fleet of jets for execs who have done such a crappy job of running their companies into the ground. More gov helps is now a lost cause. Meanwhile their sales have to be plummeting. Would you want to buy a car fearing the the car company may not be around next year?

This is a major test for the Dow, 8K. With all the gloomy news out there, it's going to take a lot for buyers to return & keep it above that line.

Wednesday, November 19, 2008

Fate of automakers drags Dow down 427, to below 8000

Markets were down all day but sold off big time in the last hour (getting to be a habit). Uncertainty about the automakers, their customers (car dealers) & suppliers is a lot for markets to absorb even though the talk has been around for some time. Dow tumbled 427 bringing it just under the important 8K support line, decliners over advancers 10-1 & NAZ dropped 97 bringing it below 1400.

S&P 500 FINANCIALS INDEX reached new lows with one of their worst days in history. They are connected with the future of the automakers, auto loans represent a portion of their loan portfolio & is now under a very dark cloud:

% Change

Amidst all the uncertainty, the Alerian MLP Index dropped 12¼, to 173, another low (aside from the spike down in early Oct) & the Dow Jones REIT Index dropped an enormous 16 to 108. However, the VIX shot up 6.62 to 74.26, approaching its record of 80 set a couple of weeks ago. Fear is going to extremes.

In sympathy, oil slipped pennies taking it below 54.

The Federal Reserve, at their last meeting, expects the economy to shrink thru the middle of next year. As a result, they are prepared for more rate cuts (among other measures) but little is left when interest rates are already at 1%.

Fed Policy Makers Saw Economy Shrinking Through Mid-2009 at Last Meeting

Dow stocks: Bank of America (BAC), General Electric (GE) & Intel (INTC) have fallen below 15 while American Express (AXP), Microsoft (MSFT) & Pfizer (PFE) are under 20. The 3 under 10 have already been mentioned many times. These are vastly different times when the Dow holds so many "low priced" stocks.

High yield (junk) bonds got a relatively nice mention. One index has their yields topping 20%, one of the highest rates ever. They point out that either they deserve these valuations because the economy is going to get soooo bad or there are extraordinary values out there which can be used to lock up record high yields. One of my junk bond funds dropped 10% today, taking the yield over 25%. I just don't know!

Junk-Bond Yields Reach Record 20% as Weaker Economy Boosts Risk of Default

Speaking of extraordinary high yields, Kayne Anderson Energy Total Return Fund (KYE) is a closed end fund which invests in MLPs & shown in my Finance badge on the right. At the current price, it yields over 19%. The market is pricing in many distribution cuts on their MLP holdings. It should be mentioned, this is a corp with stock which pays dividends & some of the divs may not taxable (for those interested).

The "big 3" are trying to justify their existence to Congress but that's a tough battle. They have to beg for another $25B to keep them afloat for another year, whatever. I really don't know, but the thought of just one bankruptcy is frightening.

While the auto cloud overhangs the markets, it's difficult to see buying returning in a meaningful way. It could also be this is just another one of the many clouds overhanging the markets.

Those Websense guys are back, off & on, blocking my picture. Sorry about it, was hoping that Google straightened them out. I guess not.

Stocks keep drifting down

Dow is down 105 & slipping in a very soggy market, decliners over advancers 3-1 & NAZ dropped 22. S&P 500 FINANCIALS INDEX is down a big 9 to another multi year low below 149. Two months ago, the index had a modest rally taking it over 300. In this short time span, the index has been halved. The Alerian MLP Index is slipping badly after a bear market rally last month took it up to the 225 area. It's down to 6 to 179 & may be heading to test the lows under 160 when added selling was brought on by the Lehman demise & related liquidations:

Alerian MLP Index --- 1 month

Even worse off is the Dow Jones REIT Index, dropping 8 to 116, a 10 year low. They are being punished badly & may see worse times in the coming weeks with tax loss selling. Their dividend yields, like for MLPs, are well into double digits. Speaking of high yields, don't even ask about high yield (junk) bond funds. Some of those may be heading for 25% yields. For the very brave, these high yields provide incentive to lock up dividends for the long term. The VIX, volatility Index, is up only 1, mild in these times.

Dow Jones REIT Index --- 1 month

Oil dropped below 55 as world recession news trumps all other factors which would have brought higher oil prices in ordinary times.

Consumer prices dropped a record 1% last month. The good news on the inflation front was expected although the decline was larger than forecasted. This follows plunging prices for commodities in the last few months. Core prices, excluding food & energy, fell 0.1%, the first drop in over 25 years. However the housing report was more of the same dreary news that has been dragging on for months. The highlight was foreclosures in Oct were up 25% from the prior year.

Consumer Prices in U.S. Fall Record 1% on Drop in Oil, Retailer Discounts
U.S. Housing Starts Drop to 791,000 Pace, Lowest on Record; Permits Slide

Congress is still trying to figure out what to do with the big 3 auto companies, whether or not to give them added help. Congress is not expected to pass meaningful legislation in the lame duck session & General Motors (GM) has signaled it may not have enough money to stay alive into next year. If one or more auto makers fail, that can be another big jolt to the markets even that possibility is being factored into prices already.

Tuesday, November 18, 2008

Late day rally lifts Dow

Dow had a major rally in the last hour, from 8100 to 8425, maybe on hopes that auto makers will be bailed out again. Much of the gains came from : Chevron (CVX), Exxon Mobil (XOM), Hewlett-Packard (HPQ), IBM (IBM), Johnson & Johnson (JNJ) & 3M (MMM). However decliners lead advancers 2-1 & NAZ was just about even.

Big Three Plead With Congress for $25B in Uphill Fight- AP

Meanwhile, oil was down 37 pennies. Times are tough for oil when even hijacking a tanker off Africa can't bring out buyers.

S&P 500 FINANCIALS INDEX was down "only" 1.26 to another multi year, the Alerian MLP Index dropped 3 to a new low (aside from the week prior to Columbus Day). Without the last hour 5 point rally, it would have been a lot worse. The Dow Jones REIT Index slipped 1 (again, even after rallying 6 in the last hour) to another multi year low. In the last hour, prices got too low so bargain hunters were attracted. In addition to all the macro economic problems, tax loss selling & selling by funds to meet redemptions are taking their toll. Meanwhile the VIX Index, or fear index, was down 1.51 to 67.64, still near its recent record levels:

VIX --- 2 months

The annualized yield on the 90 day Treasury bill is only 11 basis points. To buy a Treasury promise to prepay $100 in 90 days, it costs $100 less 3 pennies. The 10 year Treasury bond has a yield of only 3.52%. Those are places frightened money is going.

The auto makers are testifying before congress pleading for more aid beyond the $25B they have already been granted to retool for more fuel efficient cars.

Late day rallies are always suspicious, especially in these times. Tomorrow's a new day, let's see what it brings.

As a note, Websense is blocking my picture on the right (along with many others). This may vary from one computer to the next, hopefully Google will get after them & soon!

Relief rally helps stocks

Markets are still trying to figure out what is going on in this confusing financial mess. Dow rose 93 but decliners are barely ahead of advancers & NAZ was about even despite the 1.35 pop for Yahoo (YHOO) on growing speculation Microsoft (MSFT), a Dow stock, might buy them. The averages I follow are only modestly changed, even VIX is down 1½ (small change in comparison to recent times). Oil is also flattish.

Wholesale prices plunged 2.8% in Oct, the biggest drop in 60 years. While a major decline was expected, this beat expectations & follows the sharp drops in prices for oil & just about every other commodity. However, core inflation, prices excluding energy & food, rose 0.4%, higher than expected. The drop in prices is what is called "demand destruction" in Asian trading, further declines in the next few months are expected.

U.S. Producer Prices Plunge 2.8%, Most on Record, as Global Demand Shrinks

Ben Bernanke & Henry Paulson are defending to congress that they really know what they are doing in a make it up as we go along world. I suppose they are doing the best anybody can with these seemingly unsolvable financial problems, but cures remain in the distant future.

Paulson, Bernanke Defend $700 Billion Bailout on Capitol Hill- AP

Better news on the corp front, Hewlett-Packard (HPQ), a Dow stock, gave glowing guidance for the qtr just ending Oct 31 sending the stock up 3.38. Home Depot (HD), another Dow stock, gave a common story, earnings were down but beat analysts forecasts, stock up 1.32

Time for a break. Last night we saw "Second Chance Harvey" with Dustin Hoffman & Emma Thompson. My friend liked it a little more than me, she always goes for the romance films. After the movie, Dustin & Emma told us how they made the film & what it was like working with each other & the director. It should be out soon for those who want to see it.

Unless there is a major news announcement today, markets may continue to muddle along with the the downward bias. The Dow is close to 8K, looks like it is ready to be tested again.

Monday, November 17, 2008

Another depressing day for stock markets

After dropping 200 early in the first hour of trading, Dow tried & tried to break into the green but couldn't make it stick. For much of the day, it stayed near the flat line with sellers returning in the last ½ hour taking the Dow down to close with a 223 loss (near its lows), decliners over advancers more than 3-1 & NAZ sold off 35 taking it below 1500. On NYSE floor, volume was nothing exceptional at only 1.3B.

S&P 500 FINANCIALS INDEX dropped 11 to 159, another multi year low. At the famous July 15 low, Bank of America (BAC) dropped to 18 with an eye popping yield of 14+%. Now it's down to 15 after the div has been halved. Investors are betting more ugly news is coming for that div even though BAC started the year as an S&P 500 Dividend Aristocrat. The Alerian MLP Index dropped 6½ to 188, breaking out on the downside of its recent sideways trading zone. The Dow Jones REIT Index dropped to 125½, another multi year low. All REITs are being punished badly. Simon Property (SPG), one of the premier REITs, at 48.88 is at a 5 year low & yields 7½%, others of lessor quality have yields well into double digits. However, the VIX shot up 2.85 to 69.15, fear is on the rise.

Similar to the stock markets, oil tried to post a gain but couldn't make that hold.

CLZ08.NYM...Crude Oil Dec 08....55.00 ....Down 2.04 (3.6%)

50 professional forecasters gave their forecast for the economy & it is pretty gloomy. Q4 is shaping up as negative which will define a recession. They are forecasting the economy will contract at a 2.6% annual rate, others say 3-4%. This is down from expectations in the prior month when they said the economy would eak out a gain in Q4, things are worsening at a rapid pace. In the next 12 months, they expect the unemployment rate to shoot up another percentage point to 7½%. The important point may be how quickly they revised their forecasts downward in just the last month. That reminds me of these familiar thoughts about how the economy fell off a cliff on Sep 15.

The PM trading had nothing exceptionally going for it, merely stumbling along so sellers took over at the close. Banks were very weak on all the confusion in financial markets. Sadly there is nothing around to corner to stop the bleeding especially while the fate of 3 major auto companies is up in the air.

Stocks little changed on dreary economic news

Economies around the world are reporting recessionary conditions. Last week, the European block registered a recession & last night Japan & Hong Kong reported they were in recessions. Singapore & New Zealand began reporting recessions a month ago (or so). Japan, 2nd largest economy in the world, is highly dependent on exports. There was a report last night (Monday their time) that a string of the bluest chips of Japanese companies starting with Toyata (TM) would announce this week negative guidance. So far no announcements, keep an eye out for them.

Meanwhile among all the dreary economic news Dow is flattish (rallying from a 150 loss an hour ago), decliners are ahead of advancers 2-1 while NAZ is also flat. S&P 500 FINANCIALS INDEX set another multi year year, banks will probably be sold thru 2008:

% Change

The Alerian MLP Index dropped 2 to 192 (it's been hanging in there better than other averages in recent days) & the Dow Jones REIT Index dropped 1 to 129. Meanwhile VIX, the fear index, rose another 1½ to 68 as it soars for the heavens. Hard to remember that a couple of months ago, this level was difficult to imagine.

Oil was flat after a report of favorable industrial output in Oct, which rose 1.3% largely related to normal operations at oil facilities following hurricane damage in prior weeks. Global economic issues are the prime driver for oil prices, the main reason it's down $90 in only 4 months:

CLZ08.NYM...Crude Oil Dec 08....57.12 ....Up 0.08 (0.1%)

There was a G-20 meeting in DC over the weekend, but, as usual, little was decided other than the worldwide economies need a lot of help.

Citigroup (C), one of the Dow stocks under 10, announced they will lay off 53K or 14% of their staff following layoffs earlier this year.

Citigroup's Pandit Will Reduce Headcount by 50,000, Lower Expenses by20%

Target (TGT) reported lower EPS in Q3 but beat expectation by a penny, the stock is down only 18¢ as weak sales & lower results in its credit card division hurt. For guidance, they talked about many challenges going forward. Lowe's (LOW) reported EPS declined 24% but that beat expectations sending the stock up 1.44. They expect Q4 EPS of only 8-16¢ bringing full year totals to 1.46-1.54.

Amidst all the problems & chaos out there, the fate of the 3 auto makers is center stage. Instead of the markets, politicians in DC will decide their future.

Sunday, November 16, 2008

Just another grim week

Markets can't attract buyers in a meaningful way. In 2+ months, Dow has dropped an astounding 3K, but has leveled off with a floor of 8K. Last week, it hit that floor & bounced up 800 on Thurs PM. But that didn't hold, the Dow ended the week down about 450, ugh:

Dow Jones Industrials --- 3 months

Yield issues can provide comfort as long as dividends hold (or are increased). However, market bets are very ugly, assuming the worst. The high yield securities with proven track records of paying & preferably increasing divs should give comfort during a period which can drag on for months & months. Some of the highest yields are with MLPs, REITs & high yield (junk) bond funds. Even regular companies with excellent track records routinely offer 3, 4 or 5+% yields.

Of the top 20 holdings at Charlers Schwab, all are down for the year. The best are Johnson & Johnson (JNJ) & Procter & Gamble (PG), 2 Dow stocks, each down less than 20%. The others are down 21-68%. Among the many problems markets are facing, tax loss selling in the next few weeks will be just another.

Friday, November 14, 2008

Late day sell-off sinks stocks

After being down all day on very bad economic news, a lunchtime rally took the Dow up 300 points in a couple of hours, but it was not meant to last. Maybe the hedge funds guys were prompted by higher prices to sell & they sold off big time. In the last hour, Dow pulled back 400 ending down 338 for the day, decliners over advancers more than 3-1 & NAZ declined 80. S&P 500 FINANCIALS INDEX dropped 9 within a couple of points of the multi year low set yesterday, the Alerian MLP Index was of marginally while Dow Jones REIT Index dropped 16 (12%), just off the new lows set yesterday. But the VIX rose 5 to 65, fear is running high. Those 5 points came in the closing mins as stocks sold off

Lost in all the dreary news on the economy & the financial crisis, the price of gas was cut in half during the last 4 months. Yes, they those prices respond to crude oil prices even if it takes a little time. Unfortunately, this is not giving the economy the expected lift.

Gas Prices Drop Nearly $2 in Four Months-

Consumers are getting squeezed hard with loss (or threats of loss) of jobs, mortgage problems, etc. They are cutting back sharply on discretionary spending. Retail sales, as expected, are coming in bleak with no significant changes forecasted in the near term.

The 90 day Treasury bill offers an annualized yield of 13 basis points. That means to buy a $100 bill due in 90 days, it costs $100 less 3¢. That's one of the places where frightened money is going after stocks are sold. This was another down week for the markets. The Dow started Nov at 9336 closing today about 850 points lower. Macro economic news will continue to be the primary movers of the markets.

Negative economic news drags markets down

Stocks want to give back gains from yesterday's rally. Dow is down 325 & sinking fast, decliners over advancers 4-1 & NAZ is down 71. S&P 500 FINANCIALS INDEX dropped 9 to 171, inches away from the closing low a couple of days ago,the Alerian MLP Index is down 2.75 but really has given up 5 from today's high or 1/3 of the 15 point advance off yesterday's low & the Dow Jones REIT Index is down 10.77 which represents ½ the gain off yesterday's low. Meanwhile VIX is up 4 to 64. Oil is pulling back even though is widely expected that next week's OPEC meeting will call for a cut in oil production aimed at propping up prices.

CLZ08.NYM....Crude Oil Dec 08....56.37 ....Down 1.87 (3.2%)

Retail sales plunged 2.8% in Oct, the worst decline since record keeping began in 1992. This ties in with many who have been saying that after Sep 15, demand just fell off a cliff. A dreary economy & the credit crisis caused consumers to pull back on spending. The decline was led by a 5½% decline in auto sales, the worst showing in 17 years. Excluding auto sales, the decline was 2.2%, a record for that category.

Retail Sales in U.S. Fell 2.8% in October, Most Since Records Began in '92

In Nov the consumer confidence inched up from the prior month's record low to 56.9 (up 0.3), as it remains near the 28 year low. The outlook is for more dreary numbers in coming months.

U.S. Consumer Confidence Stays Near Lowest in 28 Years as Job Losses Mount

As I said yesterday, it looks like the Republicans are playing hard-ball on bailing out the auto companies. The idea floated around was that their finance companies (the connection with the bailout program) would receive $25B of the $700B in the bailout package. But the Reps are saying, not so fast. Dems are behind it while Reps aren't, we have to await developments. General Motors (GM), still a Dow stock, said they're not sure if they have enough money to remain alive thru next month.

Auto Bailout Loans Are In Jeopardy as Top Republicans Oppose Legislation

FED Chairman Ben Bernanke said the Federal Reserve would work closely with other central banks to fix global financial problems, hardly a news bulletin. Plus future rate cuts will be considered. The chaos in financial markets is wearing down investors which will probably bring on more selling & fund redemptions, adding to selling pressure.

Bernanke Says Central Banks Around Globe `Stand Ready' for Further Action

Speaking of financial chaos, Freddie Mac, now a penny stock, reported a $25B loss, 20x analysts expectations & up sharply from last year's 1.2B loss. As a result, they will ask for almost $14B in gov aid. 60% of the loss was due to writing down assets to market, the rest came from writedowns & credit losses. This loss follows the $29B loss reported by Fannie Mae at the start of the week.

J.C. Penney (JCP) reported Q3 EPS fell 52% to 56¢ (analysts forecasted 53¢) because consumers cut back on spending & took fewer trips to the mall. Sames store sales fell 10.1%. They are looking for a similar decline in Q4 with this ugly scenario continuing well into next year. The stock slipped 1.55.

Dow Jones Industrials --- 2 days

While writing this post, as shown in the graph, Dow has been selling off & looks like it wants to give back most or all of yesterday's 3 hour monster rally.

Thursday, November 13, 2008

Overdo relief rally

Markets had another wild, volatile day even for recent times. Dow bounced off its low, just under 8K, with a monster 800+ point rally in the last 3 hours. Dow ended up 552, advancers ahead of decliners 3-1 (rather mild considering what 550 points should bring) & NAZ jumped 97. S&P 500 FINANCIALS INDEX had a very good PM, up 12:

% Change

The Alerian MLP Index was up 3 to 195½, a modest gain all considered. But this is still the lowest level in 5 years (aside from the horrible week of Oct 3). Standard & Poor's talked about difficulty for lower-rated oil & gas companies to access high-yield debt which may pose a liquidity risk. While their discussion did not specifically mention MLPs, this kind of thinking may be bleeding over to them causing the sell-off in the last few days taking the index below 200. Their very long term projects underway have financing in place. However, financing issues might negatively impact them going forward when they arrange new projects. As in the rest of the business world, uncertainty affects the future for all.

Weak appetite for junk bonds poses risk for oil sector: S&P

The Dow Jones REIT Index had an 15 point pop today, a reaction to the greatly oversold conditions for REITs with dividends which offer extremely high yields. High yield (junk) bond funds had more of a mixed day retaining yields near 20% or about 1600 basis points above the Treasury 10 year bond rate. The Volatility Index dropped 7 to 59, fear subsided a bit.

Oil finally had a pretty good day:

CLZ08.NYMCrude Oil Dec 08....59.52 ....Up 3.36 (6.0%)

Nothing dramatic happened causing the 800+ point rally in 3 hours other than just a relief rally. A couple of months ago, a 500+ point rally for the Dow would have been headline news but today it has become routine. In the last few weeks daily point swings for the Dow have been reduced to 300 or fewer points, but today brought back prior times with a 900+ point swing.

Dreary macro economic problems drone on. Republicans look like they want to play hard ball about helping the autos with money from the loan package. The Treasury Dept is trying to figure out how to handle financial lending problems & bad loans. Yesterday reminded everybody they they have to make it up as they go along which brings complaints & uncertain markets. I think Citigroup (C), depending how the figures are calculated, is still the biggest financial institution in the US, but the stock is under 10. I just don't know. The rally today will probably be described as technical in nature. Let's see what tomorrow brings.

Confused markets muddle along

Dow & NAZ are about even while decliners are slightly ahead of advancers. In the Dow 30, General Motors (GM) & Citigroup (C) are under 10 while Alcoa (AA) is just over 10. In the old days, under 10 signaled a very speculative stock. Speaking of down on their luck, American Express (AXP), another Dow stock, is at a 12 year low & probably headed even lower:

American Express --- 37 years

S&P 500 FINANCIALS INDEX is down pennies, the Alerian MLP Index is down 3½ to 189, Dow Jones REIT index is down pennies at a multi year low under 131. The VIX, Volatility Index, dipped slightly to under 66.

Oil rebounded a little, but the fundamentals continue bearish on expectations of lower worldwide demand:

CLZ08.NYMCrude Oil Dec 08....57.61 ....Up 1.45 (2.58%)

The Labor Dept reported jobless claims jumped 32K last week to 516K, higher than expected & almost matched 517K claims in 2001. This is only the second time in 16 years that claims exceeded 500K. An important sign of a recession is when jobless claims are above 400K.

Almost 280K homes received a foreclosure notice last month, 5% over last year's figure. The number of homeowners with foreclosures in Oct grew 25% above last year.

Wal-Mart (WMT), a Dow stock, feels good about THEIR holiday sales. Their guidance for 2008 EPS is $3.42-3.46, up from $3.16 last year. But this projection is down from the prior guidance of $3.43-3.50. Analysts are estimating $3.48 for 2008. The stock fell 73¢ on the reduction in earnings guidance.

Wal-Mart Says It's `Optimistic' About Holiday Sales; Earnings Advance 9.8%

I feel sorry for the Treasury & Federal Reserve trying to solve seemingly impossible problems for the financials. But that's the world we live in & markets are reacting. More grim news on the economy, etc. will keep coming.

Wednesday, November 12, 2008

Markets crumble, Dow down 411

Just another down day for the Dow, down 411, near the lows of the day, taking it below 8300, after starting the month at 9336. Decliners were ahead of advancers 10-1 & NAZ dropped 43.

S&P 500 FINANCIALS INDEX set another new multi year low:

% Change

The indices I follow got slammed very hard. The Dow Jones REIT Index is touching a new multi year low, falling 10¼ to 131. The Alerian MLP Index dropped 9½ to 192. This is an unusually large drop for it, even on a terrible day like today & it's solidly below 200, probably headed to test the lows of 155 (which were aggravated by forced selling after the demise of Lehman). The VIX shot up 5.16 to 66.60, fears rose sharply.

Oil keeps falling on continued worries about a severe global recession:

CLZ08.NYMCrude Oil Dec 08....55.89 ....Down 3.44 (5.8%)

A quickie auto $25B bailout package received White House approval, it will be folded into the $700 bailout program the Federal Reserve is working with.

Frank Plan Would Give Automakers Extra $25 Billion Through Treasury Funds

American Express (AMX), a Dow financial company, became a bank yesterday (i.e. on a moment's notice). It looks like they are getting hit hard with bad debts from the cardholders, requiring a $3½B investment from the gov. This is now a $20 stock, hard to believe:

General Electric (GE), another Dow stock, will guarantee $139B of the debt for GE Capital . Can you spell, "Uh-oh?"

GE Says U.S. Will Guarantee Up to $139 Billion in Debt for Lending Unit

Las Vegas Sands (LVS) received a big financing package from Asia plus over ½B loan from the Adelson family to remain alive for the time being.

The Treasury had plans to buy troubled mortgages yesterday but that had to be abandoned after complaints that it wouldn't help. Hello!!! What's going on here? Maybe I'll have to check in with Chicken Little tonight, it seems like the sky is really falling. OK, we'll get thru this mess but over the short term life is brutal which is causing stocks to sell off.

The level of redemptions at mutual & hedge funds is important, I have a feeling they are running very high again which means fund managers will throw more stock out the window, maybe they were doing it today. When confusion & chaos are in charge, stocks get hit hard. The Dow low on Oct 27 was 8175, that needs to be tested & probably tomorrow.

Stocks keep tumbling

Dow declined 276 near its session lows, sadly that kind of decline has become common recently. The daily range for the Dow has been settling back in the last few weeks to "only" 300 bringing a relative sense of calm. A few weeks ago, daily ranges were exceeding double that number. Decliners are over advancers 5-1 & NAZ is down 46. NAZ has been punished badly, the chart below for Wall Street darling Google tells that story well:

Google --- 4 years

S&P 500 FINANCIALS INDEX declined 8 to 171. I think Bloomberg TV, which monitors this index, said it's a 19 year low. Their site only shows a 5 year history, 5 years ago it was in 400+ territory. The Alerian MLP Index dropped 6¼ to 195½ taking it below the important 200 line of resistance, the Dow Jones REIT Index fell 5½ to 136 matching the prior yearly low reached a couple of weeks ago (which is really a 6 year low). But the VIX, Volatility index, is back up 4½ to 66 as fear is running higher.

Oil, down 2, is pretty much at a 3 year low:

CLZ08.NYMCrude Oil Dec 08...57.25 ....Down 2.08 (3.5%)

Whopper size financial problems drone on & the US Treasury has to come up with new rescue plans, but making it up as they go along is a tough way to handle it. OK, I don't have any better ideas in the horrible financial crisis they are trying to get us out of. Chaos in solving seemingly unsolvable problems is adding to selling pressure for stocks.

Paulson Scraps Plan to Buy Troubled Assets, Shifts Focus to Consumer Loans

Company news keeps coming & it's all dreary. BestBuy (BBY), down 1.43, guided EPS for 2008 sharply lower, down almost $1 from the guidance ONLY 2 months ago ($2.30-2.90 vs $3.25-3.40). Since the first 3 quarters are recorded, the negative guidance will come out of Q4 profits!

Best Buy Drops on Reduced Profit Forecast, `Seismic' Slowdown in Spending

Macy's reported a loss only half what was expected. After rallying in the first hour, it sold off sharply, taking below 9, or down 50% this year.

After the July 15 low, I was sorry that I missed a chance to get Bank of America (BAC) at just 18 with an enormous yield. Four months later the stock is back at 18 while the div has been halved. This is just one story, but it will be repeated many times as bleak days are ahead. Currently, bigger than Q3 retail sales reports coming in the next few days, is whether or not the gov will save GM & maybe Ford & Chrysler. Horrible days for auto companies is a worldwide problem. Last week Toyota (TM) said this will be their worst year in the last 15.

Dow is heading south fast. It looks like will have to test 8K & probably very soon.

Monday, November 10, 2008

Stocks fall on economic worries

Today began with so much hope, based on the enormous stimulus package announced by China. But the Dow fell 300 points from the highs reached early in day, ending near their lows with a net point drop of 73. Decliners led advancers 2-1 & NAZ dropped 30 led by Google (GOOG) falling 14, near a multi year low, on worries about its earnings.

S&P 500 FINANCIALS INDEX fell 8½ to 184. Alerian MLP Index dropped only 2½ while the Dow Jones REIT Index fell a big 14½ to 144 just inches from its low multi year low set a couple of weeks ago. The VIX popped almost 4 to 60 as even higher levels of fear are returning to the markets. Oil ended with a 1 point gain to 62, rather muted considering all the enthusiasm regarding increased spending by China's gov.

Now Goldman Sachs (GS), down 6.57, looks like it will report its first loss since going public in 1999 bringing its stock price near the lowest levels in the last 9 years. Despite their premier status, they may fall prey to the credit crisis requiring a bailout:

Goldman Shares Fall to 5-Year Low on Loss Estimates (Update1)

Goldman Sachs --- 9 years

Reality will be the main market driver this week led by gloomy numbers from retailers & worries about very big companies. Maybe we should all pray for General Motors, Las Vega Sands, AIG, Goldman Sachs, etc., etc., etc.

SeekingAlpha just published my current article on the S&P 500 Dividend Aristocrats, giving ideas about investing in quality securities during these troubled times:

S&P 500 Dividend Aristocrats and Your Portfolio

I'll be off tomorrow, hope everybody is well.

Early market gains fade fast

Stocks out of the gate started strong following the leads of overseas markets. Asian & European markets rose on news that China adopted a $586B stimulus spending package. Commodity & telecom stocks were strong. Leading gainers in the Dow were Alcoa (AA), AT&T (T), Verizon (VZ) plus McDonalds (MCD) on a 8.2% gain in same-store sales for Oct. Dow is now down 23 (down from a 200 gain early on), advancers equal decliners & NAZ is down 16.

Buyers pulled back on more glum economic news such as Circuit City filing chapter 11, AIG needing even more money for their bailout, Fannie Mae recording a bigger than whopper size loss & GM dropped 1 to 3.39 on predictions it may not have enough cash to last thru next month (their days as a Dow stock are numbered).

Circuit City Files for Bankruptcy Amid Competition From Best Buy, Wal-Mart
Fannie Mae Posts Record $29 Billion Quarterly Loss After Asset Writedowns
AIG Bailout Swells to $150 Billion as Insurer Reports Fourth Straight Loss
General Motors Plummets After Deutsche Analyst Cuts Price Target to Zero

S&P 500 FINANCIALS INDEX dropped 3, the Alerian MLP Index was even but the Dow Jones REIT Index dropped 7 to 151 (maybe heading for the recent low of 135). The VIX, Volatility index, was up 1½ to 57.60 continuing in astronomical territory.

China's plan for spending is supposed to help the world's economy as they are a big player. They will be spending on infrastructure: roads, bridges, housing & repairing damage form the earthquakes. However, they may be already spending on some of the projects in the plan. China envisions this will take a couple of years to complete. Financing the plan was not addressed. The most directly impacted will be metals. Metals were strong but oil was little changed:
CLZ08.NYMCrude Oil Dec 08....61.46 ....Up 0.42
..... (0.7%)

Retailers will be reporting Q3 earnings later in the week, expectations are bleak.

Sunday, November 9, 2008

Yields are more important than ever

Last week was just another one of those rough weeks we have gotten used to:

Dow Jones --- 1 week

Wed-Thus was the worst 2 day session in years which brought the Dow below 9K. The banking crisis is receding to some extent after central banks around the world have been throwing $B & $B at banks. But huge problems remain.

Las Vegas Sands Corp. (LVS) will announce next week how it plans to avoid defaulting on $3.8B. Maybe problems with this loan helps explain why banks are hesitant about lending.

Dividends & yields have become increasingly important for very smart investing during these times. When all divs are under suspicion, looking to the Standard & Poor's 500 Dividend Aristocrats can provide names of companies with reliable divs. Nearly 60 of the Standard & Poor's 500 have track records of at least 25 consecutive years of annual div increases. Unfortunately, S&P is not making the list widely available but recent ones can be found on the web. Since they are dated, it should be kept in mind that most banks have or will be removed removed from the list, only State Street (STT) & US Bancorp (USB) remain. Others on the list may be taken off by next year including: Masco (MAS) even though it has a 50 year track & General Electric (GE) plus Pfizer (PFE) & Eli Lilly (LLY) with their high yields show investors worry about how patent expiration on important drugs may affect their divs in a few years.

However many on the list are doing well & look like they will get thru this financial storm with additional annual div increases. A few that might be checked out because of their good earnings coverage for the div include: Coca Cola (KO), Kimberly Clark (KMB), VF Corp (VFC), Walgreen (WAG), Johnson & Johnson (JNJ), Procter & Gamble (PG) & Wal-Mart (WMT). These are not specific recommendations since I'm not familiar with all their problems, but companies like these with good earnings should be able to remain on the list for many years.

The very brave can also look to other securities with very high yields. Many MLPs, REITs & high yield (junk) bond funds have yields well into double digits. Well run ones should survive & high monthly or quarterly divs will be welcome during continued financial turmoil.

The biggest financial problem today is survival of the 3 big autos. Given the current economic environment, it is difficult to see how stock markets can mount a significant rally for some time. Tax loss season is here, making matters worse. Dividend yields (or distribution yields for MLPs) should make stock market gyrations easier to take.

Friday, November 7, 2008

Markets hang on to early gains

Dow rose a couple hundred out of the gate & remained pretty much flat for the rest of the trading day. The negative unemployment report & threats of possible failures by the auto companies did not keep buyers away. With a 180 point rally in the last 30 minutes, Dow ended up 248, advancers led decliners by 2-1 & NAZ was up 38. The indices I follow posted gains, the best being 9.37 for the greatly oversold Dow Jones REIT Index. The S&P 500 FINANCIALS INDEX managed a gain of 3.69 after being flat much of the day. VIX declined 5.10 to 58½, probably due to the rising markets. Oil was up pennies, just under 61.

General Motors (GM), a Dow stock, reported a Q3 loss of 4.2B & said it may not have enough cash to stay alive THRU NEXT MONTH. The mighty auto industry is shaky & implications for the economy of the failure for any or all 3 auto companies boggles the mind. But markets were little concerned today.

GM Says It May Not Have Enough Cash to Finish Year, Suspends Merger Talks

Goldman Sachs is cutting profit forecast for the S&P 500 by 10% in 2008 & 9% for next year. The are estimating this year, S&P will earn $65 & next year it should rise to $68. No big surprise.

Goldman Cuts 2008, 2009 S&P 500 Profit Forecasts, Citing Economic Slowdown

Markets had another rough week but pulled into the lower half of the 8-10K trading range. The 11K level which used to be thought of as a floor, now is a level many would like to regain:

Dow Jones Industrials --- 2 months

John Chambers, head of Cisco (CSCO), after reporting earnings this week, said Cisco is gearing up for a very tough economic environment around the world. I think he expressed well what business people & investors are facing.

Dow rallies despite 6.5% unemployment rate

Asian markets last night sold off in opening hours following the horrible day in US markets. Australia, Tokyo & Korea were all hit hard. However most rallied by the close of trading. A major news item in Japan was that Tokyo said that they were expecting this to be their worst year in 15 years.

Dow was encouraged & rose 166, advancers over decliners 2-1 & NAZ was up 28 on a greatly oversold rally. The indices I follow were up mildly, while S&P 500 FINANCIALS INDEX was down pennies. Oil was up, again only by pennies. If there is logic behind the rally, it seems to be on the hope of another rate cut (even though banks aren't lending) which trumps the terrible unemployment report

The unemployment report came out & it was ugly. The rate shot up to 6.5% in Oct, versus 6.1% in the prior month & the highest rate since 1994. This is the 10th consecutive month of job declines, 1.2MM jobs lost this year. The outlook is for more rate increases, as everybody is trying to guess how high the rate will go.

Jobless Rate in U.S. Jumps to 6.5%, Highest Since 1994, as Payrolls Tumble

Ford (F) reported a terrible qtr (GM results should be out shortly) as sales plunged 22% producing a $3B loss (Ford is now a $2 stock). Their biggest problem is the rapid pace at which they are "burning cash" (7.7B in Q3). The auto makers are meeting in DC, trying to come up with a rescue, bailout, whatever package (roughly $50B) so they can ride out the recession. When I hear that about sales plunging, I am reminded of talk about how retail demand dropped off a cliff on Sep 15.

Ford Has $2.98 Billion Operating Loss, Burns $7.7 Billion Cash in Quarter

Las Vegas Sands Corp. (LVS), plunged 10 in the last week to 6.76, is looking for Asian money (where it has $16B in expansion projects underway) to avoid defaulting on loans.

Las Vegas Sands Chief Adelson Holds Talks With Singapore, Banks on Funding

Markets are having a good day but the Dow is still down 400 this week after the pounding it took in the last 2 days. Markets remain on defense.