Thursday, December 18, 2008

Dow down again

Dow keeps trying but can't break thru the 9K ceiling. Today the threat that Dow stock GE may lose it's AAA debt rating encouraged market sellers. Dow fell 219, decliners over advancers 3-2 (not so bad for Dow down 219) & NAZ was down 27. The S&P 500 FINANCIALS INDEX fell 5.

Alerian MLP Index was down 3 to 177. After rebounding off the bottom under 160, it has been trying to get back to the intermediate highs around 225. For a couple of weeks it has pretty much been flat lining around 175-180. Tax loss selling (all MLPs are prime candidates) has hurt, but there has also been a lack of enthusiasm on the buyer side. Next month is when new distributions will be announced. A few have single digits handles, already pricing in very gloomy news. Any cuts, especially big ones, may bleed to all, making every distribution going forward more doubtful.

Alerian MLP Index --- 2 months

Today's news includes Kinder Morgan (KMP), the largest MLP, raised $900M selling stocks & debt. That was an encouraging showing for MLPs.

Kinder Morgan Energy Partners, L.P. Raises Almost $900 Million of Capital

However, Constellation Energy (CEG) had to cut its quarterly distribution from 56¼¢ to 13¢. The stock is down from the 50s last year to 2.81.

Constellation Energy Partners Announces 2009 Business Plan and Forecast

Lehman High Yield Bond ETF (JNK) had a very good day, one of the best in a long time. It rose 1.11, or 4%. Nibblers noticed that it's yield is 1350 basis points above the anemic Treasury bond yield of 2.07%. Other junk bond funds with even higher yields had bigger gains. The very venturesome buy these funds hoping for a rebound. For some funds, just a move up in price to reduce the yield to "only" 20% could bring a very nice gain. Already, JNK below, has had a good pop on high volume:

Lehman High Yield Bond --- 2 months

Not all have fared so well. The Dow Jones REIT Index dropped 12 points to 140 today. They trade on junk bond valuations.

Dow Jones REIT Index --- 2 months

Oil had another very bad day, taking it down to 4 year lows. Global economic recession trumps the largest production oil cut in OPEC's history:

CLF09.NYM..Crude Oil Jan 09...36.26 ..Down 3.80

S&P said General Electric's (GE) coveted AAA debt rating is in danger of being cut. Only a handful of companies (I think about 10 or so) can claim that distinction & it seems like that number gets smaller every year.

GE, GE Capital Ratings Outlooks Cut to Negative by S&P on Earnings Concern

Doubts about the auto bailout & dismal economic stats will tough for any stock market to absorb. Meanwhile, the administration is trying to arrange an orderly bankruptcy for the auto makers. It will be very difficult to get employees, stockholders, auto dealers & future car buyers to agree.

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