Early gains on auto bailout are withering

Dow rose 150 out of the gate on news of the auto bailout package being approved. However since them enthusiasm has faded. Dow is up 17, advancers ahead of decliners 2-1 & NAZ is up 17. S&P 500 FINANCIALS INDEX was even (giving up early gains), the Alerian MLP Index is down pennies, Dow Jones REIT Index was up 2 & Lehman High Yield Bond ETF is up a couple of pennies (while the Treasury bond yield remains at historic lows of 2.1%). The VIX keeps pulling back, today down 4 to 43. By another measure, it dropped about 25 in the last 3 weeks.

General Motors (GM), still a Dow stock, and Chrysler have been given a 90 day lease on life. They will have to make changes with their bond holders, unions, management, etc to try & stay alive. This money will exhaust funds in the first half of the $700B TARP program. Sec Paulson will ask Congress for the 2nd half, only 2 months after the program began. Ford (F) was not included. Despite reassurance by their CEO yesterday, they may not be too far from requesting similar aid.

•GM, Chrysler Will Get $13.4 Billion in U.S. Loans to Survive Through March


Oil is down again, near 5 year lows.

CLF09.NYM

..Crude Oil Jan 09

...35.00

.. 1.22 ......(3.4%)

• Oil drops below $34 to lowest level in almost 5 years- Reuters

The Alerian MLP Index may have a rough month ahead until most quarterly distributions are announced by mid Jan. Yesterday, Kinder Morgan, the largest MLP, successfully raised $900M, quite an accomplishment in these times. Below is a chart for the stock equivalent, KMR, which I track in the Yahoo widget on the right. The stock has held up well during a very difficult period. During severe declines in the last 3 months, it was not damaged as badly as many other MLPs. The stock div yield is 10%, a low rate compared to a 13% yield for the Alerian MLP Index.


Kinder Morgan (KMR) --- 1 year




Constellation Energy Partners (CEP) yesterday pre announced their guidance which included a large distribution cut from $2.25 annually to 52¢ annualized. The chart, which doesn't show $50 prices more than a year ago, tells markets have been pricing in a large cut for some time. 8 other MLPs are also trading under 5, more cuts in the industry are coming. Cuts are new to the industry & may have a larger impact on market psychology than the favorable financing news from Kinder Morgan. I still like the industry, but buyer beware (at least for the short term).

Constellation Energy Partners -- 1 year




As I write, the markets are fading fast. It doesn't look like they will hold gains by the end of day. In all fairness, this is an option expiration day making any call extra difficult.