Stocks had best monthly gain since 2003

Dow gained 87, advancers over decliners 3-1 & NAZ was up 26. The Dow climbed during the trading session, but sold off in the last hour trimming more than 100 from its gains.

Banks had a nice recovery from the last 2 days of declines. After getting clobbered in Sep-Jan, the S&P 500 FINANCIALS INDEX has been trading sideways in the last 2 months. Trading has been very choppy, but generally above 100.

Value 119.01

Change 7.49

% Change 6.7%

MLPs, REITs & junk bond funds participated in the gains. The Alerian MLP Index closed up 2½ at 191, returning to the 190-200 range where it has spent much of this year. REITs have not participated in the Mar stock market rally. The index was up 7½ today to 101 but hasn't been able to stray far from par in Mar. There are good values with very high yields for those who can separate the wheat from the chaff. Junk bonds had nice gains today, concluding a good month after losing ground in Jan-Feb. Following yesterday's big decline, oil rose almost 1 to the 49s.


MLPs & REITs have a much different story in the last 6 months. MLPs, after having a rough go of it in Sep -Nov (Sep isn't shown but the index lost 15%), have been fighting their way back. Headwinds have been strong, but it's up 15 (off a very depressed level) in Q1. REITs have not seen a let up in selling, losing 30% in Q1. In the last month, they have underperformed the Dow.



Alerian MLP Index vs Dow
6 months




Dow Jones REIT Index vs Dow
6 months





Dow started the qtr (& year) at 8776 & concluded at 7609, down 13%. It would have been worse without the recovery in Mar. The end of the qtr means earnings are around the corner. Dow stock Alcoa (AA) next week gives the first report & expectations are low. However, AA had a nice pop today (up 65¢ or 10%) on takeover speculation.

The S&P 500 rose 10% in Mar, cutting the loss for the qtr to "only" 10%. The strong markets were led by bank stocks recovering from deeply depressed levels. Earnings & guidance from banks in April will be especially important, again expectations are very low.

Oversold rally again

Dow is up 92, advancers over decliners 5-2 and NAZ gained 20. Following the drubbing banks took yesterday, bargain hunters are back to bid up those prices. The S&P 500 FINANCIALS INDEX is having a good day, but nothing really special.

Value 116.71

Change 5.19

% Change 4.7%

MLPs, REITs & junk bond funds are higher, finding their share of bargain hunters. The big drop in oil prices yesterday was the forgotten story. But today it's fairly quiet, little changed in the 48s.


The Conference Board reported consumer confidence in Mar inched up but remains at dreary levels. More low readings will be coming in the coming months.

• Consumer confidence up slightly in March, still near record lows- Reuters

Below is a chart from the NY Times plus a link to their article about 2 very strong camps of bulls & bears. Choose your side & there will be plenty of backers for your position.

Time to buy stocks. No, wait — time to sell them.

• A Pitched Battle for Turf Between the Bears and the Bulls- NYT

The president is off to London for the G-20 meeting where everybody will agree they're against the recession & that's about it. Most western European countries are not enthused by the whopper spending packages in the US (even though they lean left). Yesterday the president reassured everybody that the US does not want to manage the auto companies even though he is telling GM & Chrysler what to do & how to conduct their businesses.

Below is the track record for the Dow after the credit crisis struck full force Sep 15. It's difficult to get much meaning from price changes today with all the qtr ending trades going on. But Dow is down over 1100 in Q1. Grrr! Just one example of how bad this credit crisis struck is Citigroup, hard to believe it's still a Dow stock, was 18 in mid Sep.

Dow Jones Industrials -- 6 months

Monday Massacre

Nothing like a double dose of bad news, potential auto bankruptcies & more gloomy thoughts about the bank crisis dragging on, to take markets down. A rally in the last hour reduced losses for the day, allowing the Dow to recoup almost 100 points off its low. But Dow still tumbled 254, decliners over advancers 6-1 & NAZ joined in the decline, down 43.


Prospects of even more bad news on the banking front dragged the S&P 500 FINANCIALS INDEX down sharply:

Value 111.52

Change -11.60

% Change -9.4%

Another banking stock, Citigroup (C), I call it a just a call, has had a wild ride this month. Those who risked playing with fire & bought it near the lows were rewarded nicely. Those who got in a little late found out what can happen when playing with fire. The new Mets ballpark, Citi Field, is opening. It's difficult to believe this has any connection with the Dow stock, Citigroup.


Citigroup ---- 1 month




MLPs, REITs & junk bond funds all participated in today's sell-off. The only winner was the VIX, up 5+.


As promised, the Federal Reserve has been buying Treasury bonds. These purchases help push yields down, but so far there have been no dramatic changes in the yield. The yield on the 10 year Treasury closed at 2.71%, not far from the yields during the last week. However, money managers in this market seem to be responding favorably. They have been selling Treasuries to lock up their gains & using that money to buy mortgages for the higher yields combined with the lack of confidence on further price increases for Treasuries. If true, the FED move is "working" to some degree, the beleaguered building industry would like to see more mortgage money made available.

•Bernanke Buying Treasuries Drives Pimco, TCW to Mortgages, Corporate Bonds


Oil sold off badly on fears of lower demand for oil. Generally this is viewed as a plus for the markets but today it's a solid negative, a sign that the worldwide recession is getting worse.

CLK09.NYM

..Crude Oil May 09

..48.53

.. 3.85 ......(7.4%)

• Oil tumbles below $49 on gloomy economic outlook- AP

Chrysler looks like it will work out an arrangement with Fiat to stay alive. In this world, time is measured in mins, everything is subject to more change. If this goes thru, there will be an enormous amount of pressure on GM to figure out how to stay alive. Bondholders & unions, among others, will have to give up a lot to save what little remains.

• Chrysler agrees on framework of alliance with Fiat- Reuters

GM bondholders are getting ready to swap bonds for stock, largely because they have little to lose, to help preserve GM. Again, the long term is viewed as an hour or 2.

•Obama Says GM, Chrysler Have One Final Chance to Restructure or Lose Aid


Over the weekend, talk by administration officials that the banking crisis is not over, might even get worse, hurt markets. But the gloomy outlook for the 2 autos is center stage & nobody is sure how it will play out. All sides are releasing statements with current news & spin for political effect. One thing is clear, the administration is acting very tough & seems ready & willing to let the 2 auto companies fail for what is called a structured bankruptcy. Asian markets, which open in a few hours, will probably continue the negative theme from Wall Street.

Grave GM outlook sinks markets

This is the do or die time for General Motors & the indications are they will not receive more gov support. The administration says that GM & Chrysler will have to overhaul their operations before receiving more assistance. Markets can figure out it's a little late for that, so they're selling off in a major way. Dow is down 277, decliners over advancers 9-1 & NAZ dropped 52.


Financial did not take this news well. The S&P 500 FINANCIALS INDEX suffered another major setback, after its recent recovery from the low of 82 on Mar 6.

Value 115.13

Change -7.99

% Change -6.5%

The major averages I follow were also hit hard on the GM news. The Alerian MLP Index & Dow Jones REIT Index each dropped 4+. The former, at 188, is below the important 190 resistance line. Junk bonds were weak while the VIX shot up 5 to the 45s.


The White House rejected the auto restructuring plans making more gov aid doubtful. The chairman of GM was fired, not really a major move in turning a battleship around. GM is replacing its board & will stress fuel efficient vehicles. Chrysler was told to form a partnership with Italian, Fiat. Confusion reigns, but the the outlook is bleak for the 2 autos. GM stock is down 25%, back into the 2s.

•Obama Says GM, Chrysler Get One Last Chance, Can't Become `Wards of State'


Gloomy auto news was enough to send oil below 50, first time in a week & the low end of its range.

CLK09.NYM

...Crude Oil May 09

...50.11

... 2.27 .......(4.3%)

Meanwhile, global leaders (G-20) are meeting in London to come out with tougher rules to regulate financials. They are focusing on hedge funds, an easy target these days. They will also try to come out with remedies for the worldwide financial mess & credit crisis. But any coordinated message will be limited given each country has its own agenda. Europe, in particular, will need more arm twisting to take tougher measures in helping economies recover.

•G-20 Targets Hedge Funds, Derivatives as Leaders Agree on More Regulation


Not much to do now but wait for the auto mess to get straightened out or end. The chart below shows Dow had been having a superb month, one of the best in history. But it fell off a cliff on Fri as it approached 8K. First 2 CEOs of major banks talked about Mar results coming in soft & today facing auto bankruptcies is too much for markets to handle.


Dow Jones Industrials --- 1 month

Choppy times

This has been an excellent month for the markets, coming off severely depressed levels. But enthusiasm for stocks has waned in the last week. Much of this week stocks have been trading sideways to down on Fri as shown below:

Dow vs Alerian MLP Index - 1 month




Dow vs Dow Jones REIT Index - 1 month




The MLP line, shown in the first graph, recently leveled off in the 190-200 trading. REITs, in the 2nd graph, have had a choppy time of it in the last couple of weeks. Among other problems, Simon Property (SPG), Vornado (VNO) & UDR (UDR) have been giving stockholders an option to substitute stock divs for the cash divs. More REITs will do this as conserving cash has become king this year & that may take time for the markets to adjust to. Adjusting means adding to selling pressure.

• REITs Paying Dividends In Stock, Not Cashat Investopedia(Thu, Mar 26)

Stocks return some of recent gains

After the best 3 week period in 70 years, stocks gave back gains today. Dow dropped 148, decliners over advancers 3-1 & NAZ dropped 41.


Banks led the way up & had to give back today, but not too badly as the S&P 500 FINANCIALS INDEX fell only 4:

Value 123.12

Change -4.45

% Change -3.5%

In the great run-up for the last few weeks, MLPs did best. They had a nice one week pop & then settled back to trading in the 190-200 trading range they became accustomed to early this year. MLPs remain up for 2009. REITs rose but have had a very choppy time in the last couple of weeks. 3 have given stockholders choices of accepting divs in stock or cash. This trend will extend to more. Junk bond funds gained sharply from their depressed levels as yield spreads exceeding 2000 points over the Treasury bond yield are attracting bargain hunters. I think MLPs have the prettiest chart for the last month:


Alerian MLP Index --- 1 month




Stocks are back on defense. The last 2 days of trading for Mar can see unpredictable swings as money managers try to adjust portfolios for their benefit. But stocks have returned to defense. In the middle of April, earnings reports will start coming & this dose of reality could hurt. Just today, CEOs from JP Morgan (JPM) & Bank of America (BAC), both Dow stocks, after their meeting with the president, gave very cautious comments about Mar being a bit on the sluggish side.

Profit taking day

Stocks are having an outstanding month after starting from greatly oversold levels. Such a sharp rebound was to be expected. The Dow chart below shows how far it has come off the lows, making this one of the best months ever. Today Dow fell 112, decliners over advancers 3-1 & NAZ dropped 24.


Dow Jones Industrials --- 1 month





Banks are holding up well after the run-up in Mar, the S&P 500 FINANCIALS INDEX slipped only pennies today.

Value 126.60

Change -0.97

% Change -0.8%

MLPs, REITs & junk bond funds followed averages lower while VIX ticked up. In its biggest decline in 2 weeks, oil fell below 52 on growing doubts about world economies & their recoveries.

CLK09.NYM

...Crude Oil May 09

...51.84

... 2.50 .......(4.6%)

Growth in spending by American consumers slowed in Feb & most of that was attributable to inflation. Adjusted for inflation spending declined 0.2% last month vs a 0.7% increase in the prior month. Meanwhile, incomes fell 0.2% last month after a 0.2% rise in Jan. This was the 4th decline in the last 5 months. Michigan final index of consumer sentiment rose slightly but remains bogged down in the mid 50s, record low readings.

•Consumer-Spending Growth in U.S. Slows as Rising Prices Erode Buying Power
•Consumer Sentiment in U.S. Holds Near Three-Decade Low as Job Losses Mount


The president is meeting with the top bank execs, trying to round up support for the massive amounts of debt the gov will be spending & a fundamental changes proposed for banks. Goldman Sachs's Abby Joseph Cohen, a highly respected Wall Street economist, expects there will be more negative news from banks. She said the US economy is "less bad" & may show growth later in the year. But she worries about the health of European economies & other countries. However at the start of last year, she predicted the S&P 500 would be 1675 by year end (double the current value).

•Obama Seeks Support From JPMorgan, Goldman Sachs, Citigroup on Bank Plan
•Goldman Sachs's Abby Cohen Predicts There Will Be More Bad News From Banks


After such a good month for the markets, Mar may go out like a lamb if today is any indication.

Stocks try for third gain this week

Dow rose 59, advancers ahead of decliners 2-1 & NAZ was up 27. The S&P 500, up 6 to 820, is working on its best monthly gain in 22 years.


S&P 500 ---- YTD





S&P 500 FINANCIALS INDEX is having a day of mild profit taking. Of course, profits only apply to those who bought in the last few weeks.

Value 125.12

Change -1.15

% Change -0.9%

Sec of Treasury Geithner is calling for a sweeping overhaul of financial institutions, including hedge funds. Such changes will bring more regulation.

•Geithner Says U.S. Needs `New Rules of Game' to Avert Another Bank Crisis


MLPs & REITs were little changed while junk bond funds gained modestly. Oil was up on encouraging data for durable goods orders & home sales.

CLK09.NYM

...Crude Oil May 09

...53.74

... 0.97 .......(1.84%)

First time claims for jobless benefits were up slightly to 652K last week. Last year, the figure was 367K (400K was considered a gloomy number). The total number claiming benefits is nearly 5.6M, the highest since record keeping began 42 years ago. An additional 1½M receive benefits under an extended unemployment compensation program approved by Congress last year. In additional data, the Commerce Dept revised upward shrinkage in domestic GDP for Q4, from a 6.2% annual rate to 6.3%. The unemployment rate at 8.1% is the highest in 25 years, it's expected to peak near 10% later this year.

• Economy dips at faster pace, but better than expected- AP

Barney Frank wants to limit bonuses paid by companies receiving gov aid. This follows the feeding frenzy last week when Congress tried to show it knows about unjustified bonuses, but AFTER THEY APPROVED THEM.

•Frank's House Panel Votes to Limit Bonuses for Companies Getting U.S. Aid


Not much to do while Congressional hearings (which don't accomplish much) drag on. For the time being, stocks have a following wind behind them as the Dow approaches the 8K ceiling. However, ugly macro economic news keeps coming.

Stocks gain on final hour rally

Markets fell in the PM on a weak response to the Treasury sale of $34B in bonds. In just 3 hours, the Dow plunged 300 points. However, buyers returned in the last hour taking the Dow back into the black. Dow gained 90, advancers ahead of decliners 2-1 & NAZ rose 12.

The weaker than expected Treasury market bled thru to banks. The S&P 500 FINANCIALS INDEX gave up an early gain in the AM, turning into red in the PM. But the late day rally put the index solidly in the black:

Value 126.27

Change 5.52

% Change 4.6%

The Treasury auction was unsettling to say the least. They auctioned off $34B in 5 year notes. The expected rate was 1.80%, but the final rate, just shy of 1.85%, was just plain disappointing. The 10 year Treasury bond fell sharply, sending the yield up 12 basis points to 2.77%. One immediate effect of a disappointing auction is that Treasury borrowing costs are increased, today & going forward. Related, the UK failed to attract enough bidders on an auction involving £1¾B of borrowings. This was their first such failure in 7 years. These responses sent a strong signal to markets that there are limits to borrowings, even by the biggest govs.

•Treasuries Decline After Sale Produces Higher Yields, U.K.'s Auction Fails


High yield sectors (MLPs, REITs & junk bond funds) were up thanks to the late day rally.


Oil dropped after the weekly inventory report showed inventories at a 16 year high (suggesting lower future demand). This type report causing oil to sell off is generally favorable for stocks. Unfortunately, today it reinforces the deepness of the recession.

• Oil prices fade as storage levels hit 16-year high- AP

CLK09.NYM

..Crude Oil May 09

..52.86

.. 1.12 ......(2.1%)

There are a lot of questions about today's economic statistics combined with the recent run-up in stocks signaling the "end" of the recession. No way. It looks like current macro economic data suggests that the steep fall, which is very scary, may be ending. But the recession will continue. Unemployment will keep rising, it may go up another 1 or 2 percentage points. That's plenty to worry about. More div cuts are coming. General Motors (GM) is still sweating tires about staying alive, next week will be their next big test. But an end to free-fall provides a modest sense of relief. A new wrinkle, when the gov has to struggle to sell debt, in front of selling massive amounts of debt, more financing problems are ahead.


Jake DeSantis, an exec VP at AIG publicly resigned by having his letter published in the NY Times. He charges that Liddy, the CEO working for a salary of $1, gave into public pressure during a feeding frenzy last week. His complaint is another example of the sloppy handling of this mess by Congress & problems with their eagerness to cover-up their complicity in AIG's problems. The link below has a good discussion about this matter.

• Betrayed by AIG: Exec VP Resigns, Publicly Skewers CEO Liddy- Tech Ticker

Today was an unusually volatile day (for this year at least) as shown in the BigCharts widget in the right sidebar. However, the VIX changed little at 43. Below is a chart for the Dow in 2009:


Dow Jones Industrials --- YTD

Dow soars again

Stocks jumped out of the gate to a triple digit gain. Dow is up 163, advancers over decliners a strong 6-1 & NAZ rose 30. Dow continues on a winning streak after recent lows.


Dow Jones Industrials --- 2 weeks





Bank stocks shot out of the gate this AM, leading the stock market gains. The S&P 500 FINANCIALS INDEX is flirting with the high from 2 days ago (& best level since early Feb).

Value 126.16

Change 5.41

% Change 4.5%

The administration is asking Congress for new powers to take over large financial institutions before they become disasters (i.e. learning from the AIG situation). While this may seem logical, it gets touchy when asking for the feds to have greater control over the economy. It's reported that Goldman Sachs (GS) is looking to repay the $10B in loans it got from the gov. The reason is simple, get Barney Frank off our back!

• Administration seeks action on financial overhaul- AP
• Goldman Sachs Said to Be in Talks to Repay TARP Funds

MLPs, REITs & junk bond funds were higher aided by the strong market. Junk bonds may be viewed in a more favorable light since they will be similar to the new junk mortgage debt with gov guarantees being sold, only without gov guarantees. VIX is down 1½ to the 41s, in the lower area of this year's range. Oil is pulling back on worries about a buildup in inventories.

CLK09.NYM

...Crude Oil May 09

5...2.65

... 1.33 .......(2.5%)

Home sales were up 3.7% last month. Good news, but tempered by the fact that this was still the 2nd worst month in the 45 years records have been kept. In addition, durable goods orders rose 3.4% last month. This was the first gain in 7 months & biggest in more than a year. These stories encouraged bulls today, suggesting that the sinking economy may be stabilizing.

February New Home Sales Rise Unexpectedly- AP
•Durables Orders in U.S. Unexpectedly Jump 3.4% in Biggest Gain in a Year



Berkshire Hathaway (BRK.A) debt was put on a negative outlook by S&P for its AAA rating. Further deterioration in its capital can cause S&P to lower the debt rating to AA, as did Fitch recently. AAA rated debt is a very elite group, only a handful of AAA rated companies are left.

• Buffett's Berkshire may lose "AAA" S&P rating- Reuters

Banks are market leaders as they should be. The S&P 500 FINANCIALS INDEX is up more than 50% from the depressed lows a few weeks ago as gov plans to create a market for junk mortgages is going over well.

Asian markets

These values (courtesy of Bloomberg) are prior to Asian markets opening on Wed.

The ¥, probably the most important Asian currency, is 98 to the $. In the last few days, it weakened even more to 99, then rallied to mid 90s & now is back at 98. The weaker ¥ is a very important to the Japanese economy, which is in a severe recession, because exports are so crucial.

Oil & gold prices are always important in the world economies. As said in the prior post, it looks like gold is searching for new 2009 highs above 54.

These bond yields may be new to some investors. Australia has the only yield higher than the US (at 2.65%).


CURRENCIES

	VALUE	CHANGE	% CHANGE
USD-JPY	98.1370	0.2755	0.28
USD-HKD	7.7501	0.0000	0.00
USD-SGD	1.5114	-0.0028	-0.18
AUD-USD	0.6982	0.0026	0.37

COMMODITY FUTURES

	VALUE	CHANGE	% CHANGE
Oil	53.60	-0.38	-0.70
Gold	932.00	6.00	0.65
Natural Gas	4.34	-0.00	-0.05

BONDS

	PRICE	YIELD
10-Year Japan	100.36	1.27
10-Year Hong Kong	97.26	1.94
10-Year Singapore	116.67	2.05
10-Year Australia	106.66	4.43

Stocks down in late day selling

Following the monster rally yesterday, a pullback was to be expected. But that isn't exactly what happened. Stocks dropped modestly in the AM with accelerated selling in the last 2 hours. Dow dropped 115, decliners over advancers 2-1 & NAZ fell 37.


Banks are in charge of this market. The S&P 500 FINANCIALS INDEX was having a quiet day with only a modest decline but again, there was greater selling in the last 2 hours.

Value 120.79

Change -8.42

% Change -6.5%

The Alerian MLP Index slipped 1¾ while the Dow Jones REIT Index dropped over 9 (much of yesterday's gains) to 100. Junk bond funds were mixed probably helped by the bullish environment for other debt.


The Federal Reserve will buy Treasuries with under 10 year maturities for the rest of this month. These purchases are expected to reduce borrowing costs. Earlier in the day, the 10 year Treasury rallied but fell back to break even (after declining in the last 4 days). The Treasury 10 year bond yields 2.65%, still far less that 3% last week.

• Fed to Start Buying Treasuries in $300 Billion Plan to Cut Borrowing Costs
•Treasuries Reverse Course, Wipe Out Losses on Fed's Debt-Purchase Schedule


Oil was down, but only pennies as the bulls are looking to take it to new yearly highs.

Hedge fund assets, following the worst year in their history, are expected to decline 11% this year. Their assets exceed $1T, more contraction means their future selling is overhanging the markets.

Hedge Fund Assets to Fall 11% in 2009, Study Says


The only 2 gainers in the Dow were Boeing (BA) & DuPont (DD). About 1 hour before the close, 10 were in the green. Not a good early signal for trading tomorrow.

Monster rally fades

Asian stocks followed thru after the Wall Street rally last night with strong gains, but European markets were mixed with second thoughts on the Treasury plan to deal with bad loans. Dow pulled back 82, decliners over advancers 3-1 & NAZ fell 24. The Dow has rebounded more than 1K from its low a couple of weeks ago. But even with this rally, it's only back to levels seen in mid Feb:


Dow Jones Industrials --- YTD





Banks lost some of yesterday's glamor. S&P 500 FINANCIALS INDEX is down, but not badly:

Value 126.43

Change -2.78

% Change -2.2%

The Alerian MLP Index remains up for the year. But today MLPs, REITs & junk bond funds are giving up some of yesterday's gains.


Alerian MLP Index --- YTD





Oil fell, taking it under 53 (the highest price this year). Below is a chart for key commodities courtesy of Bloomberg. If not clear on the color bars below, blue is oil, orange is gold, yellow is corn (what else?) & pink is wheat. Gold is the clear winner, fighting its way back to break even.


Key Commodities - 1 Year

Oil

Oil

Gold

Gold Spot

Corn

Corn Spot

Wheat

Wheat Spot

Bernanke & Geithner are testifying before Congress which will give everybody a lot to talk about. Bernanke has said he was against the AIG bonus money & tried to stop payment of the money. More important, he is asking for new powers to seize banks in danger of failing as the FDIC does. The implication is that such banks could even be the whopper size ones. Naturally, inept Congress is focusing on AIG bonuses (something they undertstand) while paying less attention to the bigger issues (i.e. what they don't understand) involving $B. As an aside on the bonus money, perhaps one third went overseas, money that can not be retrieved.

•Geithner, Bernanke Call for New Wind-Down Powers After AIG's U.S. Bailout


The Treasury is spelling out more details about how to invest in these "troubled" mortgages. It looks like a variation of junk bonds, very high yields but with gov backing. At this early stage, nobody knows how successful the effort will be.

•Geithner Tempts Investors With Reduced-Rate Loans, Returns as High as 25%


Congress is center stage today. There will be plenty of fault finding about AIG bonus money, without any mention of Conrgess allowing to this happen after approving bailout packages.

Bulls were in charge!

Stocks held their early gains & were bid up again in the last hour, finishing at their highs . Dow rose 497, advancers over decliners 8-1 & NAZ gained 98. Today's point advance was one of the biggest in history.


Buyers read my thoughts in the prior post & bid up bank stocks more, giving the S&P 500 FINANCIALS INDEX an outstanding day:

Value 129.21

Change 19.47

% Change 17.7%

Gains extended to about every group. The Alerian MLP Index rose 7 to 195s, taking back into the 190-200 range which were its boundaries in the early part of the year. REITs had an outstanding day as the Dow Jones REIT Index vaulted 16 to almost 110. Of course, it was coming off severely depressed levels & even at these prices, yields of 15+% are common. Even junk bond funds had a good day, those 20+% yields are drawing more attention. Meanwhile, the VIX, dropped 3, down to the 42s.


Oil had a very good day, tagging along with stocks, as enthusiasm for stocks bled over to oil. It even managed to get over 54 at the high.

CLK09.NYM

...Crude Oil May 09

...53.86

... 1.79 .......(3.4%)

Oil climbs toward $54 as U.S. equities surge- Reuters


What is called "the AIG bill" has been put on hold for a couple of weeks so Reps can look it over & think about it. That's a nice change of pace from lets rush this enormous spending bill thru in hurry before anybody can read & understand what is being approved.

•AIG Bonus Bill May Be Delayed Until Next Month as Republicans Study Plan



As a note of reality, the head of the FDIC said that some banks may be beyond help, even with a new plan. The note of caution follows comments by many that this plan will take months to implement. Don't expect quick cures.

•FDIC's Bair Says Some Banks May Be `Beyond Help' of U.S. Assistance Plans


Today was all bulls. Tomorrow is a new day with new problems. This plan relies on banks doing their fair share, something that has to be proven. The president now is getting mixed reviews for pushing on too many fronts at once. Business people would like to see a focus on the biggies: credit crisis, high unemployment, housing & autos. It may be unfair to others who are suffering, but dividing forces to attack on many fronts can bring problems everywhere. And that's where the markets have been coming from.

Stocks jump up on bank toxic assets plan

Stocks shot out of the gate on the plan by the Federal Reserve to take bad debts off bank balance sheets. Dow is up 290, advancers over decliners 8-1 & NAZ rose 54.


The S&P 500 FINANCIALS INDEX is having an excellent day, although I would have expected an even better response:

Value 120.25

Change 10.51

% Change 9.6%

Market enthusiasm spread to all sectors. MLPs, & REITs showed good gains, junk bond funds had more moderate gains. The VIX, volatility index, dropped 3 to the 42s, low region of this year's trading range.


Oil is on a streak, climbing above 53.

CLK09.NYM

...Crude Oil May 09

...53.50

... 1.43 .......(2.8%)

The long awaited Treasury plan to cure the worst financial crisis since the depression was finally announced. The plan seeks to harness government & private resources for the purchase of $½T in bad assets to get them off the balance sheets of banks. Such purchases could eventually grow to $1T. This involves another massive amount of money to solve the worst financial crisis since the great depression. The major problem is nobody is sure how well it will work. Prior plans, even though well intentioned, didn't help.

•Treasury Announces $1 Trillion Public-Private Plan to Buy Banks' Bad Debt


This story about a big bank getting the staff to return bonuses sounds good on first blush. But the follow thru can haunt stock markets.

•ING Asks Employees to Return 2008 Bonuses, Defers Payments Pending Review


General Motors (GM) is facing its month end deadline to see if it will survive. Among many concessions needed, they are working with bondholders to reduce debt (i.e. debt for equity swap). As with unions, more negotiations are needed for a final solution. Sort of related, Daimler AG is getting outside financing (selling stock) from an agency of the Abu Dhabi government. Maybe GM can attract a large investment, even with its problems.

• GM bondholders want response on restructuring plan- AP
• Daimler shares rise after Emirate takes top stake- AP

Markets have settled down in the last hour. Dow is drifting sideways around up 280. As a reminder, this is what $1T looks like:

$1,000,000,000,000

A lot of money is being tossed around & we don't know how it will play out. There will be plenty of testimony before Congress this week, it's not clear if banks will play ball with Congress.

Chaotic confusion in DC drives markets down

Stocks tried to extend their strong gains from 2 weeks ago into a 2nd up week. They did, but barley by eeking out a gain of 55 last week. That gain does not tell the full story. The Dow had a substantial gain of 330 by mid week when the Treasury announced its plan to buy bonds to drive rates lower. Then the house of cards crashed, brought on by chaos in DC.

Tax a handful of "bad guys" at AIG to reclaim $165M paid in bonuses AUTHORIZED BY CONGRESS became the top priority in Congress. The dunderheads refuse to admit their mistakes, instead blame & tax businessmen (& women). The $Bs & $Bs paid to overseas banks which do not employ American workers is being ignored. Plenty of other problems we don't understand involving $Bs are being ignored. All that Congress is worried about is covering its tracks. Stocks sold off in the 2nd half of the week & only the clock saved the Dow from more selling which would have dragged it into a loss for the week.


Dow Jones Industrials --- YTD




Today the administration is trying to put Humpty Dumpty back together again. It looks like their plan is to take away authority from the Federal Reserve given last year by Congress & give to the Treasury. More will be revealed this week. Barney Frank thinks that's a great idea which signals more controversy & chaos is coming.


•Obama to Outline Regulatory Changes Aimed at Preventing Repeat of Crisis

Obama advisers note populist tone, urge restraint- AP


The bungling by Congress is hurting all, most of all banks. The S&P 500 FINANCIALS INDEX bottomed at 81 on Mar 6 & only 12 days later rebounded to 126. In the last 2 day selloff, it's back under 110. That's what happens when Congress declares war on banks & less directly on Wall Street. Their focus is clear, watch the molehills, the mountains will take care of themselves. Attacks by DC is not getting banks to lend more. If anything, it will only make the credit crisis worse.


Meanwhile MLPs are holding in there or losing out, depending on your point of view. They are up this year, a rare story, but were not able to get back into the 190-200 trading zone which prevailed early this year. I have a feeling that glummer news announcements next month will take them lower. This week, REITs sold off but junk bond funds were up a little, probably helped by the very strong week for Treasury bonds.


Alerian MLP Index --- YTD





Sorry to drone on about the gov. But financial problems are enormous & Congress doesn't have a clue what to do other than cover their own tracks. As long as Congress makes war on financial businesses, stocks are going nowhere.

Banking sell off drags down markets

Dow ended last week at 7223. After today's loss, the Dow managed a gain of less than 60 for this week. Stocks peaked at mid week after the Federal Reserve's announcement about buying more bonds. Since then, gov officials in DC have only one thing on their minds, take away bonuses from a handful of AIG execs. Today, they are going after more at Fannie Mae & Freddie Mac after finding out that a handful received a modest amount compared the enormous sums already lost. It looks like DC has declared war on bonuses as a way to cover up their bungling in contributing to creating this financial mess. Dow sold off 122, decliners over advancers 3-1 & NAZ fell 26.

S&P 500 FINANCIALS INDEX were weak as banks keep selling off after their recent rally. From a low of 82 on Mar 6, they rebounded to 126 12 days later (Wed). This reversal I think is more than profit taking by those who lucky enough to buy 2 weeks ago.

Value 109.74

Change -6.14

% Change -5.3%

High yielders sold off today. The Alerian MLP Index kept sliding all day, down 5 taking it below the important 190 line to close at 188.88. The Dow Jones REIT Index was weak all day, dropping a very big 9. Junk bond funds were lower while VIX shot up 2½ to 46s. The chart below shows VIX is back at its 2 week high, increased fears are creeping back into the markets.


VIX ---- 2 weeks





Gov investment means more gov interference. Now Fannie Mae & Freddie Mac have to justify bonuses to the gov (i.e. Barney Frank). I really don't know what's going on at these institutions but newly appointed CEOs working at a salary of $1 are being treated as the enemy by the largest stockholder, the gov. Barney Frank is quibbling about $4M in bonuses. Good boy! Somebody needs to tell Barney that they were just following rules established last fall when the gov rescued these quasi gov institutions. Why is Barney the last one to figure out bonuses were paid? We're back to - watch the molehills, the mountains will take care of themselves. The banking officers are trying to solve gargantuan financial problems, having gov officials looking over their shoulders questioning every move is a kick in the head they do not appreciate or need. This is just the beginning of what some call more interference, gov officials view execs at banks (& much of Wall Street) as enemies who have to be punished.

•Frank Asks Regulator to Cancel Bonuses at Fannie, Freddie, Recoup Payments

• Fannie Mae CEO defends retention bonuses- AP

Oil & gold, leading other commodities, slipped back as the commodity boom yesterday faded out today.


Autos are out of sight but not out of the woods. Bruce Rattner, Treasury's chief auto advisor, said GM & Chrysler may need far more than the $22B already ask for. I wonder if those gov guys can find a few bonus people to hammer on while ignoring the bigger problems! The auto companies will give an update by month's end, 12 days away.

•GM, Chrysler May Need `Considerably' More Than $21.6 Billion, Rattner Says


Increased gov regulation is is not liked by investors & is placing stocks back on defense. Even more dangerous is the attitude which has taken over DC that Wall Street is the enemy.

Spring brings indecisive markets

A new season starts off with confusion in the markets. Dow is up marginally & NAZ is even while decliners are ahead of advancers almost 2-1.

Banks are weak, the S&P 500 FINANCIALS INDEX is declining again. Their Feb high was 138, forget about the starting level for 2009, & the index was not able to break that ceiling. Congress wants to make those who were betting on Citi returning to 5, sorry they took that bet.

Value 110.93

Change -4.95

% Change -4.3%

Confusion about bank & financial institution growing regulation is not helping stock markets. The AIG tax idea, while it sounds good because it beats up on villains to the vast majority of Americans, is bringing more gov meddling in the business world. Singling out a few "bad guys" at AIG because the Congress didn't know what it was doing when it passed wide ranging financial reform legislation WITHOUT first reading what they were signing, brings on all kinds of problems. First slapping a special tax on a limited group of people is not constitutional not to mention it comes after the fact (the money has been paid). This legislation was written so the mega bucks bonuses paid to Merrill Lynch execs & others are excluded. Where's the outcry about the $B that was paid to foreign banks? Again, we have Congress that doesn't know what it's doing & to cover its tracks will punish anybody it can blame. A very danger precedent.

Now Congress wants to RUSH (where have I heard that word before?) new laws to make more execs sorry they got gov money. Haste maskes waste & Congress wants to show they haven't learned that lesson. This is Congress, where it normally begins by taking a month or more to first create a committee to think about things. Barney Frank is de facto CEO of Citi & he's going to make Citi, along with other banks receiving gov backing, sorry they received gov money! Citi (C), still a Dow stock, is absorbing the news well, up 2¢ to 2.62.

• US is rushing to get more control of financial giants- CNBC

MLPs & REITs are weak while junk bond funds rose. It could be that increased enthusiasm for Treasuries is bleeding over to riskier investments with 20+% yields.


While stocks remain in the doldrums Treasuries are strong, having one of their best weeks in a long time. The yield on the 10 year Treasury bond plunged from 3% a couple of days ago to under 2.6% today. After traders have had a chance to think things thru, the inflation threat which brought on the commodity rally yesterday, they aren't bidding up bond prices todayt.

•Treasury Notes Head for Best Week in 2009 on Fed's Plan to Purchase Debt


Oil slipped after it's big rally yesterday, but then headed north to a small gain on the news about a navy ship & a sub colliding in the Straits of Hormuz (threatening the access to the Persian Gulf). Excitement in commodities has dimmed led by gold prices little changed near 960.

• Oil drifts lower as traders reassess outlook- AP

I hate to dwell on blundering Congress, but the constant theme about rushing out new legislation after a track record which is so bad should send worries to all investors. I hate how often the word "rush" is used to describe new legislation. Congress still hasn't learned that rushed brings sloppy & careless, but the public has to pay for their mistakes. Dow has had a choppy week, post FED announcement has not seen fit for a rally. Not good going forward!


Dow Jones Industrials --- 1 week

Stocks lower on profit taking

Markets lost the excitement from yesterday's rally, as they faded especially in the last 2 hours. Dow dropped 85, advancers were barely ahead of decliners & NAZ fell 7.


S&P 500 FINANCIALS INDEX gave back some the recent gains in profit taking (for those who purchased last week). Citi dropped 48¢ to 2.6o, plans to take it up to 5 are on hold.

Value 115.88

Change -10.13

% Change -8.0%

The Alerian MLP Index was up 1¾ while REITs were weak. The VIX popped 3.62, bringing it to the 43s.

Oil & all commodities were very strong resulting from the weak dollar. The $ was very weak, for example the ¥ which had been at 99 to the dollar a few days ago has shot up to the 94s. The thinking behind weak dollar & strong commodities is that the gov is printing money, making money flee to stronger currencies & hard assets. Oil topped 50 & gold had one of its best days in history, the bulls are talking about 1000 this week!

CLJ09.NYM

..Crude Oil Apr 09

..51.29

... 3.15 .......(6.5%)

ZGH09.CBT

Gold 100 oz. Mar 09

..959.10

69.60 ..(7.8%)

Federal Reserve's easing money has brought mortgage rates down. Last week, the 30 year fixed rate mortgage dropped below 5%. With the Federal Reserve's latest announcement it's expected to drop to 4½%, the lowest since WWII.

•U.S. Mortgage Rates May Fall to Lowest Since World War II on Fed Purchases


General Electric (GE) at a conference today said their finance unit would be profitable in Q1 & for the full year. They envision earnings up to $5B at GE Capital in 2009. GE stock has been battered this year primarily over fears about GE Capital & its prospects for having a dismal time in the credit crisis.

• GE expects finance unit to be profitable in 1Q- AP

Further thoughts about the FED's moves to buy bonds (some call that printing money) made traders pause today. In addition, markets are coming off their best 7 day streak in modern times adding to selling pressure. The proposal to tax AIG bonus money at 90% is one of those ideas that's not going to make a big difference at the big picture level. If the gov recaptures all money paid, it wouldn't qualify as a drop in the bucket when running gov deficits over $1T.


Dow Jones Industrials -- 2 weeks

Markets meander, looking for direction

After excitement by the Federal Reserve yesterday, markets are trying to figure out which way to go. Dow slipped 24, advancers over decliners 3-2 while NAZ is even (lingering effects from the Sun buyout has to be helping).

S&P 500 FINANCIALS INDEX is giving back some of the recent gains in this confusing market.

Value 122.07

Change -3.94

% Change -3.7%

Alerian MLP Index is up 2 to 194. REITs are down & junk bonds funds have modest gains.

Oil shot up on the FED's announcement about buying bonds. The $ is very weak & gold is strong, its flight to safety quality is attracting buyers.

CLJ09.NYM

...Crude Oil Apr 09

...51.35

... 3.21 .......(6.7%)

ZGH09.CBT

..Gold 100 oz. Mar 09

..933.00

.. 43.50 ....(4.9%)

The weekly data on unemployment continues grim. Last week, 646K filed for unemployment (down slightly from the prior week). The number drawing unemployment surged 185K to almost 5½M (as of the prior week), the highest number on record. The economy keeps bleeding jobs with no end in sight.

• U.S. workers on jobless benefits at record high- Reuters

FedEx (FDX) reported dismal earnings. Profits plunged 75% on lower sales, the first sales decline in a decade. They reduced earnings guidance in what is considered a difficult year to forecast. FDX feels the pulse of the economy (US & around the world), making their earnings announcement more important than most other companies.

•FedEx Profit Slumps, Sales Drop for First Time in Decade; Job Cuts Planned


Citigroup (C) is trying to fight back from the gloom which brought the stock down to 1. They will have a reverse stock split to boost the share price (stockholders then will be able to see a $50 price, whatever, on far fewer shares). They are also proposing a stock swap for preferred stockholders to swap for common at a $3.25 value. The idea is to boost common equity which has been draining fast. Also, Citi will need $10M to renovate a floor for top executive officers in their main building at 399 Park Ave. Sounds like they are getting inspiration about spending from gov spending programs. In all fairness, they are trying to do something for the economy. Citi will sell $3B in bonds backed by credit card payments under the new gov program TALF.

Citigroup Said to Commit $10 Million for New Executive Suite
•Citigroup Plans to Sell $3 Billion in Credit-Card-Backed Bonds Under TALF

• Citigroup offers stock swap to boost capital- Reuters

The AIG hearings are a big joke. Congress screwed up by passing rescue packages & spending programs in a hurry & now seems shocked to find out that haste makes waste. They need to understand the meanings of sloppy & careless. Punishing a few AIG guys sends a bad signal that Congress will second guess everything bailout companies are doing. Much worse is the $180B (whatever) used to save AIG is being ignored. They know how to watch the mice while ignoring the mountains! I'm not sure how rushed & sloppy behavior by Congress is supposed to increase confidence for investors so they will buy more stock.

Confusing markets plus the strongest 7 day period since the depression can keep stocks under pressure.

Markets liked what they heard from the FED

Dow jumped 200 points after the announcement by the Federal Reserve to buy bonds. But enthusiasm faded, over half the advance was lost in the final hour. Dow ended up 90, advancers over decliners 3-1 & NAZ shot up 29 aided by the buyout of Sun Microsystems (JAVA) at a rich premium. Sun rose almost 4 (79%) on the buyout news. As a reminder of what a very strong chart looks like, below is Sun Microsystems for the last 2 days:


Sun Microsystems --- 2 days





S&P 500 FINANCIALS INDEX continues its recovery from overly depressed levels a couple of weeks ago, reaching a 5 week high. Banks had another day of substantial gains. For example Citi (C) surged, taking it over 3. Speaking of strong charts, their 2 week chart shows that playing with fire can be rewarding. 5 is a near (& maybe far) term goal assuming it doesn't hit a major bump in the road.

Value 126.01

Change 11.56

% Change 10.1%

Citigroup --- 2 weeks




The Federal Reserve will buy $300B in Treasury bonds & acquire $750B in mortgage and agency debt to bolster the housing market and hasten the end of the recession. The 10 year Treasury bond surged on the news, reducing the yield from 3% yesterday to 2.53% today. This is the biggest drop in yield on the Treasury bond in 47 years. We're back to throwing money at problems which is what gave us AIG & the mess Congress is FIRST learning about today. They were the ones who had to rush out the stimulus package without reading what was in it.

•Fed to Buy $300 Billion of Treasuries, Keeps Interest-Rate Range Unchanged
•Treasuries Surge as Fed Expands Asset Purchases to Include Government Debt
Fed to buy $1 trillion in securities to soothe recession- AP


Junk bonds may have been helped by the rush to buy Treasuries. Barclays Capital High Yield Bond ETF (JNK) was up 28¢, a good gain for the junk bond index, as junk bond funds were strong. The Alerian MLP Index was up 2 & Dow Jones REIT Index gained 5 but remains in the trenches. The VIX was essentially even.


In a 3rd strong chart, Dow has recouped almost 1K from the recent lows. A nice run but bulls may be getting tired. Even a recovery from very depressed markets needs a rest, like seen in today's final hour.


Dow Jones Industrials -- 2 weeks

Stocks drift lower ahead of Federal Reserve announcement

Asian markets were mixed last night following the big rally in the US. Today, stocks markets are looking for direction while traders watch AIG officials try to justify stupidity. Dow is down 106, decliners over advancers 2-1 & NAZ lost 9.

S&P 500 FINANCIALS INDEX is taking a slight breather after its recent run up. Citi (C), just a call, is up 26¢ to 2.76.

Value 114.10

Change -0.35

% Change -0.3%

High yield securities are slipping along with the overall market. VIX is up about 1 & oil is down almost 1 for the usual assortment of reasons about why it's declining.

The big news story, overwhelming the enormous financial problems at AIG, is how AIG can justify paying bonuses to the "smart guys" who gave us the AIG mess. While stupidity & insensitivity are key issues, the $Bs & $Bs used to clean up the mess at AIG deserves more attention.


IBM (IBM), a Dow stock, wants to buy Sun (JAVA) for double the market price. This would be IBM's biggest acquisition if it goes thru (maybe this week). Sun is up 3.30 to 8¼ on the news while IBM is down 2, not many details have been released. In prior times major acquisitions were bullish for the markets, not today.

• IBM May Finally Take Sun Out of Its Misery- The Business Insider

Investors await the Federal Reserve announcemnet this PM, hoping to hear encouraging swords about fixing a broken financial system.

Caterpillar lays off more workers

Caterpillar (CAT), a Dow stock, has been hit hard by the global recession. In Jan, as profits plunged, they announced 20K positions would be eliminated & management would have to take pay cuts. Today they announced another 2400 would be laid off.

The President visited Caterpillar in Feb & said that CAT CEO had promised to rehire some workers if the stimulus bill was passed. But CAT said later that more cuts were likely before the company could start hiring again. The stimulus plan was unlikely to have an effect until late 2009 or early 2010. Today the White House tried to put a good spin on it by saying that when gov money is spent, it will allow CAT to rehire workers. The problem is, don't hold your breath for the money to be spent. Given all the cutbacks at CAT, stockholders will be the next to share in the suffering.

Caterpillar to lay off 2,454 workers in 3 statesAP

Markets extend recent gains

Dow had a good day as 9 stocks were up at least $1. That's not a bad performance, since 8 are selling under 15 which pretty much rules out such a gain in one day. Dow was up 178, advancers over decliners 3-1 & NAZ gained a stronger 58 (4%).

S&P 500 FINANCIALS INDEX has had a nice bounce off its extremely depressed lows (when Citi was at 1). The current value is back to mid Feb levels, but down sharply from the starting point this year (168).

Value 114.45

Change 7.06

% Change 6.6%

After a strong start this year, MLPs sold off in Feb but have staged a nice recovery in the last couple of weeks. This week, it's trying to make up its mind which way to go. Today it went up 2 to 190 (the low end of a trading range earlier in the year). I worry about unpleasant guidance & more possible distribution cuts next month. Kinder Morgan (KMP), after raising the distribution in Q1 said they expect that rate to hold for the rest of the year. This is the largest MLP, one that is very proud of its many increases. Conserving cash may grow in importance at MLPs.


Alerian MLP Index --- YTD





REITs continue to have a very rough year. In the last month, the Dow Jones REIT index has remained near 100, down sharply from the 270 area just 6 months ago. Correspondingly yields are at astronomical levels. But today it was up 7.78 to 103.70. Junk bond funds were higher & VIX dropped 3 to the 40s, near the lows for this year.

Oil had a good day, up 1.49 to 48.84. It wants to get to 50 but may have more resistance in the 50s.


Ben Bernanke of the Federal Reserve expects that they will buy much more debt, primarily mortgages, to give the banks more liquidity, in response to the deteriorating economy. Purchases may also include other forms of debt, including treasury & corporate bonds. The FED is scheduled to release a statement tomorrow afternoon.

•Bernanke May Need `Massive' Asset Purchases to Counter Deeper Contraction


Dow has had a nice run after being greatly oversold. On TV, everybody is asking if this is the real thing? Have we put in a bottom? Today Dow closed on its high representing a 3 week high. The bulls are in charge, at least for the time being.


Dow Jones Industrials --- 2 weeks

Nervous markets in nervous times

Stock markets don't know what to do. Dow is up 12 & NAZ up 15, waffling around break even. Decliners are slightly ahead of advancers. S&P 500 FINANCIALS INDEX is up 1 to 108+ in all the confusion over financials.

High yield securities are little changed while the markets are trying to figure out where to go from here. Oil is having a good day, looks like it wants to make a run on 50.

CLJ09.NYM

...Crude Oil Apr 09

...48.37

... 1.02 .......(2.2%)

The furor of AIG bonuses continues, but it looks like it's a lost cause to avoid paying the money. The money is based on contracts & there's probably not one union person who will suggest that voiding a contract for any reason makes sense. The guys will have to live with embarrassment if the names are brought to light. But for that kind of money most could live with a little embarrassment. AIG tried to justify the payments with the story that this money was used to pay for the brightest & most talented employees. You know, the guys who gave us the AIG mess. The employees are largely not in the dull insurance business, instead the guys who play with $Bs in derivatives. After Stanley O'Neal ran Merrill Lynch into the ground, he was told to take his $150M & go (as per his contract). Sadly the bigger story about AIG spreading its bailout money around the world to help foreign banks involves $Bs & has been lost. After learning an expensive lesson, the gov will clamp down on future aid to AIG. Swell!

• Bonus furor may prompt limits on AIG bailout money- AP

Monthly housing starts jumped 22% last month to a 583K annual rate, demand for new condos & apartments was strong. However, the annualized rate remains at a dreary level & the glut of housing will be around for a very long time.

•Housing Starts in U.S. Unexpectedly Rise Amid Surge in Condo Construction


Corporate borrowing is tough to get & expensive. Pfizer (PFE), a Dow stock, has debt still (barely) rated AAA. They will borrow over $13B to help finance the Wyeth purchase at rates of 1.95-3.45% above benchmark rates. Those rates are considered expensive but necessary during these times. As a result, their debt is expected to be downgraded to AA. Coca Cola (KO), another Dow stock, will borrow long term to pay off commercial paper. This is becoming common among the biggest companies who issue commercial paper. The cost in added interest will exceed $75M but will assure they have funds going forward versus having to worry about constantly rolling over commercial paper. Just another cost of the credit crisis.

•Pfizer Plans to Sell $13.5 Billion of Notes to Fund Acquisition of Wyeth
•Coca-Cola Flees Commercial Paper's Low Rates for Safety in Long-Term Bonds


The fate of financials will determine market changes.

Alcoa slashes dividend

Alcoa (AA), a Dow stock which presently has a 6 handle, slashed the quarterly dividend from 17¢ to just 3¢. The last cut was more than 25 years ago. The stock rose 39¢ to 6.12 during trading hours but slipped back 88¢ after hours. In addition, AA will sell $1.1B of stock & bonds to raise capital. This follows a previous announcement that 13% of the workers would be let go. Their business has been hard hit buy the global recession. The theme to "conserve cash" will be repeated by other companies facing similar financial difficulties. In an environment where workers are laid off & salaries are reduced, shareholders will be asked to share in the suffering.


•Alcoa to Slash Dividend 82%, Raise $1.1 Billion as Aluminum Demand Falters


Speaking of pain & suffering, AIG did not respond to the request by NY attorney general to name recipients of the bonuses. Their officers are going to experience a lot of pain & suffering.

•AIG Faces Pressure From Obama, Subpoena From Cuomo Over Employee Bonuses

Recession reaches MLPs

MLPs are not immune to the effects of the economic slowdown. Kayne Anderson MLP Investment Company (KYN) announced its quarterly dividend for Q2 would be 48¢ per share, 2¢ below the prior quarter and stated that it expects its portfolio investments to generate sufficient cash and other investment income to sustain dividends in the range of 48¢ per share during fiscal year 2009. Some good news, they expect most of their dividends will be treated as "distributions" (tax free). If you don't want to click on the link below, I copied the reasoning behind the dividend cut:

"Our current dividend is two cents per share lower than the guidance provided in December 2008 as a result of reduced distributions received from our portfolio of MLPs," stated Kevin McCarthy, CEO of the Company. "In our previous guidance, we had anticipated that certain MLPs would reduce their distributions during 2009 in response to lower commodity prices and high debt levels. During the first quarter, the number of MLPs that cut distributions was larger than expected and the distribution cuts were greater than expected."

"As a result, we currently believe our portfolio investments will generate cash and other investment income sufficient to pay a quarterly dividend for the remainder of 2009 in the range of $0.48 per share. We believe that additional distribution cuts by our portfolio investments will be limited in 2009 as long as commodity prices remain at current levels. As commodity prices stabilize, economic growth resumes and capital markets re-open, we believe our portfolio investments will resume their pattern of steady distribution growth," stated Mr. McCarthy.

Their track record of dividends is :

PRICES

Date
2-Jan-09	$ 0.50 Dividend
31-Dec-08	$ 0.50 Dividend
1-Oct-08	$ 0.50 Dividend
2-Jul-08	$ 0.50 Dividend
1-Apr-08	$ 0.498 Dividend
2-Jan-08	$ 0.495 Dividend
1-Oct-07	$ 0.49 Dividend
2-Jul-07	$ 0.49 Dividend
2-Apr-07	$ 0.48 Dividend
3-Jan-07	$ 0.47 Dividend
2-Oct-06	$ 0.45 Dividend
3-Jul-06	$ 0.44 Dividend
3-Apr-06	$ 0.43 Dividend
3-Jan-06	$ 0.425 Dividend
3-Oct-05	$ 0.42 Dividend
1-Jul-05	$ 0.415 Dividend
1-Apr-05	$ 0.41 Dividend
3-Jan-05	$ 0.25 Dividend

MLPs are great investments with an excellent future, but they are mortal & are feeling the economic squeeze. KYN acknowledges MLP distribution cuts in Q1, there could be more going forward.


Kayne Anderson MLP Investment Company Announces Dividend of $0.48 per Share for Q1 2009 and Updates Dividend Guidance for Fiscal 2009