MLPs soar to another 2009 high

Markets are digesting recent gains with little change today. Dow fell 22, advancers barely ahead of decliners & NAZ is off 9. But banks are having a good day:

S&P 500 FINANCIALS INDEX

Value 169.20

Change 1.75

% Change 1.0%

MLPs are trading as if the the sky is the limit. The Alerian MLP Index gained 3+ pushing the magic 250 level, yet another 2009 high. In just the last 2months, the index is up almost 20%, probably the best run in its history. This is distribution time, some may be buying for distributions going out in Aug. Meanwhile, REITs are up only fractionally while junk bond funds are mixed. Treasuries sold off ahead of the 4 auctions this week. The yield on the 10 year Treasury bond rose 7 basis points to 3.74% & looks to be heading back to 4% reached last month. Oil is little changed today.

Alerian MLP index --- 3 months




10-Year Treasury Yield Index - 3 months





Analysts have become more bullish on earnings estimates, last month more raised earnings estimates than lowered estimates. Of the 204 companies in the S&P 500 reporting earnings for Q2, 75% beat estimates. While these signs are bullish, some point out that the best earnings are reported early, ones with problems tend to be reported later in the earnings season. Also, beating estimates refers to beating already lowered estimates. Higher earnings have more to do with cost cutting than higher revenues, another disturbing trend. But for the time being, optimism sounds good.

•Surging Earnings Estimates Signal 26% Advance for Shareholders of S&P 500


Treasuries are the cheapest they've been in 15 years based on the "real" yield. This yield is defined as the difference between rates on gov securities & inflation. This translates for the 10-year notes to 5.10% today, compared with an average rate of 2.74% over the past 20 years. This gap is used to explain demand for Treasuries after they have had the greatest drop in price (& corresponding rise in yields) in more than 30 years. Demand has been great especially from foreigners which is why Tim Geithner is reassuring Chinese today that the US will reduce deficits going forward. However, this week the Treasury is auctioning off a record $115B in debt.

•Real Yields Highest Since 1994 as Treasury Sells Record $115 Billion Bonds


Stocks are having another stellar month as the Dow crashed thru the ceiling, making 9K its new floor. Buyers are forgetting that the recession drones on. Among other problems, lower tax revenues combined with massive gov spending are forcing record levels of borrowings.

Dow Jones Industrials --- 3 months