S&P 500 FINANCIALS INDEX
| Value | 209.21 | |
| Change | 4.15 (2.0%) |
The Alerian MLP Index shot up another 2½ (75 YTD) to nearly 360, another new record! The REIT index rose 2¾ to the 231, a new high over the last 2 years. Junk bond funds were flat to slightly up. Treasuries declined, with yields on 5-year notes rising for the first time in 7 days, after the U.S. payrolls report showed employers added more jobs in Oct than forecast. The yield on the 10 year Treasury bond rose 5 basis points to 2.52%.
5-Year note yields - 1 year
Treasury yields:
| U.S. 3-month | 0.11% | |
| U.S. 2-year | 0.35% | |
| U.S. 10-year | 2.52% |
Alerian MLP Index --- 2 weeks
Dow Jones REIT Index --- 2 weeks
10-Year Treasury Yield Index --- 2 weeks
Oil traded near its highest level in 2 years as US payrolls rose more than forecast in Oct, a sign the economy is recovering. Gold slipped after a rally to a record & a rebounding dollar prompted some investors to sell bullion.
| CLZ10.NYM | ...Crude Oil Dec 10 | ...86.59 | ... 0.10 | (0.1%) |
| GCX10.CMX | ...Gold Nov 10 | ....1,382.00 | ... 0.70 | (0.1%) |
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Photo: Bloomberg
In Oct the economy generated a net gain in jobs for the first time in 5 months, but the unemployment rate remained stuck at 9.6% (for the 3rd straight month). The Labor Dept said employers showed a net gain of 151K jobs last month & private employers hired 159K workers, the best since Apr. Employers also extended the average work week to 34.3 hours, up 0.1 hours. The additional jobs & longer work week should boost Americans' incomes & provide fuel for more consumer spending. The Aug & Sep payroll figures were also revised higher. The private sector added 103K more jobs in those 2 months than previously estimated. YTD the economy has added 874K jobs & over a million in the private sector. But that comes after the loss of more than 8M jobs in the last 2 years. 14.8M were unemployed, a figure that hasn't improved much since the beginning of the year. Job gains were concentrated in relatively few sectors: retailers added 28K positions, likely in preparation for the holiday season & temp agencies added 35K. Restaurants & bars also hired 24K. Gov at all levels shed only 8K jobs. The economy needs to add at least 100K net new jobs a month just to keep up with population growth. It will need to generate many more to cut into the unemployment rate, which has now topped 9.5% for 15 months. Overall the numbers were better than expected, but remain gloomy as new hires are largely in lower paying jobs.
U.S. Added 151,000 Jobs in October, Unemployment at 9.6%
The Treasury will auction $32B in 3-year notes, $24B in 10-year notes & $16B in 30-year bonds next week (in line with the forecasts), signaling a pause in the auction cutbacks until the fiscal & economic outlook becomes clearer. There will also be more frequent auctions of Treasury Inflation-Protected Securities (TIPS) to improve liquidity in the market. There are plenty of buyers despite rates being at or near record low levels.
U.S. Treasury to Sell $72 Billion in Long-Term Debt
Constellation Energy (CEP), the laggard MLP, reported mediocre results for Q3. In Q3, CEP completed 10 net wells & recompletions in the Cherokee Basin with total capital spending of $3.6M. YTD CEP completed 18 net wells & recompletions & had an additional 17 net wells & recompletions in progress in the Cherokee Basin. Net income before charges was $3.3M for Q3, which excludes a $270.4M non-cash impairment charge related to Cherokee Basin & Woodford Shale assets. Adjusted EBITDA for Q3 was $12.9M & YTD adjusted EBITDA was $42.5M. Outstanding debt was $171.5M, leaving the CEP with $33.5M in available borrowing' “In 2011, our focus will continue to remain on debt reduction, which we intend to achieve with cash flow from operations through lower capital spending, continuation of our distribution suspension through 2011, and cost containment,” said Stephen R. Brunner, CEO. “We currently anticipate that this strategic focus will result in additional debt reduction of between $25 million and $30 million next year.” The company anticipates capital spending for 2011 of $10-12M allowing it to complete 30-35 net wells. Distributions will remain suspended until such time that debt levels are reduced & market conditions again warrant resumption of capital spending at maintenance levels. The units have been lumbering along at 3 after falling early this year.
Constellation Energy Partners Reports Third Quarter 2010 ResultsBusiness Wire
Constellation Energy --- YTD
Today is another case of buy on the rumor & sell on the news. The headline number on jobs was favorable but digging underneath, it still paints a gloomy picture about the economy & its recovery. MLPs are on fire & REITs are trailing behind. Equity holders are happy but too much, too fast always disturbs me especially with gold at record levels.
Dow Jones Industrials --- 2 weeks
Global Strategy Portfolio/Diversification Doesn't Work.
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