Markets close mixed on low trading

Dow rose 7 to within a hair breath of the yearly high made earlier this week, advancers 5-4 ahead of decliners & NAZ was fell 10.  The Financial Index shows bank stocks inched higher. 


S&P 500 FINANCIALS INDEX

Value	214.77
Change	0.44  (0.2%)

The MLP index inched up still in the 363s (2 below its recent record high) & the REIT index fell a fraction into the 223s.  Junk bond funds eked out gains after falling at least 5% during Q4.  The yield on the 10 year Treasury bond fell 6 basis points to 3.30%. 

Treasury Tields:

U.S. 3-month		0.12%
U.S. 2-year		0.59%
U.S. 10-year		3.30%

Alerian MLP Index   ---   YTD



Dow Jones REIT Index   ---   YTD



10-Year Treasury Yield Index   ---   YTD




Buying brought oil back above 91, encouraging for the bulls.  Gold is just below its record high in the 1420s. 

CLG11.NYM

...Crude Oil Feb 11

...91.32

.......1.48

(1.7%)

GCF11.CMX

...Gold Jan 11

......1,418.90

... 13.30

(1.0%)

$$ Gold Super Cycle $$  

Click Here

  The close of markets today will bring the decade to a close.  As a reminder, the number system of the calendar goes from years 1 thru 10, etc.  This has been a very tough decade for some of the biggest companies.  Here's a few of the Dow stocks along with Citigroup (C), a Dow stock at the start of the decade.  Also, all but Cit had been Dividend Aristocrats. In addition, a chart for the Alerian MLP Index is added.  It's had a fantastic decade, helped by its outstanding recovery from its lows 2 years ago.  The index also has been yielding at least 6% annually, making for an excellent track record.  AMJ, a closed end stock fund,  was started in recent years to track AMZ.  MLP tax hassle scares away some investors, but there are ways to directly participate in the growth of a few prominent MLPS.  Kinder Morgan (KMR) and Enbrdige Energy (EEQ) are 2 stock equivalents which track their respective unit prices & pay stock dividends equivalent to distributions paid to unit holders, very tax efficient.  General Electric   ---   1 decade  Pfizer   ---   1 decade
 Merck   ---   1 decade   Bank of America   ---   1 decade  Citigroup   ---   1 decade   Alerian MLP Index   ---   1 decade     Dow ended the last decade at 10,788 & finished the first decade of the 21 century at 11, 577.  I look forward to talking about very smart investing in the next decade!  Dow Jones Industrials   ---   1 decade   

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Mixed markets in quiet trading

Dow fell 6, advancers 3-2 ahead of decliners & NAZ is off 10 on a very, very quiet day of trading.  Bank stocks are inching up, nothing meaningful.

S&P 500 FINANCIALS INDEX

Value	214.73
Change	0.41 (0.2%)

The Alerian MLP Index is flat in the 363s & only 2 below the record reached last month.  The REIT index is up a fraction to 225 & junk bond funds are up a couple of pennies (not too far below yearly highs reached 3 months ago).  The yield on the 10 year Treasury bond fell 4 basis points to 3.33%.  The QE2 program by the Federal Reserve to buy Treasuries aimed at lowering interest rates is not working.

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.62%
U.S. 10-year		3.33%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks

Photo:  Bloomberg


Oil fell, paring its highest yearend close since 2007, on profit taking & a US gov report yesterday showed a smaller- than-forecast drop in inventories.  Gold rose, poised for a 10th consecutive annual gain, as investors sought a protection of wealth & alternative to currencies. 

CLG11.NYM

...Crude Oil Feb 11

...89.27

... 0.57

(0.6%)

GCF11.CMX

...Gold Jan 11

.......1,413.10

.... 7.50

(0.5%)

Gold Super Cycle Link! Click Here

Photo:   Bloomberg


Commodity prices beat gains in stocks, bonds and the dollar this year, led by strong demand from Chinea, the biggest user of everything from cotton to copper to soybeans.  The Thomson Reuters/Jefferies CRB index of 19 raw materials gained 15% through yesterday. The MSCI All Country World Index of stocks rose 13% with reinvested dividends. Global bonds returned 4.7%, based on Bank of America Merrill Lynch’s Global Broad Market Index & the US Dollar Index, a gauge against six counterparts, just added 2.1%. The CRB outpaced the other measures for the first time since 2007.  Raw materials were stong in 2010 as China’s growth, the fastest of any major economy, spurred record demand for sugar, soybeans & rising imports of copper. At the same time, crops suffered from droughts in major agricultural counties such as Russia & Canada.  This was the first year since 2005 that commodities, stocks, bonds & the dollar all rose as the global economic recovery proved resilient.  Gains in the CRB were led by cotton, which surged 89% this year, reaching a record on Dec 21, on speculation that supply would fail to keep pace with rising demand in China. Silver jumped 81%, attracting investors betting on both faster & slower economic growth. Corn jumped 49% & coffee climbed to a 13-year high as inventories shrunk & bad weather threatened crops in South America. China’s economy expanded more than 10% in 2010. While growth could slow to 9% next year, that would still be triple the rate of the US & 6 the times the speed of the € region.  Bottom line is that commodities were extremely strong this year & 2011 is shaping up as another good year for most commodities.  Gold was not one of the best performers because it was up less than 30%.  Look for a number of closed end funds to be started next year to invest in commodities (as happened with MLPs this year).

Commodities Beat Stocks, Bonds, Dollar in 2010


MLPs have had nothing short of a stellar run in the last 2 years.  The chart below shows the performance of the index over the last 4 year so that it includes the prior peak in 2007.  The annual distributions associated with the index is roughly 20, making for phenomenal total returns.  Don't expect this rate of growth to continue in 2011.  MLPs are yield securities & the yield for the index is below 6¼%, in very low territory based on historical standards & approaching the record low under 5.4% in Jul 2007.  Among other factors, increased demand by China & other eastern Asian countries will not help US MLPs.

Year end closes:

2007...301
2008...176
2009...285
2010...363  today

Alerian MLP Index   ---   4 years




Volume is  running at one of the slowest days of the year.  Stocks have put together back to back years of big gians.  Many are forecasting continued recovery by the US economy (along with strong overseas demand for US products) will extend the markets' winning streaks to 3.  Of course, when so many come to the same conclusion, maybe all the good news is already factored in.  Dow is up 560 in Dec, making it one of the best Dec months in history, a time when many "experts" have raised expectations for next year!   

Dow Jones Industrials   ---   2 weeks

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Markets slosh around on mixed economic data

Dow dropped 15,  advancers barely ahead of decliners & NAZ fell 3.  Bank stocks were also a little lower.  Economic data reported got very little attention today.


S&P 500 FINANCIALS INDEX

Value	214.32
Change	-0.76  (-0.4%)

The Alerian MLP Index fell back in the PM, but still had a decent gain of 2½ to the 363s (only 2 below the record reached last month).  On this slow day, the REIT index was down a fraction in the 224s & junk bond funds were slightly lower.  The yield on the 10 year Treasury bond rose 3 basis points to 3.37%, remaining one percentage point above its low at the start of Q4.

Treasury Yields:

U.S. 3-month		0.11%
U.S. 2-year		0.64%
U.S. 10-year		3.37%

Alerian MLP Index   ---   YTD



Dow Jones REIT Index   ---   YTD



10-Year Treasury Yield Index   ---   YTD




Energy prices dropped after the gov said oil & natural gas supplies fell less than expected last week.  Gold fell for the first time this week on investor sales following this year’s rally

CLG11.NYM

...Crude Oil Feb 11

...89.60

.... 1.52

(1.7%)

GCF11.CMX

...Gold Jan 11

.......1,405.00

... 8.10

(0.6%)

*** Gold Super Cycle ***  

Click Here

Corp bond sales worldwide topped $3T for a 2nd straight year, led by the highest-ever issuance of junk-rated debt, as borrowers locked in the lowest yields on record.  Companies sold $287B of debt in the US, smashing the previous record of $163B in 2009. Signs the global economic recovery is gaining strength & encouraged investors to lend money to borrowers at lower interest rates, allowing Johnson & Johnson (JNJ), a Dividend Aristocrat, with a AAA credit rating to sell bonds with record-low coupons.  Yields on investment-grade corp bonds worldwide fell to an average of 3.36% in Oct, the lowest level from data that began in 1996. Yields dropped from last year’s high of 7.41% in Mar 2009, translating into savings for the average borrower of $4M annually for every $100M of bonds sold.  Interesting that investors are willing to lend record amounts of money at lower & lower interest rates.  Risk is accepted & tolerated.   

GE Leads $3 Trillion in Company Bond Sales as Yields Fall


In Dec US businesses expanded at the fastest pace in 2 decades, adding to evidence the world’s largest economy is accelerating heading into 2011.The Institute for Supply Management-Chicago said its business barometer rose to 68.6 this month, exceeding the most optimistic forecast of 63.7, to the highest level since Jul 1988. Figures greater than 50 signal expansion. Gains in business investment on new equipment & growing exports to emerging economies is keeping factories churning in the coming year, contributing to the recovery. Reports showing consumer spending is also picking up mean retailers will need to restock shelves, giving manufacturing a further lift.

Business Activity in U.S. Grows at Fastest Pace in Two Decades


Next week will be the annual CES show in Las Vegas to show off electronic products for the new year.  In computers, tablets are the hot new product.  Acer (a computer company in Taiwan) expects 20M tablets (computers) will be sold out of a computer market which exceeds 300M.  The iPad version II will be out in 2 months & Apple (AAPL) is already pumping the publicity machine.  But this time around there will be a ton of competition.  Andriod from Google (GOOG), going against iPhone, is also being increasingly popular.  AAPL is riding high, although off 1½ today from its record high (reached yesterday).  A new year will bring new charts for these companies:

Apple   ---   YTD



Google   ---   YTD




NYSE floor volume was 0.5B, like previous days.  The jobless figures did not bring out buyers, with such low volume it's difficult to make sense out of any moves in the markets,.  The MLP index slipped a point in the PM, it's entitled all considered.  Markets will be open tomorrow for those who need to make last minute adjustments to their portfolios.  Dow is up more than 1100 in 2010, not too shabby following its spectacular run in 2009.

Dow Jones Industrials   ---   YTD

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Markets slide on higher mortgage rates

Dow is off 11, advancers barely ahead of decliners & NAZ pulled back 2.  Not a lot is going on with slooow trading.  Bank stocks were also weaker but the Financial Index is just below its 8 month high of 215+.

S&P 500 FINANCIALS INDEX

Value	214.63
Change	-0.45  (-0.2%)

The Alerian MLP Index shot up 3½ to the 364s, needing just another 1+ to set a new record.  This is coming on very thin volume, so it probably is from fund managers trying to show they have MLPs in their portfolios.  The index is up 79 YTD after rising 109 in 2009.  Don't expect a repeat in 2011!  Meanwhile the REIT index was down pennies in the 224s.  The yield on the 10 year Treasury bond rose 6 basis points to 3.40%, rate to the jobless data, reversing part of yesterday's decline.

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.66%
U.S. 10-year		3.40%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil fell to the lowest level in a week after an industry report showed supplies increased for the first time since Nov.  $90 is a key line of support.  Gold fell after gaining 2.4% in the previous 3 days & gaining a whopper 300 YTD! 

CLG11.NYM

...Crude Oil Feb 11

...90.14

... 0.98

(1.1%)

GCF11.CMX

...Gold Jan 11

......1,406.00

.... 7.10

(0.5%)

Gold Super Cycle Link! Click Here

Photo:   Bloomberg

The number applying for unemployment benefits fell to its lowest point in nearly 2½ years.  Applications dropped 34K to 388K, the fewest since Jul 2008, according to the Labor Dept. The number of applications has either fallen or remained unchanged in 5 of the past 6 weeks.  Fewer than 425K seeking unemployment benefits signals modest job growth. However it is believed that applications need to fall consistently to 375K or below to bring down the unemployment rate. Applications peaked during the recession at 651K in Mar 2009.  The latest report covers the week with the Christmas holiday & is considered to be less reliable than most. One reason is that many state offices close for at least one day & other seasonal factors make the report more volatile.  The downward trend is encouraging.  The 4 week average dropped 12K to 414K, the lowest level since Jul 2008.  The graph below shows for most of the year applications hovered around 450K before dropping below that number in Nov. The 4 week average has fallen by more than 40K in the past 2 months, a sign that hiring could accelerate in the coming months.  The total number of people receiving unemployment benefits rose to 4.13M.  That doesn't include millions of unemployed workers receiving extended benefits under an emergency program set up during the recession. About 4½M people are receiving extended benefits for up to 99 weeks. All told, nearly 8.9M people obtained unemployment benefits, a very meaningful number although the charts below are clearly looking better in recent months!

Jobless Claims in U.S. Fall to Lowest Level Since July 2008

Jobless claims - 1 year




4 week average - 1 year



# continuing to receive benefits -1 year

Photo:   Bloomberg


The number of people who signed contracts to buy homes rose in Nov, the 4th increase since contract signings hit a low in Jun.  The National Association of Realtors said its index of sales agreements for previously occupied homes increased 3.5% last month from a downwardly revised reading in Oct. Contract signings were up in the West & Northeast, but down in the South & Midwest.  Signings are 22.1% above the reading in Jun, which was the lowest level since the group began tracking the data in 2001. But signings are 5% lower than Nov 2009 when buyers were scrambling to close purchases to qualify for the first federal tax credit.  This year is shaping up to be the worst for home sales since 1997!

On the downside for the industry, the average rate on 30-year fixed mortgages rose this week to the highest level in 7 months, reflecting higher yields on long-term Treasurys.  Freddie Mac said the rate increased to 4.86% from 4.81% in the previous week. It hit a 40-year low of 4.17% last month.  The average rate on the 15-year loan rose to 4.20% from 4.15% -- the highest reading in 6 months! It fell to 3.57% in November, the lowest level on records starting in 1991.  These rate hikes add substantially to the cost of buying a home & additional rate hikes can be expected.

Pending Sales of U.S. Existing Homes Rose 3.5% in November

Mortgage Rates for 30-Year U.S. Loans Advance to Seven-Month High of 4.86%

# of contracts signed - 1 year



Average rate on new mortgages - 1 year




Markets are lumbering along on mixed news, jobless claims are lower but mortgage rates are higher.  MLPs are the standout performer today which has to be related to window dressing.  Also, the yields on Treasuries are climbing again after the dramatic drop in the PM yesterday.  Bulls say they can live with higher rates.  Maybe, maybe not.

Dow Jones Industrials   ---   2 weeks

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