Wednesday, December 29, 2010

Dow extends December gains

Dow traded in the black all day, but pulled back into the close.  Dow was up 9, advancers over decliners 2-1 & NAZ gained 4.  Bank stocks as market leaders were also lower.   


Value215.08One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  -0.63 (-0.3%)

The MLP index was up 1¼ to 361 & wants to finish the year nearer its record in the 366s.  The REIT index rose ½ to the 224s, far below its record levels above 300 when most company dividends were higher.  Junk bond funds inched up.  Buyers returned to Treasuries in a big way in the PM.  The yield on the 10 year Treasury bond fell a very large 14 basis points to 3.34%.  Given thin trading in the markets, it's difficult to attribute any meaning to this move.         

Treasury yields:

U.S. 3-month
U.S. 2-year
U.S. 10-year

Alerian MLP Index   ---   1 year

Dow Jones REIT Index   ---   1 year

10-Year Treasury Yield Index   ---   1 year

Oil slipped back, but remains near its 26 month high & bulls expect to see $100 soon.  Gold is concluding another outstanding year.  It started the year near $1100 & has had a nice run to record levels while the Dow is still almost 20% below its record in Oct 2007.

CLG11.NYM...Crude Oil Feb 11...91.13 ....Down 0.36 (0.4%)

GCZ10.CMX...Gold Dec 10.....1,413.10 ...Up 7.90  (0.6%)

+++ Gold Super Cycle +++  

The blizzard that swept through the northeast delayed $1B in retail spending, according to ShopperTrak. But, it says that won't derail a holiday shopping season expected to be the best since 2007.  The effect won't be as bad as last year's pre-Christmas snowstorm that similarly paralyzed parts of the East Coast costing retailers an estimated $2B.  About $10B in retail sales usually occurs Dec 26-27 & bad weather likely delayed about 10% of that. ShopperTrak's still estimating for a 4% gain over last year in revenue for Nov 1-Dec 31. Retailers are hoping to see much of the spending when shoppers return to stores as streets are cleared & transportation restored.  This year's storm cost retailers 11.2% of their foot traffic Sun & 13.9% on Mon.  Dec 26 should rank 10th-busiest day of the holiday shopping season. Last year, it was 2nd-busiest behind Black Friday.  Stores will report results next week & Dec auto sales are also due.

Constellation Energy Partners (CEP) is an MLP which has been left behind in the enormous MLP rally over the last 2 years.  But it's still alive. The borrowing base just reestablished by lenders was $195M.  CEP has $26½M available under the line & the company had $18.2M cash on hand in early Dec.  In addition CEP acquired, from a private seller, non-operated oil properties in northern Kansas & southern Nebraska for approximately $5.9M. The properties currently produce approximately 126 barrels of oil equivalent per day from 36 wells with proved reserves estimated to be 170K barrels of oil equivalent.  81% is classified as proved developed producing. The transaction closed Dec 21, 2010 & was purchased with cash on hand.  Risk takers who are willing to wait for the company to resume distributions might be interested in CEP at less than $3.

 Constellation Energy Partners Borrowing Base Set At $195 MillionBusiness Wire

 Constellation Energy Partners Acquires Mid-Continent Oil AssetsBusiness Wire

Constellation Energy   ---   2 years

Volume was slow again at only 0.5B on the NYSE floor.  As a frame of reference, 1B shares is generally considered low.  Low yields have driven investors to higher yielding stocks in Dec.  But they have not been buying junk funds & have only been buying REITs to a limited degree.  MLPs have had a modest advance.  Old fashioned stocks have done the best as reflected in the Dow which has risen 5¼%.  It's hard to believe, but volume could be even slower tomorrow.    

Dow Jones Industrials   ---   1 year

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