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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