Stocks try for three straIght up days

Dow gained 84 taking it above 7000, advancers over decliners 2-1 & NAZ rose 10.

The S&P 500 FINANCIALS INDEX is crawling up from the depths, helped by major big bank CEOs giving pep talks to investors.

Value 101.06

Change 1.92

% Change 1.9%

The high yield sector was up. The Alerian MLP index broke back into the black for 2009.


Alerian MLP Index ---- YTD





Oil rose on stronger stock markets & a rise in inventories last week. The fall to sub 40 was halted for the time being.

CLJ09.NYM

...Crude Oil Apr 09

...44.10

... 1.77 .......4.2%)

• Oil rebounds to $43 after drop on inventories' rise- AP

New claims for unemployment benefits rose modestly last week to 654K, bringing the number receiving benefits to 5.3M (the highest since record keeping began in 1967). The 4 week average of new claims reached 650K, another grim reminder of how bad the recession is biting.

• Jobless claims rise as retail sales slip- AP

The figures for retail sales were less bleak than feared. Purchases (really sales) were up 0.1% after Jan figures were revised upward. Excluding automobiles, purchases were up 0.7% giving an indication the the numbers may be bottoming out as discounting by retailers is drawing customers. However, dismal unemployment data can limit further increases.

•Retail Sales in U.S. Decrease Less Than Forecast in Sign of Stabilization


Bernie Madoff pleaded guilty to federal criminal charges & is awaiting sentencing by the judge.

•Madoff Tells Judge He Wants to Plead Guilty in Biggest-Ever Ponzi Scheme


There was very little coverage about the pres signing the bill for massive gov spending thru Sep 30. It's filled with pork, many don't want to hear about it. But unlimited gov spending, spend today & tomorrow will take of itself, philosophy is not received well on Wall Street. Now the pres will crack down on future pet projects. Swell!

Obama Signs Spending Bill as He Seeks Earmarks Curb


Markets are absorbing negative news well, the Dow is making an assault on the 7K ceiling. However banks only have a modest gain after the big run up in the last 3 days. Strong markets need bank stocks to lead.

Going nowhere day

Markets just wandered aimlessly going nowhere, waiting for word about the stimulus package, probably tomorrow, & bank bailout II, maybe later.

Markets closed down small change & advancers were slightly ahead of decliners. While S&P 500 FINANCIALS INDEX was up only 1%, banks did much better on expectations that TARP II is only a few days away. Bank of America (BAC) & General Electric (GE), soared (12% & 14% respectively) on hopes Bailout II will be passed soon. The Alerian MLP Index was up .68 to 202.68. This was such a dull day, even oil was down only pennies.


Bernie Madoff agreed to a settlement for the civil suits. He is going to pay a fine & return money to investors, not clear where all this money will come from. His criminal problems continue but he is expected to cop a plea, his cooperation with the authorities will get him a more lenient sentance.

• SEC, Madoff agree to settle civil fraud case- AP

Bob Lutz, General Motors Vice Chairman, credited with leading the development of the Volt electric car & revitalizing vehicles such as the Chevrolet Malibu and Cadillac CTS, will retire at the end of 2009. At 76, he is a 46 year veteran, having worked for all 3 big auto companies. Because of the long his service, his retirement is understandable. However, some suggest that he may have been motivated by not wanting to work for "Congressional Motors" with restrictions on pay, corp jets, etc. If true, when applied to executives in their middle & younger years, this line of thinking could haunt auto companies (i.e. losing "good" people). But that assumes the companies survive.

General Motors’ Bob Lutz Will Retire at End of 2009


On Bloomberg TV, they estimated how much the bailout/stimulus packages will ultimately cost the US. The estimate was about $9.7T (that's T as in trillion) or the equivalent of 13 wars in Iraq & Afghanistan. The number included direct costs plus pledges (the latter probably accounts for most of the total). Just one of the "little" pieces was $130B to help GE's financial businesses while GE's debt continues to be rated AAA.

Tomorrow the Senate will vote on the $800B (whatever the number is) stimulus package. Votes have been lined up, it will pass. Then they will have to blend it with the House bill which is probably more generous, whatever that means. That process could take a few weeks, no simple matter.

Stocks up for the day, down for the week

A choppy day for stocks ended with gains. Dow rose 68 to 8281 (but is still down almost 500 this year), advancers 3-2 over decliners & NAZ rose 17.

Banks had a tough day. At the low, the index touched a new low of 124. This week the S&P 500 FINANCIALS INDEX started at 155, but closed substantially lower (just another tough week):

Value 130.10

Change -3.18

% Change -2.4%

MLPs, REITs & junk bond funds found buyers in the PM, they rose modestly on the day. VIX pulled back 4½ to the 46s.


Oil finally had an up day, maybe because of all that cold weather out there. But it still remains down sharply from its start this month near 50.

CLG09.NYM

..Crude Oil Feb 09

...36.05

.. 0.65 ......(1.8%)

Chrysler Financial (a sub of Chrysler) will get a $1½B loan from the gov under TARP. This is a little controversial since the gov is financing a commercial business, but this loan allows Chrysler to remain in business.

•Chrysler Financial Gets $1.5 Billion Treasury Loan to Help Boost Car Sales


Almost $2B of client money at Morgan Stanley (MS) was invested in Bernie Madoff's funds. This information has come to light after their proposal to take of Citigroup's brokerage business.

•Morgan Stanley, Citigroup Clients Said to Invest in Fund Exposed to Madoff

Lower retail sales are too much!

After dropping 275 in the first hour, Dow remained flat for the rest of the day. Dow closed down 248, decliners over advancers 7-1 & NAZ fell 56.

Dow's performance led the other averages I follow, selling off in the first hour & then steady for the remainder of the day at the reduced level. VIX pulled back slightly from it's high but still jumped 5.87 to 49.14. Growing fears worry markets. Oil continues to slide downward, in the 37s, on gloomy economic news

General Electric (GE), just another big Dow stock with big problems, pulled back into the 14s near it's recent low, taking it's value back to 1996 levels. GE will release earnings next week, markets are already preparing to be disappointed. This is an S&P 500 Dividend Aristocrat. Last year in announcements regarding the div, GE only said that it would be maintained. Their last increase was Q4 in 2007, thus 2008 was another record year for their div. Unless they increase this year, they will lose their standing as a Dividend Aristocrat. In addition, they are still working to maintain the coveted AAA debt rating (only a handful of companies remain in that elite group).


General Electric --- 3 months





General Electric --- 28 years





Speaking of divs, MLPs will try to increase Q1 distributions. In the next couple of weeks, most announcements will be made for Q1. 2 announced increases last week. Today, Plains All American Pipeline (PAA), announced a Q1 distribution the same as the Q4, 2008, annualized rate of $3.57 & is above the $3.40 rate in Q1 2008. I count a year over year increase as a baby increase. More will probably try for increases. However, some are selling in single digits. They are struggling to keep the existing distributions. There is still time to place bets for the adventuresome.

A second judge ruled that Madoff can remain free (confined to his apartment) awaiting trial.

•Madoff Has Bail Ruling Upheld, Will Remain Out of Jail Pending Fraud Trial


Earnings season will be in full force next week. Lower markets suggest that GE is just one of many companies expected to disappoint.

Another mild trading day

After extreme volatility lately, markets have quieted down at least for the time being. Fluctuations were moderate today:




Dow dropped 81 taking it below 9K, but advancers were over decliners 3-2 & NAZ was down 4. The VIX ticked up a few pennies, but still moderate in the 39s (when compared with recent values in the 80s).

Worldwide conflicts & strife were the major influence on oil, up big again:

CLG09.NYM

...Crude Oil Feb 09

....48.43

.. 2.09 ......(4.5%)

Auto sales last month were in line with expectations, disastrous. Toyota & Honda led the decline, but the American companies were just behind them in sales declines. Year-end discounts & free financing programs did little good. General Motors (GM) said sales last year were the lowest since 1959. As a result, US companies only had 47% of the US auto market. Ford already said Q1 auto sales will continue to be bad. Last year auto sales were near 13M, lowest level in 16 years.

• Toyota, Honda lead declines in December auto sales- AP

•GM's 2008 U.S. Sales Drop to 49-Year Low; Ford, Honda December Sales Fall


The Madoff case goes from ugly to uglier. Federal prosecutors are asking that Madoff be sent to jail for violating terms of bail (transferring assets). Meanwhile congresional hearings are proceeding, trying to figure out what went on with his scheme.

•Madoff Transferred $1 Million of Assets, Should Be Imprisoned, U.S. Says


The Alerian MLP Index has had undoubtedly its best 3 days in history with a 30 point gain, getting within inches of 200. It pulled back in the PM, to close at 195.70, up 7 (still not a bad day) for a 3 day gain of 25 points or 15%. However, high yield securities are getting different responses. The Lehman High Yield Bond ETF had a nice bounce in the last few days. But REITs still can't get no respect, even with double digits yields:


Alerian MLP Index --- 2 weeks





Lehman High Yield Bond ETF --- 2 weeks




Dow Jones REIT Index --- 2 weeks

Dow lower again

Dow fell 100, its 5th consecutive decline in very quiet trading.


Dow Jones Industrials --- 1 week





Decliners were over advancers 3-2 & NAZ dropped 10. Other indices were quiet. VIX was little changed but Lehman High Yield Bond ETF edged up 17¢. Many junk bond funds were also higher. 20+% yields compared to 2.1% on the Treasury is too big a spread to ignore. The very venturesome buy these funds, trying to catch a small move up which works out to a big percentage gain. Other indices didn't change much. Volume remains low with many investment managers on holiday or maybe they've fled the country.

Oil continues weak, at 39. Lower prices for oil should be bullish, but they aren't.

CLG09.NYM

..Crude Oil Feb 09

...39.10

... 0.81 .......(2.0%)

The Madoff story drones on. A money manager was found dead in his Manhattan office in what is considered a suicide. He invested with Madoff. Money clients will be checking with their money managers around the world. to find out what exposure they might have to this scandal. Not good for market psychology. A couple of articles are also shown below with guesses about where he invested $Bs, even now nobody really knows

•Madoff Fund Operator Who Had $1.4 Billion Invested Found Dead in New York

• Where did all of Bernard Madoff's money go?- AP
• Madoff's Non-Trading Strategy and the Noels' Sad Christmas Tale- Tech Ticker

Retail sales are coming in very low despite big discounts. Numerous ads on TV & in the papers testify how hard they are looking for shoppers. Bloomberg TV did a piece about customers not returning to stores (from last year) except at Wal-Mart (WMT). WMT has been the best performing stock in the Dow this year. Speaking of the Dow, American Express (AXP), another Dow stock, will get more than $3B from the gov after becoming a bank last month.

• American Express gets OK for $3.39B from gov't- Reuters

Stanley Works (SWK), an S&P 500 Dividend Aristocrat, is one of the many beaten up stocks which deserves better treatment. They have paid an annual div for more than 100 years with annual increases for over 40 years. They're somewhat involved in the housing market, that hurts. But EPS should be above 3 this year & hopefully near 3 next year, allowing them to cover the 1.28 div with some degree of comfort. Some will back off because of their exposure to housing. But I like their long track record of paying dividends.

Stocks fade, dragged down by Madoff scandal

Enthusiasm from yesterday's PM rally melted. It started with Asian/Australian markets last night. They rose, but only moderately & that didn't last long. The Honk Kong market ended with a 2% gain, but the others had only modest gains. In particular, they are more sensitive to the dollar & it TANKED on news of the dramatic rate cuts. The Japanese ¥ rose to 88 to the dollar (from 110 just a few months ago) & the € is up to 1.43. The Japanese economy is is export driven & the high rates for the ¥ are not going to help them pull out of a major recession. There is also the thought that the US economy may be in worse shape than thought if the Federal Reserve has to be soooo accommodating.

•Dollar Falls Most Against Euro Since 1999 Debut After Fed's Rate Reduction


Dow is down 80, decliners ahead of advancers 3-2 & NAZ is down 16. Banks are hanging in fairly well, the S&P 500 FINANCIALS INDEX is down only 3. The Alerian MLP Index is down 2, Dow Jones REIT is down 5½ (after yesterday's very strong rally) & Lehman High Yield Bond ETF is down 1%. The weakness today is from negative market sentiment plus we are entering the final days of the year for tax loss selling (trades have to be settled by Dec 31).

OPEC just announced a production cut of 2.2MM barrels per day, the largest cut in their history. Global economic recession outweighs a production cut, oil down 2+.

OPEC Cuts 2.2 Million Barrels a Day- AP

CLF09.NYM

..Crude Oil Jan 09

....40.98

.. 2.62 ......(6.0%)

The VIX, volatility index, pulled back another 1. The 3 month graph shows it has retreated from the astronomical highs, however it still remains extremely high (20 used to be considered a high number):


VIX ---- 3 months





The Madoff scandal drones on, a huge negative for the bulls. This makes it harder to trust advisers about investing, not to mention the investing "for the long term" concept has gotten fuzzy lately.


•Madoff Placed Under House Arrest; Wife Ruth Ordered to Surrender Passport

• SEC chairman says agency failed to probe Madoff- AP
• Connecticut investment firm stung by Madoff ties- AP
• Curfew for Madoff as new condition of bail- AP
• Limited Options for Investors Burned by Madoff- Tech Ticker

The administration is struggling to come up with a plan to save the Big 3, the clock is ticking. I think they will have to announce their idea today or tomorrow

• White House pressured by lawmakers on auto bailout- AP

The final attempt to bailout the Big 3 will get a reaction, already 2 auto suppliers have failed. However, by the next day that news will be history.

Skittish markets pull back

Markets sank late in the day on the drawn out process for saving the Big 3 & waiting for the interest rate cut announcement tomorrow. But a rally going into the close limited the loss, Dow dropped 65, decliners over advancers 2½-1 and NAZ was down 32. Financials continued weak, S&P 500 FINANCIALS INDEX fell 6, the Alerian MLP Index fell 2 to 177, the Dow Jones MLP Index plunged 5½ to 132, Lehman High Yield Bond (JNK) was up a few pennies (maybe benefiting from strength in Treasury bonds) while VIX rose 3 to 57. Nervousness was the overriding factor today.

After reaching 50 early in the day, oil sold off ending down 1.

CLF09.NYM

..Crude Oil Jan 09

...45.14

.. 1.14 ......(2.5%)

The schedule below (from Bloomberg) gives rates on US Treasuries. These record (or near record) rates are good on one hand but also can also cause problems. Some blame the extended period of very low interest rates a few years ago for contributing to the sub-prime mess (making it easier for mortgages agencies to promise very low teaser rates). Now there's talk about the FED buying Treasury bonds (to keep yields from rising) on top of increased demand from foreigners seeking safety. Foreign investors bought $35B in Treasuries in Oct (after the terrible decline in the stock markets), up from $21B in the prior month.

U.S. Treasuries

	COUPON	MATURITY DATE	CURRENT PRICE/YIELD	PRICE/YIELD CHANGE	TIME
3-Month	0.000	03/12/2009	0.01 / .01	0 / .000	15:00
6-Month	0.000	06/11/2009	0.2 / .20	0 / -.000	15:00
12-Month	0.000	11/19/2009	0.46 / .47	0.01 / .010	15:00
2-Year	1.250	11/30/2010	100-31+ / .74	0-01 / -.017	15:02
3-Year	1.125	12/15/2011	100-09+ / 1.02	0-01½ / -.016	15:00
5-Year	2.000	11/30/2013	102-14 / 1.49	0-03½ / -.023	15:01
10-Year	3.750	11/15/2018	110-20 / 2.53	0-11½ / -.039	15:07
30-Year	4.500	05/15/2038	129-08½ / 3.00	1-03 / -.048	15:04

•Treasury 10-, 30-Year Bonds Advance on Speculation Fed May Go Beyond Cuts


The Madoff scandal is getting bigger & uglier. Many of the biggest boys were duped. Bloomberg TV had a story on how even Madoff investors who cashed out early, may be required to give back money to his funds so that misery can shared with other investors. A court case on appeal will make decide that matter. In the meantime, this gives another excuse for doubters to throw in the towel on stocks.

Alleged Madoff fraud victims include big banks, super rich- AP


Trading is expected to be wide open tomorrow. Everybody is waiting for the president to make an announcement about bailing out the auto companies & the FED will announce the new low interest rates. In addition, there is more to learn about the Madoff swindle.

Lower markets, awaiting developments

Asian/Australian markets rose sharply last night on expectations of an auto bailout which should help their auto makers & exports in general. US markets don't share that optimism. In nervous markets, Dow is down 62, decliners over advancrs 2-1 & NAZ is down 31. S&P 500 FINANCIALS INDEX dropped on the uncertainty ahead of the expected auto bailout, not to mention the important Federal Reserve meeting announcement tomorrow on interest rate cuts.

Value 156.05

Change -5.48

% Change -3.4%

The Alerian MLP index is flat, the Dow Jones REIT Index dropped 4 & Lehman High Yield Bond (JNK) is up pennies (for no special reason other than the extraordinary high yields) & VIX, volatility index, is up 3 to 57 on increased market nervousness.

Oil rose ahead of the OPEC meeting,. They are calling for a sizable cut, sending oil prices higher (over 50 for a time):

CLF09.NYM

..Crude Oil Jan 09

...48.75

.. 2.47 ......(5.3%)

•Oil Rises to $50 as OPEC's El-Badri Says Sizable Cut Is Needed at Meeting


Output at factories, mines, etc fell 0.6% last month, less than feared but still a solid negative. This is to be be expected during a recession.

•U.S. Industrial Production Falls 0.6% as Automakers Struggle for Survival


The Madoff scandal is growing in seriousness. They are trying to figure out who invested in his schemes & how much. Investors reach to the biggest banks around the world & hedge funds. The numbers involved are huge, nobody is sure where the bleeding will spread.

•Madoff Said to Have Managed Hedge-Fund Money in Unregistered Side Business


With so much up in the air, markets will probably bide their time today away before announcements tomorrow.