Strong second quarter, sold off on last day

The 2nd quarter closed on a sour note. Some of the selling could be related to fund managers trying to make their results look better. But it was still a down day nevertheless, stock dropped on the opening & remained at low levels for the rest of the day. Dow slumped 82, decliners over advancers 3-2 & NAZ was off 9. Banks led the markets down.

S&P 500 FINANCIALS INDEX

Value 160.76

Change -1.82

% Change -1.1%

S5FINL:IND




The high yield sectors had a quiet day, inching up by the close, in a down market. But the qtr & first 6 months have been an exciting time. High yield sectors started from depressed levels last year, offering extraordinary yields at the same time Treasuries had soared offering minimal yields. In 2009 Treasuries were sold bringing their yields closer to traditional levels while yields in the high yield sector plunged from high double digits. The VIX chart shows the reasons. It began at astronomical levels, fears were high. Nerves calmed down, allowing buyers to return the to high yield sectors. The VIX is back to levels last seen prior to Lehman's collapse.


Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

Barclays Capital Hi Yld Bond - YTD




10-Year Treasury Yield Index - YTD




VIX ---- YTD




Oil fell today but is still up 55% YTD, not good for future inflation.

CLQ09.NYM

..Crude Oil Aug 09

..70.12

.. 1.37 ......(2.0%)

Going forward may bring a much different scenario. The recession appears to have bottomed, with the help of money thrown at it by the stimulus package. But the next 6 months will be influenced by the recovery & that is being debated. A huge problem is unemployment which probably has not hit bottom. Jun numbers will be posted on Thurs & are expected to show the rate jumping again, this time to 9.6%. Housing is mired in a 3 year depression with no signs of recovery. Recovery for autos will be off very depressed levels as 2 major companies try to emerge from bankruptcy. And California is running out of time, their clock keeps ticking. The reversal of buying enthusiasm from Treasuries to high yield securities in 2009 was dramatic & can not be expected to continue. I feel a greater sense of reality about a slow recovery may dominate trading for the balance of the year.

Dow Jones Industrials --- YTD

Grave GM outlook sinks markets

This is the do or die time for General Motors & the indications are they will not receive more gov support. The administration says that GM & Chrysler will have to overhaul their operations before receiving more assistance. Markets can figure out it's a little late for that, so they're selling off in a major way. Dow is down 277, decliners over advancers 9-1 & NAZ dropped 52.


Financial did not take this news well. The S&P 500 FINANCIALS INDEX suffered another major setback, after its recent recovery from the low of 82 on Mar 6.

Value 115.13

Change -7.99

% Change -6.5%

The major averages I follow were also hit hard on the GM news. The Alerian MLP Index & Dow Jones REIT Index each dropped 4+. The former, at 188, is below the important 190 resistance line. Junk bonds were weak while the VIX shot up 5 to the 45s.


The White House rejected the auto restructuring plans making more gov aid doubtful. The chairman of GM was fired, not really a major move in turning a battleship around. GM is replacing its board & will stress fuel efficient vehicles. Chrysler was told to form a partnership with Italian, Fiat. Confusion reigns, but the the outlook is bleak for the 2 autos. GM stock is down 25%, back into the 2s.

•Obama Says GM, Chrysler Get One Last Chance, Can't Become `Wards of State'


Gloomy auto news was enough to send oil below 50, first time in a week & the low end of its range.

CLK09.NYM

...Crude Oil May 09

...50.11

... 2.27 .......(4.3%)

Meanwhile, global leaders (G-20) are meeting in London to come out with tougher rules to regulate financials. They are focusing on hedge funds, an easy target these days. They will also try to come out with remedies for the worldwide financial mess & credit crisis. But any coordinated message will be limited given each country has its own agenda. Europe, in particular, will need more arm twisting to take tougher measures in helping economies recover.

•G-20 Targets Hedge Funds, Derivatives as Leaders Agree on More Regulation


Not much to do now but wait for the auto mess to get straightened out or end. The chart below shows Dow had been having a superb month, one of the best in history. But it fell off a cliff on Fri as it approached 8K. First 2 CEOs of major banks talked about Mar results coming in soft & today facing auto bankruptcies is too much for markets to handle.


Dow Jones Industrials --- 1 month

Choppy times

This has been an excellent month for the markets, coming off severely depressed levels. But enthusiasm for stocks has waned in the last week. Much of this week stocks have been trading sideways to down on Fri as shown below:

Dow vs Alerian MLP Index - 1 month




Dow vs Dow Jones REIT Index - 1 month




The MLP line, shown in the first graph, recently leveled off in the 190-200 trading. REITs, in the 2nd graph, have had a choppy time of it in the last couple of weeks. Among other problems, Simon Property (SPG), Vornado (VNO) & UDR (UDR) have been giving stockholders an option to substitute stock divs for the cash divs. More REITs will do this as conserving cash has become king this year & that may take time for the markets to adjust to. Adjusting means adding to selling pressure.

• REITs Paying Dividends In Stock, Not Cashat Investopedia(Thu, Mar 26)

Stocks down in late day selling

Following the monster rally yesterday, a pullback was to be expected. But that isn't exactly what happened. Stocks dropped modestly in the AM with accelerated selling in the last 2 hours. Dow dropped 115, decliners over advancers 2-1 & NAZ fell 37.


Banks are in charge of this market. The S&P 500 FINANCIALS INDEX was having a quiet day with only a modest decline but again, there was greater selling in the last 2 hours.

Value 120.79

Change -8.42

% Change -6.5%

The Alerian MLP Index slipped 1¾ while the Dow Jones REIT Index dropped over 9 (much of yesterday's gains) to 100. Junk bond funds were mixed probably helped by the bullish environment for other debt.


The Federal Reserve will buy Treasuries with under 10 year maturities for the rest of this month. These purchases are expected to reduce borrowing costs. Earlier in the day, the 10 year Treasury rallied but fell back to break even (after declining in the last 4 days). The Treasury 10 year bond yields 2.65%, still far less that 3% last week.

• Fed to Start Buying Treasuries in $300 Billion Plan to Cut Borrowing Costs
•Treasuries Reverse Course, Wipe Out Losses on Fed's Debt-Purchase Schedule


Oil was down, but only pennies as the bulls are looking to take it to new yearly highs.

Hedge fund assets, following the worst year in their history, are expected to decline 11% this year. Their assets exceed $1T, more contraction means their future selling is overhanging the markets.

Hedge Fund Assets to Fall 11% in 2009, Study Says


The only 2 gainers in the Dow were Boeing (BA) & DuPont (DD). About 1 hour before the close, 10 were in the green. Not a good early signal for trading tomorrow.

Bulls were in charge!

Stocks held their early gains & were bid up again in the last hour, finishing at their highs . Dow rose 497, advancers over decliners 8-1 & NAZ gained 98. Today's point advance was one of the biggest in history.


Buyers read my thoughts in the prior post & bid up bank stocks more, giving the S&P 500 FINANCIALS INDEX an outstanding day:

Value 129.21

Change 19.47

% Change 17.7%

Gains extended to about every group. The Alerian MLP Index rose 7 to 195s, taking back into the 190-200 range which were its boundaries in the early part of the year. REITs had an outstanding day as the Dow Jones REIT Index vaulted 16 to almost 110. Of course, it was coming off severely depressed levels & even at these prices, yields of 15+% are common. Even junk bond funds had a good day, those 20+% yields are drawing more attention. Meanwhile, the VIX, dropped 3, down to the 42s.


Oil had a very good day, tagging along with stocks, as enthusiasm for stocks bled over to oil. It even managed to get over 54 at the high.

CLK09.NYM

...Crude Oil May 09

...53.86

... 1.79 .......(3.4%)

Oil climbs toward $54 as U.S. equities surge- Reuters


What is called "the AIG bill" has been put on hold for a couple of weeks so Reps can look it over & think about it. That's a nice change of pace from lets rush this enormous spending bill thru in hurry before anybody can read & understand what is being approved.

•AIG Bonus Bill May Be Delayed Until Next Month as Republicans Study Plan



As a note of reality, the head of the FDIC said that some banks may be beyond help, even with a new plan. The note of caution follows comments by many that this plan will take months to implement. Don't expect quick cures.

•FDIC's Bair Says Some Banks May Be `Beyond Help' of U.S. Assistance Plans


Today was all bulls. Tomorrow is a new day with new problems. This plan relies on banks doing their fair share, something that has to be proven. The president now is getting mixed reviews for pushing on too many fronts at once. Business people would like to see a focus on the biggies: credit crisis, high unemployment, housing & autos. It may be unfair to others who are suffering, but dividing forces to attack on many fronts can bring problems everywhere. And that's where the markets have been coming from.

Banking sell off drags down markets

Dow ended last week at 7223. After today's loss, the Dow managed a gain of less than 60 for this week. Stocks peaked at mid week after the Federal Reserve's announcement about buying more bonds. Since then, gov officials in DC have only one thing on their minds, take away bonuses from a handful of AIG execs. Today, they are going after more at Fannie Mae & Freddie Mac after finding out that a handful received a modest amount compared the enormous sums already lost. It looks like DC has declared war on bonuses as a way to cover up their bungling in contributing to creating this financial mess. Dow sold off 122, decliners over advancers 3-1 & NAZ fell 26.

S&P 500 FINANCIALS INDEX were weak as banks keep selling off after their recent rally. From a low of 82 on Mar 6, they rebounded to 126 12 days later (Wed). This reversal I think is more than profit taking by those who lucky enough to buy 2 weeks ago.

Value 109.74

Change -6.14

% Change -5.3%

High yielders sold off today. The Alerian MLP Index kept sliding all day, down 5 taking it below the important 190 line to close at 188.88. The Dow Jones REIT Index was weak all day, dropping a very big 9. Junk bond funds were lower while VIX shot up 2½ to 46s. The chart below shows VIX is back at its 2 week high, increased fears are creeping back into the markets.


VIX ---- 2 weeks





Gov investment means more gov interference. Now Fannie Mae & Freddie Mac have to justify bonuses to the gov (i.e. Barney Frank). I really don't know what's going on at these institutions but newly appointed CEOs working at a salary of $1 are being treated as the enemy by the largest stockholder, the gov. Barney Frank is quibbling about $4M in bonuses. Good boy! Somebody needs to tell Barney that they were just following rules established last fall when the gov rescued these quasi gov institutions. Why is Barney the last one to figure out bonuses were paid? We're back to - watch the molehills, the mountains will take care of themselves. The banking officers are trying to solve gargantuan financial problems, having gov officials looking over their shoulders questioning every move is a kick in the head they do not appreciate or need. This is just the beginning of what some call more interference, gov officials view execs at banks (& much of Wall Street) as enemies who have to be punished.

•Frank Asks Regulator to Cancel Bonuses at Fannie, Freddie, Recoup Payments

• Fannie Mae CEO defends retention bonuses- AP

Oil & gold, leading other commodities, slipped back as the commodity boom yesterday faded out today.


Autos are out of sight but not out of the woods. Bruce Rattner, Treasury's chief auto advisor, said GM & Chrysler may need far more than the $22B already ask for. I wonder if those gov guys can find a few bonus people to hammer on while ignoring the bigger problems! The auto companies will give an update by month's end, 12 days away.

•GM, Chrysler May Need `Considerably' More Than $21.6 Billion, Rattner Says


Increased gov regulation is is not liked by investors & is placing stocks back on defense. Even more dangerous is the attitude which has taken over DC that Wall Street is the enemy.

Markets liked what they heard from the FED

Dow jumped 200 points after the announcement by the Federal Reserve to buy bonds. But enthusiasm faded, over half the advance was lost in the final hour. Dow ended up 90, advancers over decliners 3-1 & NAZ shot up 29 aided by the buyout of Sun Microsystems (JAVA) at a rich premium. Sun rose almost 4 (79%) on the buyout news. As a reminder of what a very strong chart looks like, below is Sun Microsystems for the last 2 days:


Sun Microsystems --- 2 days





S&P 500 FINANCIALS INDEX continues its recovery from overly depressed levels a couple of weeks ago, reaching a 5 week high. Banks had another day of substantial gains. For example Citi (C) surged, taking it over 3. Speaking of strong charts, their 2 week chart shows that playing with fire can be rewarding. 5 is a near (& maybe far) term goal assuming it doesn't hit a major bump in the road.

Value 126.01

Change 11.56

% Change 10.1%

Citigroup --- 2 weeks




The Federal Reserve will buy $300B in Treasury bonds & acquire $750B in mortgage and agency debt to bolster the housing market and hasten the end of the recession. The 10 year Treasury bond surged on the news, reducing the yield from 3% yesterday to 2.53% today. This is the biggest drop in yield on the Treasury bond in 47 years. We're back to throwing money at problems which is what gave us AIG & the mess Congress is FIRST learning about today. They were the ones who had to rush out the stimulus package without reading what was in it.

•Fed to Buy $300 Billion of Treasuries, Keeps Interest-Rate Range Unchanged
•Treasuries Surge as Fed Expands Asset Purchases to Include Government Debt
Fed to buy $1 trillion in securities to soothe recession- AP


Junk bonds may have been helped by the rush to buy Treasuries. Barclays Capital High Yield Bond ETF (JNK) was up 28¢, a good gain for the junk bond index, as junk bond funds were strong. The Alerian MLP Index was up 2 & Dow Jones REIT Index gained 5 but remains in the trenches. The VIX was essentially even.


In a 3rd strong chart, Dow has recouped almost 1K from the recent lows. A nice run but bulls may be getting tired. Even a recovery from very depressed markets needs a rest, like seen in today's final hour.


Dow Jones Industrials -- 2 weeks

Markets extend recent gains

Dow had a good day as 9 stocks were up at least $1. That's not a bad performance, since 8 are selling under 15 which pretty much rules out such a gain in one day. Dow was up 178, advancers over decliners 3-1 & NAZ gained a stronger 58 (4%).

S&P 500 FINANCIALS INDEX has had a nice bounce off its extremely depressed lows (when Citi was at 1). The current value is back to mid Feb levels, but down sharply from the starting point this year (168).

Value 114.45

Change 7.06

% Change 6.6%

After a strong start this year, MLPs sold off in Feb but have staged a nice recovery in the last couple of weeks. This week, it's trying to make up its mind which way to go. Today it went up 2 to 190 (the low end of a trading range earlier in the year). I worry about unpleasant guidance & more possible distribution cuts next month. Kinder Morgan (KMP), after raising the distribution in Q1 said they expect that rate to hold for the rest of the year. This is the largest MLP, one that is very proud of its many increases. Conserving cash may grow in importance at MLPs.


Alerian MLP Index --- YTD





REITs continue to have a very rough year. In the last month, the Dow Jones REIT index has remained near 100, down sharply from the 270 area just 6 months ago. Correspondingly yields are at astronomical levels. But today it was up 7.78 to 103.70. Junk bond funds were higher & VIX dropped 3 to the 40s, near the lows for this year.

Oil had a good day, up 1.49 to 48.84. It wants to get to 50 but may have more resistance in the 50s.


Ben Bernanke of the Federal Reserve expects that they will buy much more debt, primarily mortgages, to give the banks more liquidity, in response to the deteriorating economy. Purchases may also include other forms of debt, including treasury & corporate bonds. The FED is scheduled to release a statement tomorrow afternoon.

•Bernanke May Need `Massive' Asset Purchases to Counter Deeper Contraction


Dow has had a nice run after being greatly oversold. On TV, everybody is asking if this is the real thing? Have we put in a bottom? Today Dow closed on its high representing a 3 week high. The bulls are in charge, at least for the time being.


Dow Jones Industrials --- 2 weeks

Bear Stearns - one year later

This is the one year anniversary of the Bear Stearns disaster. Investors found out that a stock which had traded at 150 was being bought out for only 2. In the summer, Barney Frank reassured investors that Fannie Mae was sound even though the stock was 10 (shown over his shoulder). By the start of Sep, there were 2 political conventions & not a peep from anybody about a looming financial disaster. Mid Sep arrived & Lehman went. Now the pols caught on, there was a huge disaster out there. Enormous players such as Fannie Mae, Freddie Mac, AIG, etc. have been marginalized since then.

On Mar 16 (really Mar 14 close), Dow was 11,951 & the Alerian MLP Index was 275. The Alerian MLP Index lost a third while Dow is down almost 40%. Today, Dow is up 114 while NAZ is only even. Advancers lead decliners 3-1. Market strength comes from hopes that this week the Treasury will announce useful plans to fix the broken banking system. S&P 500 FINANCIALS INDEX is up 5, following last week's big rally. The only 1+ gainer in the Dow is Procter & Gamble (PG), however the very low priced financials have large percentage gains. Citi (C) shot up past 2.

The Alerian MLP Index is up 3. Junk bond funds are stronger but the Dow Jones REIT Inex pulled back 2 after last week's very large rally. Oil dropped $2 in Asian trading last night but recovered so that's it's only down 1. Oil bulls were unhappy that this weekend OPEC did not set another production cut, although enforcing existed quotas could reduce shipments by almost 1M barrels a day.


Industrial output in the US fell in Feb for the 4th consecutive month. Production fell to 67.4, the lowest level since record keeping began in 1948. Auto companies increased production in Feb, but that was off deeply depressed levels in the prior month. By way of comparison, the low in the recession of the early 80s was 70.9.

•U.S. Industrial Output Slides as Export, Auto Slumps Hit Broader Economy


AIG is learning what it's like to have the gov as its biggest stockholder. It's under fire for throwing bailout money around. Much of it went to foreign banks. $Ms was paid in bonuses to the guys who brought about this mess, that's not playing well. Can you spell "embarrassing?" Wed they will testify to Congress, a job I wouldn't want to have.

• AIG says emergency aid used to pay other banks- AP

Ben Bernanke predicted the recession could end this year & recovery would begin next year. This is part of the administration's effort to bring out optimistic thoughts & stories.

• Bernanke says recession could end in 2009- AP

Markets around the world were upbeat, with good gains. The Group of 20 meeting in UK over the weekend vowed to clean up toxic assets. But details are unclear not to mention efforts will vary from one country to the next. A lack of ultra dreary stories is bringing out buyers after last week's strong market.

Snap back

It's been soooo long. Bulls returned to bid up stocks last week with banks leading the way. The S&P 500 FINANCIALS INDEX soared 28 points points, shown below. But the index remains short of the Nov low which was hoped to be a floor. Citigroup (C) went up 78¢ from $1 the week prior. Impressive, but the stock still has a lot of work in front of it just to become a $2 stock.

Nov 20__125

Mar 6____81
Mar 13__109


Dow had a great week, breaking thru the 7K ceiling (which had been a floor a couple of weeks prior). The upper line shows how well the Alerian MLP Index has been preforming this year, the Nov lows in the 155 area have held so far.


Dow vs Alerian MLP Index --- YTD




Other high yield sectors also benefited from these gains. The Dow Jones REIT Index, after plunging more than the Dow this year, rebounded 20% last week (off a greatly oversold level). Junk bond funds rebounded but to a lesser degree than the others.

Over the weekend, OPEC decided to keep production levels on hold. Their focus will be on enforcing cutbacks already approved. They are afraid more cutbacks might damage the fragile world economy.

•OPEC Will Keep Oil Production Quotas Unchanged, Adhere to Current Targets


The White House is trying to put a positive spin on global meltdown. During the campaign, Obama said McCain was out of touch by suggesting the fundamentals of the US the economy were strong. Now that's the same message the White House is putting out. They view the "mess" as temporary. Uh, huh!

White House says economy is sound despite 'mess'- AP


Further gains in the markets will come if they feel gov is working to repair the economy & financial meltdown. Not sure how that will play out.

We saw an excellent movie last night & want to give it a plug. Carmen & Geoffrey is about 2 famous dancers who have been married for 53 years, quite an achievement. In all fairness my friend is more into dancing, so she enjoyed it more than me. Carmen DeLavallade & Geoffrey Holder have an interesting story, with the focus on their dance & his art. When credits were shown at the end, the tall buy sitting behind us got up & went down front. He was Geoffrey, adding stories including how he met Carmen. Check local movie art houses if you want to see an enjoyable movie.

Best week for stocks in 4 months

An afternoon rally gave stocks their 4th straight day of gains. Dow was up 53, advancers over decliners 2-1 & NAZ rose 5. The S&P 500 had its best week since the week ending Nov 28.

Banks have come a long way off their bottom last Fri. After being down much of the day, the S&P 500 FINANCIALS INDEX climbed back to end with a gain, bringing the total to 28 for the week (off it's low). Another way to look at it is they are 400 below the highs reached 2 years ago & who knows when they will see 500+ again?

Value 109.41

Change +0.34

% Change +0.3%

Wish I had taken may advice a week ago about Citi when I said if you don't mind playing with fire, this call @ 1 can be a good gamble. I don't like playing with fire, so I didn't. But those who did have had a very nice week. Citi, a Dow stock which is really a call with an extended life, is shown below, the week before & last week. Of course, Las Vegas Sands,(LVS), another kind of financial which has been fighting off bankruptcy rumors for months, also had a very nice week. Maybe there is a connection between the 2. One is obvious, a share of LVS is worth far more than a share of Citi.

Citigroup ---- 2 weeks





Las Vegas Sands --- 2 weeks




The Alerian MLP Index fell pennies giving it a very good week, up 20 points as shown in the Yahoo badge on the right sidebar. There were also big gains for REITs & junk bond funds, again coming off deeply depressed prices. Meanwhile the VIX, dropped 10 points on reduced market worries. Today oil dropped $1 ahead of the OPEC meeting, as traders didn't want to place bets prior to the announcement.


Finance ministers are meeting in UK to discuss repairing the global banking system. Unfortunately, it began with the China minister warning the US about not trying to spend it's way out the recession (mentioned in my prior post) even though China is doing that with a huge spending package already announced. The difference is they are the largest creditor of the US while the amount of China debt that the US holds is minimal (if any).

• G-20 finance officials meet amid policy divisions- AP

Larry Summers, White House National Economic Council Director, explains what he calls "the boldest economic program to promote recovery and expansion in two generations." Very little mention is made of pork & pet projects designed to make pols feel good. There will be more regulation of derivatives. He said the crisis took years to make the problems, so they will not be solved quickly.

•White House Seeks to Reassure China U.S. Budget Deficits Are Under Control


Dow is solidly above 7k. Next week will tell us if the rally has legs.

Dow on a 2 day winning streak, barely

Stock markets had a late day rally taking it solidly into the black but sold off in the last ½ hour cutting the gain to only 4. Advancers ahead of decliners 3-2 & NAZ rose 13.

S&P 500 FINANCIALS INDEX rose to 100 but slipped back at the close, helped by Jamie Dimon's comments (see below):

Value 99.14

Change 2.32

% Change 2.4%

The Alerian MLP Index had a nice bounce off its low, up 3 today bringing it to beak even for 2009. The Dow Jones REIT Index fell 2 in the closing mins. Junk bond funds rallied while the VIX dropped 1 today bringing the 3 day decline to 9 points.


Alerian MLP Index --- 2 weeks





Oil sold off again on the forecast of much weaker demand for oil. Gold closed up 8 at 903.

CLJ09.NYM

..Crude Oil Apr 09

..42.97

.. 2.74 ......(6.0%)

Jamie Dimon chief executive officer of JPMorgan (JPM), a Dow stock, in a speech said he sees modest signs of an economic recovery & endorsed a plan to create a U.S. systemic risk regulator (proposed by Barney Frank, chairman of the House of Representatives Financial Services Committee). He also opposes nationalization of U.S. banks. If a bank is in poor shape, the FDIC has the responsibility to deal with it. His comments may have brought buyers back into the markets late in the day.


•Dimon Says Banking System Can Be Saved If Corporate `Vilification' Stops


As mentioned a few days ago in this blog, for those who don't mind playing with fire, there can be rewards buying Citi at 1. It's had a great couple of days, shown below. However, when playing with fire there's always the risk of getting burned badly. It's hard to remember that as recently as last year, this was considered the largest banking system in the world. Today it's a just dollar stock (up 9¢ to 1.54 today) but in the Dow.

Citigroup ---- 1 week





Hardly a convincing rally. After big gains yesterday, markets were shaky today. Dow was intimidated by the 7K ceiling.

Dow trying for 2 up days in a row

Dow gained 40, advancers over decliners 3-1 & NAZ rose 21. The follow thru after yesterday's monster rally is good for the bulls or shows the bears that it's run out of gas.

Banks are up, putting the S&P 500 FINANCIALS INDEX over 100. The last time it closed above 100 was Feb 27. Citigroup is gaining more fans, up 20¢ to 1.65 (doing what it can to help the Dow).

Value 100.41

Change 3.59

% Change 3.7%

The Alerian MLP Index was up 2½ to the 175s, still barely under water for 2009. The Dow Jones REIT Index pulled it back 1, taking it back down to 99, but junk bond funds were up. The VIX slipped another 2 to the 42s.


Yesterday the Energy Information Administration (EIA) lowered its forecast for global oil demand in 2009 by 200K barrels a day. Its projection for global oil consumption in 2009 is now 3M barrels a day below its forecast made in Sep, casting a long shadow on the oil market. Gold was up $4, but still below 900 an ounce.

CLJ09.NYM

..Crude Oil Apr 09

...44.38

... 1.33 .......(2.9%)

The Treasury is wants to proposing more financing to help banks sell bad loans. Ben Bernanke, chairman of the Federal Reserve, wants to see more regulation of money market funds. New ideas, we have to see how they play out. The problem is they're still making it up as they go along.

•Geithner May Use Capital Injections to Help U.S. Banks Sell `Bad' Assets
•Bernanke Proposes Money Fund Regulations Less Restrictive Than Volcker's


Congress passed the $810B spending bill which the pres is expected to sign. This contains plenty of pork, including the annual increase that those guys in congress think they deserve it (at a time when unemployment is reaching news highs & others are forced to absorb pay cuts).

•Congress Sends $410 Billion Bill to Obama That Boosts Domestic Spending


Bernie Madoff will plead guilty to federal charges today. It's not clear whether his prison will begin immediately or put on hold for another few months, but he could be sent away for a very long time!

• Madoff may be facing final hours of freedom- AP

I'm in the camp that the sputtering market is a negative sign. 7K is a new ceiling for the Dow & it looks like a barrier blocking further advance.

Citigroup spoke & traders listened

Stocks surged having their best day of the year. Dow rose 379 closing at the highs of the day, advancers over decliners 8-1 & NAZ was up 89. The overdo, vastly oversold rally was welcome to investors who are long. As impressive as it was, it only recaptured a portion of the damage done in just the last month. Now it's moving up to the first meaningful barrier, 7K.


Dow Jones Industrials --- 1 month




S&P 500 FINANCIALS INDEX had a great day benefiting from optimistic comments out of Citigroup (C). By way of perspective, the index returned to the March 2 level (down sharply from 168 at the start of the year).

Value 96.82

Change 13.05

% Change 15.6%

Other big gainers in the high yield sector were:

Alerian MLP Index_____up 6.61....4%
Dow Jones REIT Index_ up 12.89..15%
junk bond funds______up 5+%

Vastly oversold conditions can bring these kind of dramatic rebounds. At the same time, the VIX, dropped 5 or 11%.


Oil gave up early gains on a disappointing (for oil bulls) inventory report. It fell 1.30 off a 2 month contract high. An estimate by EIA for global oil demand in 2009 was reduced by 200K barrels a day from the forecast last month bringing global oil consumption 3M barrels a day below the September forecast. Gold had another bad day taking it below 900.

CLJ09.NYM

..Crude Oil ..Apr 09

..45.77

.. 1.30 ......(2.8%)

ZGH09.CBT

..Gold 100 oz. ..Mar 09

..894.70

.. 21.40 .....(2.3%)

• Oil gives up early gains on lower demand forecast- AP

Markets were given further encouragement by DC insiders. However, they have not been able to translate words into meaningful action lately.

•Geithner Says Obama Will Do `What Is Necessary' to Repair Damaged Economy

• Bernanke: "Good chance" recession could end this year- AP

Every stock I followed was in the green, quite a feeling. Citi soared to 1.45. Traders who bought Citi in the last week are happy but all other stockholders remain very unhappy. Markets will trade on reality tomorrow.

Dow sinks to another new low

What is given with one hand is taken with the other. Yesterday's gains, which was already cut in half during the last hour of trading, has been lost. Dow is down 205 to yet another new low, decliners over advancers 7-1 & NAZ dropped 37.

Banks can't find friends as S&P 500 FINANCIALS INDEX sinks to another low, the ultimate support is zero. Citigroup (C), still in the Dow, may fall below $1. At that point it would face delisting, rather embarrassing for a Dow stock. Berkshire Hathaway (BRK.A) is down 5% today. They are the premier financial company but their chart doesn't look pretty.

Value 87.16

Change -7.44

% Change -8.1%

Berkshire Hathaway --- 1 decade




The Alerian MLP Index & Dow Jones REIT Index are each down 5. The former is back under water YTD. Junk bonds are weak & VIX is flat. Oil is down 87¢ in this bleak market environment.


The number of new claims for unemployment benefits dropped to 639K from 670K in the prior week (a 26 year record high number). The 4 week average, which is less volatile, is 642K, another dreary number. By way of comparison, 400K had been considered worrisome as it signaled recessionary conditions.

• Fewer people file for unemployment benefits- AP

China, the 4th largest economy in the world & fastest growing, forecasted 8% growth for 2009. For China this is a modest number. Some analysts are forecasting a slower growth rate. There was no mention of additional stimulus to the $586B package already announced. Shanghai market was up 1% (& up sharply from it's depressed lows late last year) while Hong Kong fell 1% yesterday

• China says 8 percent growth possible in 2009- AP

Wal-Mart (WMT), Dow stock & Dividend Aristocrat, had good customer traffic in Feb. Same store sales were up 5.1%, ahead of their guidance (1-3% increase during this qtr). Customers are less concerned with the price of gas since it has come down, instead more worried about losing jobs. Sales were strong for groceries & electronics, reflecting more people are staying at home. WMT increased their div 15% to a 1.09 annual rate. Dividend Aristocrats which are financially strong will continue raising their divs.

•Wal-Mart Customers Increase Shopping Trips; Annual Dividend Is Raised 15%


Goldman Sachs has lowered their outlook for 2009. They predict the world economy will shrink by 0.6% vs 0.2% previously predicted as they see economic conditions getting progressively worse. This is considered the worst recession since WWII. The European Central Bank & Bank of England cut rates today, trying to fight the financial meltdown. The record low interest rate at the Bank of England is especially significant, since the bank was founded in 1694.

•Goldman Predicts Deeper Global Recession, Forecasts Economy to Shrink 0.6%

• European, British central banks cut half a point- AP

Markets may continue selling off in the PM, dreading the big job report coming tomorrow.

Strong gains cut in half during last hour

Markets finally had a very good day, the kind anticipated when they are so greatly oversold. However, selling in the last hour cut gains almost in half. Dow rose 149, advancers over decliners 4-1 & NAZ shot up 32.

S&P 500 FINANCIALS INDEX struggled & struggled, trying to eek out a gain but failed. Sentiment is negative, financials could not gain traction. Bank of America, Citigroup & General Electric (which closed above its 18 year low set early in the day) fell while US Bancorp (USB) dropped 1.59 on the div cut.

Value 92.06

Change -0.70

% Change -0.8%

The Alerian MLP Index rose 6 in all the enthusiasm, Dow Jones REIT Index gained 2 & junk bonds were up, good but not impressive gains. VIX was down 3½ to 47s on the renewed market enthusiasm.

Oil had a nice day from a favorable weekly inventory report. Inventories rose 0.7M barrels vs an expected increase of 2.2M (on a base of 350M).

CLJ09.NYM

..Crude Oil Apr 09

..45.16

.. 3.51 ......(8.4%)

A major uh oh, the debt of Berkshire Hathaway (BRK.A) is priced as junk bond debt, ignoring the AAA rating assigned by Moody's. Investors buy credit-default swaps to protect against default on Berkshire debt. The premium climbed 29 basis points today to 529 basis points. That's the kind of premium associated with junk bonds. There is even talk that the credit crisis could drain the $25B in cash Berkshire has. BRK.A has had a very bad year & is up only marginally (that means 25) in today's up market. We all hate to find out what happens if their stock price sinks much further.

•Berkshire Credit Swaps Climb to Record on Buffett's Bets, Implying `Junk'


Berkshire Hathaway --- YTD





The Federal Reserve sees more pain ahead for the economy. Economic activity deteriorated further in early 2009. They do not see any near term improvement with a turn around coming in late 2009. The unemployment report on Fri will likely add fuel to their dreary assessment.

• Fed: Little hope for quick improvement in economy- AP

Dow had a big rally off severely depressed & a heavily oversold level. 5 stocks in the Dow are selling for less than $7 each (Alcoa, Bank of America, Citigroup, General Electric & General Motors). $20 is enough to buy one share of each. Not too long ago, a stock price of $20 signified that it was a speculative stock. Today's gain in the context of where the Dow has come from in the last 2 weeks was not very impressive, 7K easily held as the ceiling:


Dow Jones Industrials --- 2 weeks

Time for the overdo relief rally

Out of the gate, Dow rose 100 following the lead of higher markets around the world. But it's fighting to hold onto the gains. Dow is up 144, advancers over declines almost 3-1 & NAZ is up 33.


Banks continue weak on the div cut by US Bancorp (USB) as S&P 500 FINANCIALS INDEX hits another new low:

Value 92.30

Change- 0.46

% Change -0.5%

Probably not helping financials is General Electric (GE), the only Dow stock remaining from the original 30, dropping to an 18 year low at $6. It may not be included in the S&P 500 FINANCIALS INDEX, but fears keep growing about it's ability to ride out this credit crisis.

•GE Drops Below $6 for First Time Since 1991 Amid Concern Over Finance Unit

General Electric --- YTD





High yield stocks are bouncing back from the drubbing they've taken recently. The Alerian MLP Index is up 5 taking back to 176 (its starting point for 2009). The Dow Jones REIT Index is up 1 (swell) & junk bond funds are mixed back at their very depressed levels. VIX is down 2½ to 48½.


Oil is participating in the rally ahead of the weekly inventory report which will be released shortly but gold is only flat.

CLJ09.NYM

...Crude Oil Apr 09

...44.30

... 2.65 .......(6.4%)

Over 8M householders are under water. That means the mortgage is larger than the lowered value of the home. Another 2+M are very near the water line. The danger is these people have incentive to walk away from their homes. The administration has a plan to help homeowners, who can document hardship, avoid foreclosure. This is a very touchy area because the gov is helping those who have gotten in over their heads while others who struggle to pay their mortgages are being ignored (not to mention part of their taxes is helping the ones who are in over their heads). The idea is that this is "for the good of the country." Uh huh!

•More Than 8 Million U.S. Mortgage Holders Are Under Water as Prices Tumble
•U.S. Mortgage-Modification Rules to Require Proof of `Financial Hardship'


US Bancorp, the last bank Dividend Aristocrat, made it official by cutting their div to a nickel per quarter. It's difficult to think of any major bank which hasn't had a div cut recently.

• US Bancorp cuts dividend 88 percent- AP

Dividend news has been ugly for some time & will continue that way, but some companies can weather this financial storm in good shape. A few of such remaining Dividend Aristocrats (off the top of my head) are:

3M (MMM)
Coca Cola (KO)
Exxon Mobil (XOM)
Johnson & Johnson (JNJ)
McDonald's (MCD)
Procter & Gamble (PG)
Walgreen (WAG)
Wal-Mart (WMT)


Markets are awaiting the jobs report on Fri. It's expected to be awful or even worse.

Stocks plunge on bailout fatigue

Now that the 7000 floor on the Dow has been shattered in less than 2 weeks, it's hard to think anything but down, down, down. On a series of negative news stories, stocks sank in the first half of the session & remained on the floor in the PM. Dow dropped 299 to 6763 (52% below the peak in Nov 07), decliners over advancers 11-1 & NAZ fell to 55.


S&P 500 FINANCIALS INDEX hit another new low, 31 below the low in late Nov which was thought of as THE low.

Value 94.24

Change -6.91

% Change -6.8%

The Alerian MLP Index had one it's worst days in history (any decline in double digits), down 12½ to the 177s where it started 2009 . The Dow Jones REIT Index hit another multi year low, down 7 to 91. Junk bond funds sank & VIX roared ahead 7 to 53.

Oil had a terrible day on negative sentiment in financial markets.

CLJ09.NYM

..Crude Oil Apr 09

..40.08 3

.. 4.68 ......(10.5%)

Two once powerful generals in the Dow have similar stories, dismal. OK General Electric is stronger financially but the way things are going, who knows how long that will last!

•GE Declines Below $8 a Share for First Time Since 1994; Immelt Buys Shares
•GM, Chrysler May Report Sales So Low That Recovery Is 'Difficult to See'


Last night while watching guests talking about financial markets coming apart in Asia, somebody brought up a new concept called bailout fatigue. That describes where the markets are today. 6 months ago, around Sep 15 when the major bailouts began, there was talk about the economy hitting a brick wall & demand stopped. The reference was to retail sales hitting a brick wall. That reasoning can also be used to describe financial markets hitting a brick wall.

In 2008 AIG & Citigroup were 2 enormous financial powerhouses, that's why they were in the Dow. Today all that's needed to buy one share of each of the 2 stocks is $1.50! In the last 6 months, they've been thru a number of bailouts with seemingly no end in sight. The list of similar problems at other large banks around the world seems endless. Nobody is quite sure of how many $B were spent or much money will be needed going forward. That describes bailout fatigue which markets are going thru.

General Motors, another Dow stock & higher priced than than Citi today, has to solve whopper size problems to stay alive. It's huge problems are small change compared what the financial market giants need. Where do we go from here? I don't know, nobody knows because the problems are that big! More dreary days lie ahead.


Dow Jones Industrials - 6 months

Buyers went home early

After an encouraging start, stocks kept sliding during the day. Dow started with a gain of 100+ in the AM, but finished with a loss of 88, decliners over advancers by only 25% & NAZ declined 34 (awaiting & dreading Dell, DELL, earnings, now an $8 stock).

S&P 500 FINANCIALS INDEX slipped from its high, ending up 2 (but off 5 from the high). VIX after being down much of the day, ended even in the 44s. The Alerian MLP Index finished with a 1½ point gain (down 5 from the high of the day) while REITs & junk bond funds were lower. The Dow Jones REIT Index dropped 5+ taking it just under the important 100 level.


Dow Jones REIT Index --- YTD




Barclays Capital High Yield Bond ETF is representative of the junk bond fund market. Junk bonds had a nice run off overly depressed levels. Yields of 20-30% attracted buyers late last year & into Jan. But enthusiasm waned this month. This ETF pulled back 10% in the last 2 weeks & is off 20% from its highs last month. Individual junk bond funds fared worse, driving yields back into the 20+% area.


Barclays Cap High Yield Bond ETF -- 2 weeks






Oil was strong after yesterday's weekly inventory report, but remains near multi years lows. Gold couldn't handle 1000 a few days ago, it's now down 6% from those highs.

CLJ09.NYM

..Crude Oil Apr 09

..45.22

.. 2.72 ......(6.40%)

ZGH09.CBT

Gold 100 oz. ..Mar 09

..943.00

.. 22.50 ......(2.3%)

There are new worries that the "stress test" applied to banks could have unintended consequences. More gov meddling might encourage banks to pull in their horns (make even fewer loans). In the "making it as we go along" atmosphere, it's risky to guess how changes will play out. Many of the biggest banks subject to the stress test have familiar names. But new names will be included such as Goldman Sachs (GS), Morgan Stanley (MS) & American Express (AXP).

• Bank 'Stress-Tests' Could Discourage Many to Lend- CNBC

Problem banks are another worry to deal with. So far, according to FDIC, 14 banks have failed & the number on the problem list with the potential to fail is 252, up from 171 in the prior qtr. These tend to be smaller banks with weaker finances. A string of failures would be one more kick in the head markets don't need.

• Problem bank list keeps growing- CNNMoney.com

The Pres wants to impose higher taxes on the very rich as a way to help finance whopper sized gov spending. Such moves are popular with the masses, but doesn't play well with business leaders (especially those who are part of the very rich). Today's proposals represent a shot across the bow, but is not welcome by many investors.

•Obama Seeks $1 Trillion Tax Increase on Highest-Paid Americans, Companies


The chart below shows The Dow is operating on a lower tier. 8K seems a long way away!


Dow Jones Industrials --- YTD





Dell (DELL) reported lower sales & earnings after hours. The stock was down pennies based on the gut reaction. It will help set a negative tone for Asian markets opening in a few hours.

Dell 4Q profit dives, recession stunts tech spendAP(Thu 4:25pm)

One dreary week after another

Stocks can't buy friends these days.  Last week Dow dropped almost 500 points bringing the YTD total to 1400.  This last week was especially significant for 2 reasons.  First it's after whopper sized gov spending bills were announced & approved.  The sad performance of the Dow shows they got a thumbs down rating by the markets.  Secondly, 8K now has switched from being a floor to a ceiling & looking a bit distant presently.  A new floor for the Dow has yet to be determined while it's selling at 12 year lows.

Even the very strong MLPs got dragged down last week, shown in the first graph.  The upper line shows how well MLPs have done this year, but that came to an end last week.  Perhaps they're being viewed as just another high yield security (double digit yields are common) which deserve more selling. The second graph shows how the Dow compares with REITs.  They've been on defense all year, dropping more than the Dow.  REITs have already been suffering from fears about future div cuts.  Junk bond funds had been coming off a modest rally after being greatly oversold last year, but they have been caught up in heavy selling in the last few weeks.

Dow vs Alerian MLP Index - YTD

Dow Jones vs Dow REIT Index - YTD

Divs remain a key consideration when selecting investments, however, more than ever, investors have to be aware of the constant danger of div cuts.  3 Dividend Aristocrats have already cut their divs this year.  General Electric (GE), the only Dow stock from the original group 100+ years ago, has a mere 9 handle with a 13+% yield.  They look to be next with a div cut despite reassurances by their CEO.  However strong companies persevere.  Coca Cola (KO), another Dividend Aristocrat, increased their div last week, bringing their streak of consecutive higher annual divs to 47.  

THE COCA-COLA COMPANY INCREASES ANNUAL DIVIDEND BY 8 PERCENT; 47TH CONSECUTIVE ANNUAL INCREASE

Maybe somebody from Blogger will read this.  It's been giving me (& others in the Blogger community) a tough time of posting.  This problem seems to be linked to switching to the "new" Blogger last week.  Even though Blogger is making life tough, I'm struggling & managing to create posts.  I will fight hard to keep posting even though Blogger provides no help!

Ugly talk about nationalizing banks on Fri added even more concern to already overly nervous markets.  Given that kind of loose talk thrown around in DC, next week may be another ugly week for the markets.