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

In first real day of new year, stocks lower

Stocks recovered from their early loses (Dow had been down 100+), Dow was down 48, but advancers over decliner 3-2 and NAZ slipped 8.

The big news is the Alerian MLP Index roared ahead another 6½ to 195 (26 point gain in less than 3 days). The major support relates to Lehman High Yield Bond ETF rising over 1% & the VIX dropped almost one. High yields are attracting investors as fears ease. However while the VIX is settling back from astronomical levels a few months ago, it still remains VERY high. The chart shows how dramatically the VIX has pulled back in the last few weeks. The 38s are high territory but 20 used to be the dividing line for high anxiety.


VIX ----- 6 months





Also of help for the MLPs is the rise in oil on fears about the Mid East conflict and Russia-Georgia (rest of Europe) supply (possible) problems:

CLG09.NYM

...Crude Oil Feb 09

....47.04

... 0.70 .......(1.5%)

Later today auto sales figures for Dec should be announced. The monthly unemployment numbers will come on Fri & they are expected to be dreadful, maybe 6.9%. The senate is trying to get squared away so they can deal with the stimulus package. This is considered the first day of the first week of the new year (for those who believe that the first 5 days performance predicts the full year performance).

I just had a root canal, so far so good.

Markets start new year with a bang

Dow rose 124, advancers ahead of decliners 4-1 & NAZ was up 24, all on light volume.

The Alerian MLP Index began the year with a gain of 6+ taking it above the 180 line. In the old days (say a year ago), that was an eye popping performance. In recent times it is considered routine. The S&P 500 FINANCIALS INDEX & Dow Jones REIT Index are flat while Lehman High Yield Bond ETF is off fractionally. The VIX, volatility index, is down another 2 to 38. A sense of calm is returning to the markets, at least for the time being.

Oil is down on a light day in trading.

CLG09.NYM

...Crude Oil Feb 09

....44.17

... 0.43 .......(1.0%)

The manufacturing index in Dec fell to the lowest level in 28 years. The reading of 32.5 was 3 points below expectations. By way of comparison, 50 signifies contraction! Expectations for Jan can only be dreaded.

•U.S. Manufacturing Shrinks at Fastest Pace Since 1980 as Recession Spreads


Dismal economic news didn't prevent world markets from beginning the new year with gains, but on thin trading.

• World markets kick off 2009 brightly- AP

Little should be decided today. However, the very strong start for MLPs going above 180 is a positive signal for the index. Next week, news stories will resume driving markets.

Markets advance on low volume

In the absence of major news stories, Dow rose 184 (picking up 100 points in the last hour), advancers over decliners 4-1 & NAZ gained 40. All this was on very light volume in holiday trading. The best reasoning they could attriubute to the gains was the new financing for GMAC, one set of worries has diminished.

The averages did well. Lehman High Yield Bond ETF (JNK) rebounded 24¢ after yesterday's decline. From mid Dec, it shot up from 27 to 31 reducing it's yield to only 14%. Other high yield (junk) bond funds have had more dramatic moves from very, very depressed prices. Banks also had a good day, S&P 500 FINANCIALS INDEX popped 6½ to 164. The Alerian MLP Index & Dow Jones REIT Index gained while VIX, volatility index, pulled back to 42.

Oil fell, it couldn't hold 40. Recession worries outweighed Middle East fighting.

CLG09.NYM

..Crude Oil Feb 09

...39.31

... 0.71 .......(1.8%)

The S&P 500 was trying for the worst year in its history. However after today's gain of 21, the YTD loss was trimmed to "only" 39%. This year could come in 2nd place, behind 1931.

12/31/07......1468
12/30/08.......890


S&P 500 ---- 1 year





Today's low volume (under 1M on NYSE) was the biggest story. Tomorrow anything is possible on the last day of 2008.

Mideast worries sink stocks

In thin trading, Dow dropped 82, decliners over advancers 2-1 and NAZ fell 27. Conflict in the Mideast is making the markets jittery. However, oil did not rise as much as would have been the case during its rally last summer. The Alerian MLP Index was flattish, although MLPs I watch were down.

CLG09.NYM

...Crude Oil Feb 09

....38.20

... 0.49 .......(1.3%)

• Oil rises on Gaza conflict- AP

Grim news for retailers. Same store sales (stores open more than a year) may have seen holiday sales decline as much as 2%. Too many stores are open, there may be as many as 12K branch closings this year. That caused the Dow Jones REIT Index to drop 7 to 139 (not far from its sub 100 low). Somewhat related, Lehman High Yield Bond ETF plunged 1.25 on greater fears for junk bonds. The VIX, Volatility Index, jumped 2¼, on greater market anxieties.

•Store Closings, Bankruptcies at U.S. Retailers Forecast Amid Sales Debacle


The S&P 500 will have its worst year since 1931. Further declines such as today could make it the worst year ever. Market pains have been worldwide, foreign markets generally did worse. The Hong Kong market is down about 50% & Shanghai must be down 70% (after the prior year's stellar rise). Speaking of an ugly year, S&P 500 FINANCIALS INDEX had a brutal year:

12/31 07.......392
Today...........156


S&P 500 ---- 1 year

Mild week in the stock market

After extreme volatility in the last few months, markets quieted down in Dec. The chart below shows Dow Jones has been near 8½K especially in the last semi-holiday week. The VIX, volatility index, has settled back to the low 40s, closing the week at 44. The Dow Jones REIT Index, after recovery from the lows under 100, has been near the 145 level all last week.


Dow Jones Industrials --- 2 weeks




High yield (junk) bonds, however, have finally found friends. The chart for the Lehman High Yield Bond ETF (JNK) took off in the last 7 trading days as did other junk bond funds. Now the yield on JNK has been reduced to "only" 14% with many traditional junk bond funds still sporting yields of 20-25%.


Lehman High Yield Bond ETF --- 2 weeks




MLPs have lost ground remaining near the sub 160 lows made in Q4. There were 2 major developments 2 weeks ago. Kinder Morgan (KMP) announced it raised $900M selling units (equity for them) and debt. They're the largest MLP, this move gives a positive signal that expansion projects, necessary for their projects, will keep going forward. But Constellation Energy Partners (CEP) gave a dismal outlook for next year & slashed the distribution to a 52¢ annualized rate. Even now, it still offers a 20+% yield! More (weaker) MLPs are selling in single digits, the market is looking for more cuts. This dark cloud is significant & may overhang MLPs for the next month at least.


Alerian MLP Index --- 2 weeks




Next week is expected to be another mild, semi holiday week. In the absence of major news announcements, there should not be a lot of price movement in markets. At least tax loss selling season has ended.

Sleepy day in the markets

Dow was modestly in the black all day & ended with a gain of 47, advancers over decliners 5-2 and NAZ was up 5. Averages I follow generally had modest gains with VIX pulling back a point to 43. The Alerian MLP Index gained 3 to 170, taking it a little further away from its recent lows below 160. Lehman High Yield Bond ETF continued its winning streak, up 1%.

Oil had a good day, but hard to attach much significance to it in a light trading day:

CLG09.NYM

...Crude Oil Feb 09

...37.98

... 2.63 .......(7.4%)

Despite lower sales for retailers, Amazon (AMZN), the largest retailer on the web, had record holiday sales. On Dec 15, its biggest day, 6.3M orders were placed. I carry their ads in a few widgets on the right, if interested. They feature popular new items every day.

Amazon.com Rises After Its ‘Best-Ever’ Holiday Season


On the good news front, gas at the pump dropped to a 58 month low of 1.64. Even lower prices are likely ahead, over the short run at least.

Retail gasoline prices drift to 58-month low- AP


3M (MMM), Dow stock & an S&P 500 Dividend Aristocrat, has been increasing divs every year for something like 50 years. They have a nice yield of 3½% with a P/E of only 10X. Earnings will probably pull back next year from record levels in 2008 (guidance for 2009 may be given soon), but div increases should continue making it a nice long term holding. The list of S&P 500 Dividend Aristocrats is a good place to look for long term values where there are many to choose from.

Next week, back to more recession stories.

Stocks gain ahead of the holiday

Dow was up 49 in lackluster trading, advancers over decliners 3-2 while NAZ was up a measly 3. S&P 500 FINANCIALS INDEX perked up with a nice gain:

Value 159.04

Change 2.92

% Change 1.9%

The Alerian MLP Index was off 2.17 to 166.70, Dow Jones REIT Index (JNK) was up 1 & Lehman High Yield Bond ETF soared for what must be a record 2.17 (7%) to 31.46. Other high yield (junk) bond funds generally had more mild gains, despite the very good day for JNK. VIX was down .81 to 44.21, near its recent low of 41.


Oil prices, as is the case with most other commodities, are in their own bear market. Oil has retreated over 110 from its high in the summer. Even countries in the Persian region are going to be running deficits with these low prices.

CLG09.NYM

Crude Oil Feb 09

35.68

... 3.30 .......(8.5%)

Everybody expects holiday retail sales to be dismal, early returns will be reported on Fri.

Once again, Happy Holidays for everybody!!

Stocks struggle for a gain

Dow is up 47, advancers ahead of decliners almost 3-2 & NAZ is flat.

The indices I follow are flattish today. But 2 different stories have emerged in the last month. The Alerian MLP Index is down 2 today to 166½. In the last 2 weeks, it has pulled back 10% & it will probably test the lows around 160. The large distribution cut by Constellation Energy (CEP) last week has done damage to the industry. The reduced distribution yields over 20% if anybody is interested. A good half dozen additional MLPs are selling in single digits signaling investors are expecting more cuts. However high yield (junk) bond funds have found friends. Lehman High Yield Bond ET (JNK), as with other high yield funds, has moved up sharply in the last week. Their yields continue very high for those who want to bet on them & short term traders are looking to make quick profits if more buy these funds.


Alerian MLP Index --- 1 month





Lehman High Yield Bond ET --- 1 month




Oil continues its slide on global recession thoughts, now it's solidly below 40.

CLG09.NYM

..Crude Oil Feb 09

...37.50

... 1.48 .......(3.80%)

Economic statistics continue glum. Consumer spending dropped (0.6%) again in Nov, while the savings rate rose from 2.4% to 2.8%. Orders for durable goods fell 1% in Nov, 4th consecutive monthly decline. Excluding a big decline in transportation, orders went up 1.2% in Nov, the strongest gain in 6 months. However, the recession is expected to drag this number down going forward. New jobless claims jumped to 586K, above expectations. This is the highest figure in 26 years, the recesion is biting hard.

• Consumer spending posts fifth monthly drop, income contracts- Reuters
• Durable goods drop 1 percent in November- AP
• New jobless claims jump to 26-year high- AP

The Mafoff story gets worse as more is revealed. Bank Medici just received an award for the amazing performance on its hedge fund. Now they are trying to determine if there is any money left after the Madoff scandal. Law suits have just begun, there will be more.


•Bank Medici Is Engulfed in Madoff Losses After Winning a Hedge-Fund Award
•New York University Sues Merkin, Hedge Funds Over $24 Million Madoff Loss


The rest of the day (and Fri) should feature low volume with few major changes expected. But I keep worrying about the MLPs, they look like they are facing more head winds. In the meantime:

Happy Holidays to All!!!

Markets up mildly

Markets rose despite more negative news on housing & GDP figures (showing the economy shrank in Q3). Dow was up 22 (down from earlier gains), advancers ahead of decliners by about 35% & NAZ was up 8.

Other indices were basically quiet. However, money is flowing into junk bond funds. Lehman High Yield Bond ETF gained 18¢ to 29.39 (up from 27 last week). The VIX pulled back 2 to 42, investors are less nervous.

Oil continues weak staying under 40. However volume is low during this holiday shortened week, these numbers are less meaningful than usual.

CLG09.NYM

..Crude Oil Feb 09

...39.32

... 0.59 .......(1.5%)

Sales of new homes dropped to the lowest level since 1991. Revised GDP figures for Q3 showed the economy shrank at a 0.5% annualized rate, in line with expectations. Next month the preliminary figures for Q4 will be reported. They are expected to show the economy shrank at a greater rate, confirming the US is in a recession.

•New Home Sales in U.S. Decline to 17-Year Low on Credit Crunch, Recession

• GDP shrank 0.5 percent in Q3 as economy chilled- Reuters

In 2008, one of the smartest investments was Treasury bonds. This run can not continue, especially when the Treasury has to finance a record deficit next year. A greater supply of debt can be expected to drive rates up which can interfere with other low rates.

Stocks fall, a little

Dow was under pressure all day, down 200 at the low. But a rally in the last hour narrowed the loss to 59, decliners over advancers 3-1 & NAZ dropped 32. Buying in the last hour helped all averages.

S&P 500 FINANCIALS INDEX rebounded 2 off its low:

Value 159.27

Change -6.66

% Change -4.0%

The Alerian MLP Index dropped 2½ to 172 (down almost 10 points in 3 days). The index hasn't been able to crack the 185 ceiling & now may be heading back down to test the 160s floor which has held a couple of times. These are low beta securities (easy to forget this year), however are down 50% from the peak reached last year. The Dow Jones REIT Index fell 5, again down 8% in the last 3 days. Its recent low (floor that held) is just under 100. However Lehman High Yield Bond ETF rallied 39¢, over 1%, as buyers are returning the high yield (junk) bond funds. Maybe tax loss selling (they are prime candidates) is largely over for them. The VIX, however, after falling in recent days, had been flattish, but finished up .37 to 44½.

The 2 year Treasury notes fell for a 2nd straight day, in stark contrast to recent strength. They sold $38B in notes at a record low annualized interest rate of 0.922%. But the forecasted rate was lower at 0.912%. The bid to coverage ratio was 2.13X versus 2.25X at recent auctions. A lot of paper has been bought but this market was a little softer. More paper from all maturities will be sold next year to finance the enormous increase in gov spending.

•Treasury Two-Year Notes Decline as Sale Draws Higher Yield Than Forecast


Oil sank below the important 40 level on the same fears as stocks markets, global recession.

CLG09.NYM

..Crude Oil Feb 09

...39.94

... 2.42 .......(5.7%)

• Oil prices tumble below $40 on dour economic news- AP

Another indecisive day. The semi-holiday week may continue this sideways pattern (with a downward bias).

Early gains on auto bailout are withering

Dow rose 150 out of the gate on news of the auto bailout package being approved. However since them enthusiasm has faded. Dow is up 17, advancers ahead of decliners 2-1 & NAZ is up 17. S&P 500 FINANCIALS INDEX was even (giving up early gains), the Alerian MLP Index is down pennies, Dow Jones REIT Index was up 2 & Lehman High Yield Bond ETF is up a couple of pennies (while the Treasury bond yield remains at historic lows of 2.1%). The VIX keeps pulling back, today down 4 to 43. By another measure, it dropped about 25 in the last 3 weeks.

General Motors (GM), still a Dow stock, and Chrysler have been given a 90 day lease on life. They will have to make changes with their bond holders, unions, management, etc to try & stay alive. This money will exhaust funds in the first half of the $700B TARP program. Sec Paulson will ask Congress for the 2nd half, only 2 months after the program began. Ford (F) was not included. Despite reassurance by their CEO yesterday, they may not be too far from requesting similar aid.

•GM, Chrysler Will Get $13.4 Billion in U.S. Loans to Survive Through March


Oil is down again, near 5 year lows.

CLF09.NYM

..Crude Oil Jan 09

...35.00

.. 1.22 ......(3.4%)

• Oil drops below $34 to lowest level in almost 5 years- Reuters

The Alerian MLP Index may have a rough month ahead until most quarterly distributions are announced by mid Jan. Yesterday, Kinder Morgan, the largest MLP, successfully raised $900M, quite an accomplishment in these times. Below is a chart for the stock equivalent, KMR, which I track in the Yahoo widget on the right. The stock has held up well during a very difficult period. During severe declines in the last 3 months, it was not damaged as badly as many other MLPs. The stock div yield is 10%, a low rate compared to a 13% yield for the Alerian MLP Index.


Kinder Morgan (KMR) --- 1 year




Constellation Energy Partners (CEP) yesterday pre announced their guidance which included a large distribution cut from $2.25 annually to 52¢ annualized. The chart, which doesn't show $50 prices more than a year ago, tells markets have been pricing in a large cut for some time. 8 other MLPs are also trading under 5, more cuts in the industry are coming. Cuts are new to the industry & may have a larger impact on market psychology than the favorable financing news from Kinder Morgan. I still like the industry, but buyer beware (at least for the short term).

Constellation Energy Partners -- 1 year




As I write, the markets are fading fast. It doesn't look like they will hold gains by the end of day. In all fairness, this is an option expiration day making any call extra difficult.

Dow down again

Dow keeps trying but can't break thru the 9K ceiling. Today the threat that Dow stock GE may lose it's AAA debt rating encouraged market sellers. Dow fell 219, decliners over advancers 3-2 (not so bad for Dow down 219) & NAZ was down 27. The S&P 500 FINANCIALS INDEX fell 5.

Alerian MLP Index was down 3 to 177. After rebounding off the bottom under 160, it has been trying to get back to the intermediate highs around 225. For a couple of weeks it has pretty much been flat lining around 175-180. Tax loss selling (all MLPs are prime candidates) has hurt, but there has also been a lack of enthusiasm on the buyer side. Next month is when new distributions will be announced. A few have single digits handles, already pricing in very gloomy news. Any cuts, especially big ones, may bleed to all, making every distribution going forward more doubtful.


Alerian MLP Index --- 2 months




Today's news includes Kinder Morgan (KMP), the largest MLP, raised $900M selling stocks & debt. That was an encouraging showing for MLPs.

• Kinder Morgan Energy Partners, L.P. Raises Almost $900 Million of Capital


However, Constellation Energy (CEG) had to cut its quarterly distribution from 56¼¢ to 13¢. The stock is down from the 50s last year to 2.81.

Constellation Energy Partners Announces 2009 Business Plan and Forecast


Lehman High Yield Bond ETF (JNK) had a very good day, one of the best in a long time. It rose 1.11, or 4%. Nibblers noticed that it's yield is 1350 basis points above the anemic Treasury bond yield of 2.07%. Other junk bond funds with even higher yields had bigger gains. The very venturesome buy these funds hoping for a rebound. For some funds, just a move up in price to reduce the yield to "only" 20% could bring a very nice gain. Already, JNK below, has had a good pop on high volume:


Lehman High Yield Bond --- 2 months




Not all have fared so well. The Dow Jones REIT Index dropped 12 points to 140 today. They trade on junk bond valuations.


Dow Jones REIT Index --- 2 months




Oil had another very bad day, taking it down to 4 year lows. Global economic recession trumps the largest production oil cut in OPEC's history:

CLF09.NYM

..Crude Oil Jan 09

...36.26

.. 3.80 ......(9.5%)

S&P said General Electric's (GE) coveted AAA debt rating is in danger of being cut. Only a handful of companies (I think about 10 or so) can claim that distinction & it seems like that number gets smaller every year.

•GE, GE Capital Ratings Outlooks Cut to Negative by S&P on Earnings Concern


Doubts about the auto bailout & dismal economic stats will tough for any stock market to absorb. Meanwhile, the administration is trying to arrange an orderly bankruptcy for the auto makers. It will be very difficult to get employees, stockholders, auto dealers & future car buyers to agree.

• Bush considering "orderly" auto bankruptcy- AP

Stock markets drift

Confusion reigns in the stock markets, so they just muddle along. Dow is down 25, advancers 30% ahead of decliners & NAZ is up 1. Indices I follow are little changed although Lehman High Yield Bond ETF is up 40¢ (its version of a rally). Demand might up for junk bonds as the rate on the 10 year Treasury is at a record low 2.08%. The VIX, volatility index, is down another 4½ to 45½ indicating there is a small sense of relief in the minds of investors. However, it was just a few months ago that this level was a record:


VIX ---- 1 month




Oil continues weak on all the gloomy news about the worldwide recession. Breaking thru 40 is an important bearish sign for technicians.

CLF09.NYM

..Crude Oil Jan 09

...38.25

.. 1.81 ......(4.5%)

Jobless claims last week dropped to "only" 554K, a little better than expectations. However, the news is not all good. The prior week's claims figure was revised upward to 575K, a new 26 year record level. The number of people receiving jobless benefits declined to 4.38M, or 1% from the previous week.

Jobless Claims Drop More Than Expected- AP


The Conference Board said the index of leading economic indicators fell 0.4% in Nov. The index dropped 2.8% in the last 6 months, worst performance in 17 years. Negative figures for building permits, stock prices & unemployment claims led the decline last month.

• Leading economic indicators fall in November- AP

Mortgage rates while low, need to be measured against historical relationships which indicate they should be another 50 basis points lower. This is one more indication that the reduction in interest rates is not playing out as well as hoped.

•Mortgage Rates Left in the Dust by Falling Treasury Yields, Failed Lenders


General Motors (GM), still a Dow stock, & Chrysler will idle 59 factories next month in the face of declining sales & a dismal outlook for next year. The White House is working on their version of a bailout package. For the autos, time is being measured in hours. Rumors about a GM - Chrysler merger were denied, at least for the time being.

Greta had the CEO of Ford on last night. He said they do not need a bailout presently. Filing for chapter 11 is a bad alternative for any auto company, that would send their sales to zero. When asked about whether he would work for only $1 a year, he dodged the question. He said they are not in a precarious situation with little additional explanation. If required, they will comply with all federal rules & laws. Translation, there is no need to take his salary down to $1 at present.

GM, Chrysler Shutter Factories, Await Bush Decision (Update4)

• GM says report on Chrysler merger talks is untrue- AP

Federal Express (FDX), up 88¢, reported higher profits in Q2 (just completed) but gave a dismal outlook for next year. The execs are all taking pay cuts (including their Chairman, founder, who will take a 20% cut), employees will be laid off as they prepare for for a weak economy with increased uncertainty. As a result,they did not give guidance for the next quarter. FDX is an important company since they feel the pulse of the economy.

•FedEx profit up, but to cut costs as '09 looks bad


Markets may continue drifting until an announcement is made about the auto bailout package.

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.

Stocks rocket ahead on rate cuts

Dow had a nice 100+ gain prior to rate cut, but then popped another 200 after the announcement when the Federal Reserve said it would cut lending rates to as low as zero to promote growth & price stability. I hope they know how to spell INFLATION! Low interest rates will encourage an even larger stimulus package (government spending) next year.

•Fed Cuts Target Rate to as Low as Zero, Signals Asset Buying as Next Step


The Dow ended with a gain of 359 (bringing it close to 9K, 8924, an important psychological ceiling), advancers ahead of decliners 5-1 & NAZ rose 81. Banks benefit from low interest rates, the S&P 500 FINANCIALS INDEX had a very nice day, up 17 (almost 50 points above its recent depressed low):

Value 172.53

Change 17.44

% Change 11.2%

The Alerian MLP Index went up a modest 3 to 180 (maybe held back by the outcome of expected production cut announcement tomorrow), the Dow Jones REIT Index had an extremely nice gain of 19, the Lehman High Yield Bond ETF (JNK) gained pennies for a 1½% gain (swell!) & the VIX (Volatility Index) dropped 4 to 52½ (remaining in astronomical territory). Oil however was down pennies on uncertainty.


Car makers are running out of time while they wait for help from the administration. The White House is putting together a package to keep the Big 3 alive (for awhile). Expect an announcement by tomorrow:

• Carmakers cut production as U.S. bailout awaited- Reuters

The Madoff scandal keeps growing & getting uglier. They're saying it will take months to reconstruct the books which are in shambles. Account holders have a level of insurance ($½M) with SIPC but that won't cover all the losses for big investors. Plus holders who were cashed out early may face lawsuits trying to recover that money so it can be shared by all. Hedge funds are some of the biggest holders to come forward already. Confusion reigns.

•Madoff Books in `Disarray,' May Take Six Months to Unravel, SIPC Head Says


The rally on the widely expected Federal Reserve rate cut was based on gut reactions. The oil meeting in Algeria plus word from the White House on a bailout package for the Big 3 will each be worth temporary rallies. However dreary economic news continues, reporting terrible auto & housing sales not to mention a very weak holiday season for retailers. Stay tuned for big bumps in the road ahead.

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.

Stocks lower, awaiting news on car makers fate

When the Senate announced last night that they would not be able to pass legislation to help the auto companies, Asian markets & Dow futures sank. Asian markets were weak already, but dropped further to losses of 5-6%. Auto companies were hit hard. Toyota, shortly expected to be pronounced the #1 auto company in the world, was down 10%. The auto companies were lower because the auto suppliers are very much tied in with the auto companies. These suppliers which are also threatened, sell parts to Asian car companies. Dow futures were down 250 & sank to minus 330 later.

But today there is a ray of hope, auto companies may yet get help from the administration. The White House is behind the idea of helping the Big 3 & the Treasury is looking for a way to provide help. In the meantime, we have to let them work out details. After falling 170 on the opening, Dow has recovered to a loss of 94, decliners ahead of advancers 3-2 while NAZ is up 4.

•Treasury Says It's Ready to Assist Automakers Until New Congress Convenes


S&P 500 FINANCIALS INDEX is down only pennies, awaiting developments on the auto bailout. Given the fuzzy situation, the Alerian MLP Index is down 1, The Dow Jones REIT Index is up 3 from very depressed levels, Lehman High Yield Bond ETF is down pennies (it always seems to be down pennies at least) & the VIX is up almost 1 to 56½

Oil pulled back, wiping out most of yesterday's gains. Traders are mainly concerned with OPEC's meeting next week.

CLF09.NYM

..Crude Oil Jan 09

...44.72

.. 3.26 ......(6.8%)

In the other news dept, retail sales continues weak. Sales dropped 1.8% in Nov, slightly better than the ugly forecasts being used. But that provided little comfort, as this was the 5th straight month of declines. A terrible month for autos led the way down. Lower gas prices helped, but depressing news about job losses & threats of more losses are weighing down the public.

•U.S. Retail Sales Drop For Fifth Month on Auto Slump, Decline in Gasoline


The index of consumer confidence rose to 59.1 from 55.3 in Nov, but still very close to a multi year low. Lower gas prices provided only limited help when compared to dreary economic news, especially regarding the possible loss of employment.

•Consumer Confidence in U.S. Rises From 28-Year Low as Gasoline Prices Fall

I think the White House will come up with help to keep the auto companies alive. However any such aid will be only temporary. They still face huge major problems which need to be solved if they are to survive.

Doubts about auto bailout sink stocks

Dow dropped 196 as sellers took command in the PM. Decliners were over advancers 3-1 & NAZ was down 57. Dow tumbled almost 300 in the 2nd half of the day with a modest recovery in the closing minutes, the auto bailout package is center stage. Banks, as shown by the S&P 500 FINANCIALS INDEX, had another very bad day:

Value 158.29

Change -14.66

% Change -8.5%

The Alerian MLP Index which used to be somewhat independent of the major averages, has tended to follow along fairly well this year. The index had been bumping against short term resistance of 185 & pulled back today, down 3 to 179. The Dow Jones REIT Index was hit with a brutal sell-off, dropping 22 to 124. Lehman High Yield Bond ETF was down 23¢ (1.3%), trading at already very depressed levels. The VIX was flattish at 55.60.

Oil had a very big day, although it trailed off going into the close. Worries about paying for the super US economic bailout next year, not to mention the weak dollar, is encouraging the oil bulls. The ¥ has strengthened sharply during the last few months, going up to 91s (from 110 a few months ago) to the dollar. In the last few days the € has had a big pop from the 1.25s to 1.33. A weak dollar this year especially has been tied with lower stock markets.

CLF09.NYM

..Crude Oil Jan 09...

47.25

.. 3.73 ......(8.6%)

Oil Spikes 12% as Dollar Sinks- AP

There are thoughts that the Federal Reserve may not cut the interest rate 50 basis points next week as the banking crisis has stabilized. Many short rates have already sunk to very low levels & it's unclear how much good additional rate cuts will do for this sick economy.

• Why the Fed may surprise the markets next week- CNBC

I thought the auto bailout package would get thru Congress, but now its in grave doubt. The president is pushing hard to get it passed, but Reps in the senate don't look like they want to budge. This sense of confusion is dragging the formerly strong dollar down, which is probably the real culprit in today's decline.