Stocks rise on commodity gains

Stock advanced for no special reasons. OK, commodities had a good day which brought out stock buyers. Dow gained 45, advancers over decliners 5-2 & NAZ was up 9. Banks continued strong, with the Financial Index closing at another 2010 high.

S&P 500 FINANCIALS INDEX

Value___215.96
Change___0.41
% Change_0.2%


The Alerian MLP Index remained higher all day, ending up 3.21 to 300. The REIT index slipped pocket change to 200.62, still near its recent high of 204. Junk bond funds continue at high levels while the Treasury bond slipped back taking the yield up 1 basis point to 3.68%.


Oil had a very big gain, but remains near the 80 trend line while gold is firmly over 1100 (again).

CLK10.NYM..Crude Oil May 10__82.36__2.36 (3.0%)

GCH10.CMX..Gold Mar 10__1,110.30 6.10__(0.6%)



For the 5th straight month, consumer spending rose in Feb. It was up 0.3%, matching estimates & following a 0.4% increase in Jan. However, income was unchanged, falling short of expectations as winter storms hurt hiring & hours worked. This performance was rated as fairly good, although it will probably not lead to a significant increase in hirings.

•U.S. Consumer Spending Climbs a Fifth Straight Month as Recovery Quickens



The Treasury said it's getting ready to start selling almost 8B shares of Citigroup (C), the stock fell 13¢ to 4.18. For me, the most important story, on a day with little news, discussed the enormous rally in junk bonds (during the last year) & the willingness of investors to buy up more high risk bonds at even lower yields. Yields of 8½-10% are now common, levels not seen since the best days for junk bonds a few years ago. While the yield on the Treasury bond eked out a minor gain, it looks like it wants to go back over 4%. Higher yields on Treasuries would drag down corp debt prices, especially for high risk debt. With stocks advancing for no clear reasons (Dow is just under 10.9K, an inch below its 2010 high made last week), they would also be hurt with a rise in Treasury yields.

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Markets feel healthy

Stocks took off in the first hour of trading & remained at those levels for the rest of the day. Dow rose 43 to another 2010 high (closing in on 10,800), advancers ahead of decliners better than 3-2 & NAZ was up 20. Pharma stocks led the rally, but banks also did very well taking the Financial Index towards its interim highs reached last week.


S&P 500 FINANCIALS INDEX

Value 212.41

Change 1.22

% Change 0.6%

After beginning the day down 5, the Alerian MLP Index bounced back nicely to end with a gain of 0.74 in the 299s. The Dow Jones REIT Index was up 2½ to 200, very close to its interim highs recorded last week. Junk bond funds were down a smidgen, still doing quite well (discussed below). Treasuries advanced, the yield on the 10-year Treasury bond fell 2 basis points to 3.66%.


Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Oil & gold were also in a rally mode in the PM. There were enough buyers to take oil back into the black & firmly above 80, although it's been near 80 for several months. Gold pretty much held at the 1100 floor, encouraging for gold bulls.

CLJ10.NYM..

Crude Oil Apr 10

..81.29

0.61 ......(0.8%)

GCH10.CMX

..Gold Mar 10

..1,099.30

.. 8.10 ......(0.7%)

High yield bonds are being sold by corps at the fastest pace since credit markets seized up in 2007. Demand is driven by signs the economic recovery is gaining momentum. Speculative-grade borrowers issued $24.2B of high-yield notes in Mar thru last week, putting Mar on course to be the busiest since Jun 2007, according to Bloomberg.com, when $34B in debt was sold. Bond sales were only $16.2B for all of Feb.


Junk Bonds Selling at Briskest Pace Since 2007: Credit Markets

Photo: Bloomberg



Rising sales, particularly during the holidays, helped quadruple Q4 profits at Tiffany (TIF). Luxury customers are willing to spend more as fears about the economy lessen. Q4 (ending Jan 31) produced more than half of TIF fiscal 2009 profits & the company forecast fiscal 2010 earnings ahead of estimates. TIF earned $1.10 per share in Q4 compared with 25¢ per share in the prior year. However excluding a restructuring charge TIF earned 86¢ per share in the year-ago quarter. Revenues rose 17% to $981M with growth in all regions. Sales in stores open at least one year rose 11%, helped by a 22% rise at its NYC flagship store. For the year, profit rose 20% to $2.11 per share but revenues fell 5% to $2.71B. In 2010, the company expects earnings from continuing operations of $2.45-$2.50 per share. The stock was up 16¢ to $47.41.


Tiffany Profit Trails Estimates as Expenses Rise


Tiffany --- 2 years





Considering health care reform will bring higher costs, markets took this news quite well. Of course, much of the added costs will be phased in over time. Markets may not take those changes so well when the campaign promise about "share the wealth around" starts to sink in. Macro problems persist. The Greek situation drones on & they are using the word default again. Housing is bogged down in the doldrums. But there is a "feeling" that the economy is on the mend which is encouraging buyers. Dow is near 10.8K. This could be a critical level since it represents the high end of a longer term range in 2010. NAZ is at a new 2010 high & shooting for 2400. A greater acceptance of risk is shown by the strong performance of NAZ & the junk bond sector.

Dow Jones Industrials --- YTD




Nasdaq --- YTD

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Junk bond funds update

I just attended a shareholder meeting for a number of closed end funds, including junk bond funds. At the end, there was a chance to talk with their manager of taxable bond funds. His comments about junk bond funds were similar to mine.

He said that ½ a year ago, when their yields were off the charts, was a good time to buy junk bonds to lock onto exceptionally high yields. After the market rally, rates are down to high levels but closer to traditional levels. Junk bond funds can be bought for their high yields, however investors need to be aware they are facing tough times ahead. High levels of defaults may continue or even increase if the economy does not have a swift recovery. 13% yields (950 basis points above the yield on the 10-year Treasury bond) are available. The difference between 13% & 9% (or so which is generally more common) is the risk premium to absorb future defaults. As usual, the trick for successful investing is finding the funds which will have fewer defaulting bonds.

Profit taking day

Stocks pulled back after one their best runs. Dow dropped 124, decliners over advancers better than 3-1 & NAZ fell 36. Banks, had been leading the charge up, sold off. But the S&P 500 FINANCIALS INDEX wasn't hurt badly:

Value 127.76

Change -3.19

% Change -2.4%

MLPs & RETs fell back, nothing major, along with the markets. Oil is falling, probably in sympathy with the stock markets:

CLK09.NYM

...Crude Oil May 09

...50.66

... 1.85 .......(3.5%)

Ford (F) was able to slash $10B in debt by exchanging it for stock & bonds. This will save Ford $½B annually in interest costs. The stock jumped 15%, another way to look at it is the low priced stock is up 45¢. It's good to see one of the big 3 can make things happen when their survival is at stake. The stock chart shows a glimmer of hope for the stock

•Ford Slashes Debt by $9.9 Billion Through Bond, Loan Buybacks; Shares Jump


Ford ---- 1 year




There is a forecast that defaults on high yield (junk) bond debt will exceed 50%, worse than even in the depression. So far, junk bond funds haven't really been touched by defaults, but the future is scary. At least companies & banks have warnings. Many will prepare for an ugly period & hopefully will be able to muddle by. Already, I am encouraged that REITs are talking about preparations, arranging financing to ride out the shock wave when it hits. If this gloomy junk bond forecast proves out, that will be devastating for not only bonds but also the stock market.

•High-Yield Corporate Default Rate to Reach 53% Over Five Years, Reid Says


The biggest news story was that Sun (JAVA) will not be acquired by IBM (IBM). As expected, Sun dropped 2 to 6½. Big buyouts are bullish for the markets. When one of the biggest of the year collapses, all stocks are hurt.

•Sun Microsystems Drops as Talks to Be Bought by IBM Said to Have Collapsed


Stocks markets are coming off one of the best 4 week winning streaks in history. But Dow may have met the immovable object, the 8K ceiling.


Dow Jones Industrials --- 1 month

Bernanke testimony raised spirits

Markets liked what they heard when Chairman Bernanke testified before Congress. He tried to clear the air about nationalizing banks. However, the concept will remain murky especially when the Federal Reserve has to make it up as they go along. Dow rose 236, advancers over decliners 4-1 & NAZ was up 54.


Banks had an excellent relief rally giving the S&P 500 FINANCIALS INDEX one its best days in some time. Of course, it came off extremely depressed levels.

Value 107.57

Change 11.39

% Change 11.8%

High yield securities found buyers today. The Alerian MLP Index gained 5 to 182 as shown in the Yahoo widget on the right. REITs & junk bond funds also had an excellent day while the VIX plunged 8 to 44½.


Oil rebounded while gold was hit with more profit taking. Maybe some of that money from gold sales was used to buy stocks.

CLJ09.NYM

..Crude Oil Apr 09

..39.93

1.49 ....(3.9%)

ZGG09.CBT

..Gold 100 oz. Feb 09

..970.20

24.30 ....(2.4%)

Chairman Bernanke made investors feel better saying that the FED would not nationalize banks & the recession could end by later this year. He also talked about banks lending more & being prepared to cut divs to conserve cash for the balance sheet. His ideas sounded good but the FED's role in bank business & lending activity still has to be better defined.

Stocks Jump After Bernanke Says Recession May End This Year- AP
Fed urges banks to lend bailout funds: source- Reuters


The decline must the worst one since the depression. By way of comparison, at the start of 1973 Dow just touched 1000 on a wave of optimism. That year was awful, highlighted by the oil embargo driving up oil prices & inflation to what were record levels for modern times. The Dow kept dropping for more than a year. The total decline was more than 40%, dreadful. Then it took almost another decade before it tested 1K again.

The current peak was 17 months ago. After today's rally, Dow (7350) is down 48% from the recent peak.

Oct_9,_2007.........14,164


Asian markets will begin trading in a couple of hours with a strong upward bias. But economic reality will keep playing out. The markets will tell us if this relief rally has legs.

MLPs in 2008

The Alerian MLP Index has had an excellent growth record over its 13 years history. 9 year were up & only 4 suffered declines. Last year (-41%), especially in the 2nd half, was the brutal year. Using a crude mathematical relationship, the other 3 down years combined did less damage than the 2008 decline. And those years started from lower levels. The value including reinvested income at over 4X is superb. These securities have been purchased for their high yields. MLPs have an outstanding record which will stand up well when compared to other indices or stocks.

Alerian Index 12/31/95.....100

Alerian Index 12/31/08.....176
Alerian Index 12/31/08.....428 (including reinvested income)
Yield income 12/31/08.......12%


Alerian MLP Index --- 13 years





Other high yield securities have a similar showing, but maybe not as favorable. Junk bonds don't have an index but have performed in a similar fashion. The Dow Jones REIT Index only covers this decade, with a comparable track record subject to wider swings between highs & lows (especially in the last 2 years). Both groups have clearly been known for their high yields.


Dow Jones REIT Index --- 9 years

Choppy, indecisive day for the Dow

Dow fought back from a lower open, but remained underwater for most of the day. Dow dropped 27, advancers over decliners by 25% but NAZ was up 18. In the chart below, Dow is the lower black line while NAZ is the upper blue line.







The averages I follow closely were quiet, but the Alerian MLP Index deserves special mention. Yesterday it pulled back after maxxing out at 200 on the prior day (following one its best gains in history). Today it rebounded, up 3 to 197½, looks like it may be trying for another assault on the 200 ceiling.

Good news for MLPs. Enterprise Products Partners (EPD), shown in my finance badge on the right, raised the quarterly distribution by 3¢ to 53¢, their 18th consecutive quarterly increase. Earlier this week they had a successful offering of more units. With all this good news, their yield approximates 10%!

Enterprise Increases Cash Distribution Rate


Alerian MLP Index --- 2 weeks





S&P 500 FINANCIALS INDEX, high yield (junk) bonds & REITs were mixed, VIX slipped pennies.


Dreary retail sales and unemployment figures sank oil. The chart shows war scare in the Mid East could not overcome fears about the economic global meltdown. Numbers for the OIL ETF do not match quotes for oil prices, but it tracks correctly:

CLG09.NYM

Crude Oil Feb 09

41.70

.. 0.93 ......(2.2%)

• More evidence of waning demand sinks crude prices- AP

OIL (ETF) --- 2 weeks

Long-term mortgage rates dropped this week to a record low of 5.01% (compared to 5.87% a year ago) according to Freddie Mac. This is the 4th consecutive record low rate & the lowest rate since record keeping began 37 years ago.

• Rate on 30-year fixed-rate mortgage hits new low- MarketWatch

Tomorrow the dreaded jobs report. Grrrr!

Markets rally again on low volume

Markets conclude a dismal year on a positive note. Dow rose 108, advancers ahead of decliners 5-1 & NAZ was up 26. The beaten up averages with very high yields all did very well, thank you. The Alerian MLP Index had an exceptional day, up 5½ to 176 (after starting the year at 301). High yield (junk) bond funds found buyers in the last couple of weeks. One of mine jumped 25% off its low, reducing the yield to 23%.

Oil had a nice pop on a favorable weekly report (a smaller than expected increase in supplies). Below is a chart for OIL (an ETF that tracks the price of oil). There was a lot of money to be made as long as the ETF was sold near the summer peak.

CLG09.NYM..

Crude Oil Feb 09

...42.86

... 3.83 .......(9.8%)

•Crude Oil Rises After Smaller-Than-Expected Increase in U.S. Fuel Supplies


OIL (ETF) ---- 1 year




In 2008 all mutual funds dropped, save the ones specializing in buying short related ETFs. The best performaing ones (owning regular stocks) were down "only" 10-20%. Let's hope the new year brings better times. My friend has wishes for everybody:

Happy New Year to all
& to all, a Good Night!!!

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.

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!!!

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 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).

Late day rally lifts markets

Go figgah! In a day filled with plenty of negative stories, Dow remained fairly close to the break even for much of the day. In the last 2 hours buyers returned to give the Dow a gain of 172, advancers over decliners 2-1 & NAZ up 42.

S&P 500 FINANCIALS INDEX had a good day, but is still close to recent lows.

Value 160.75 .... Change up 8.51 .... % Change up 5.6%

The Alerian MLP Index was up a weak 1.68, the Dow Jones REIT Index had a stronger gain of 6 to 126 & the VIX dropped 2.26 to 60.72. SPDR Lehman High Yield Bond (JNK), an ETF which gives the general trends in the high yield or junk bond market, was even (with a yield of 16.1%). Oil was flat.

Macro economic news continues dreary. The Big 3 autos are center stage. They are pleading for help & probably will get some. The failure of any or all would be a brutal jolt to a very fragile economy which is struggling for sound footing so it can recover. Congress has to play hardball with many worrying about a future request for even more aid. Details of the rescue package have to be worked out & the clock is ticking since General Motors (GM) said they are desperate.

The bulls have the recent track record of the markets in their favor while the bears point to the possibility of hedge fund redemptions, etc. Fortress Investment Group (FIG) fell 25% to a record low of 1.87 after announcing it was halting redemptions from one of its major hedge funds. Investors had requested redemptions of $3½B by yearend. Fortress stock is down 88% since going public in Feb 07.

Fortress Halts Drawbridge Global Fund Withdrawals (Update3)


However, over the short term markets have been down only once in the last 9 trading sessions (terrible Mon). Forced redemptions & added tax loss selling remain very dark clouds overhanging the markets.

MLPs in November

November was another down month, but markets recovered strongly off their lows in the last week as was the case for the Alerian MLP Index. It's hard to remember, but these securities traditionally have low betas (forgotten this year). They started the month trying to push thru the 220 ceiling which would have carried the index to territory last seen in early Sep. But they were caught up in the market sell-off taking them to a little under the 160 lows following the Lehman demise in early Oct. They were swept along in the rally in late Nov, ending the month at 183.


Alerian MLP Index --- November 2008




Their story is similar to the ones for REITs & high yield (junk) bond funds. All are selling at very depressed prices offering extraordinarily high dividend yields for the brave. At the same time, the 10 year Treasury bonds yields less than 3%.

Even though their fundamentals remain quite good, they are facing more selling pressure in Dec (along with the rest of the stock market) from tax loss selling, year end adjustments (a kind way of saying selling) & more fund redemptions.

Blackfriday retail sales came in a little above last year, but margins could be lower. An analyst on Bloomberg TV said she saw Wal-Mart customers were focused on getting presents for kids (with an emphasis on electronics) & necessities. Other purchases were deferred & they were not continuing on to other retailers. Apparel is having one tough year, most merchandise is reduced 60+%.

I am now an Amazon Affiliate, hosting 3 of their ads in my right column. I'm also looking to get one of the new netbook computers for practical reasons. Amazon is among the vendors I'm checking with because they have good prices & many of these products have free shipping. There is one widget for their deal of the day & another to search all their merchandise. Amazon is one of the largest retailers in the world hosting a wide variety of products at excellent prices.

This week I'll be in & out but will work hard to keep market posts current. Retail sales along with the fate of the auto companies are 2 of the major stories to follow. Combining them, the auto companies should be reporting Nov sales shortly & they are expected to be dreadful.

Market gains for 5th straight day

Stocks had another good day, stretching the winning streak to 5 days. Dow rose 102, advancers ahead of decliners 2-1 (not exceptional) while NAZ was up a tepid 3.


Dow Jones Industrials --- 1 week





Dow Jones Industrials --- 1 month





S&P 500 FINANCIALS INDEX went up 5 to 170 The Alerian MLP Index was up 6 to 183 (a 7 day high) but the Dow Jones REIT Index slipped 3 to 131. High yield (junk) bonds were flattish, but up 25% from the overly depressed prices just a few days ago. The VIX was flat, but down from 80 at the start of the week. Markets settled a bit as buyers clearly won the day ahead of the weekend.

The 10 year Treasury bond had a super rally in Nov driving the yield to 2.96%, a record low. The 90 day Treasury bill yields only 3 basis points, rounding we can call it zero. After dipping to the 51s in early trading, oil rebounded to flat at 54.43.

First glimpses for retail sales today look to be sluggish. Next week we'll learn more about sales results & the future of the 3 auto companies (among other news stories). Autos already had their biggest 2 day rally in 28 years (i.e. General Motors rose about 70% to 5.24 in the 2 days).

Markets extend winning streak

From the lows in the early AM hours, stocks rose steadily for nice gains on an otherwise quiet day in the markets. Dow ended up 247, advancers over decliners 4½-1 & NAZ was up 67.

General Motors stockholders were among the joyous today. GM popped more than a point on hopes about a possible bailout (also helping the Dow). In its pursuit of $5 price for its shares, it rose 1.27 to 4.83.

Other indices joined in. The S&P 500 FINANCIALS INDEX had another great day (rebounding from depressed levels, the 125 low was made last week):

Value 165.23

Change 7.77

% Change 4.9%

The Alerian MLP Index rose 9 to 177 & the Dow Jones REIT Index was up 6 to 134 (& a sharp rise over the sub 100s just a few days ago, shown below). The unloved high yield (junk) bond funds had a mixed day, some up & others down from their very depressed prices. The VIX pulled back another 6 to 55, signaling some relaxation in the markets.


Dow Jones REITs --- 2 weeks




Stock market enthusiasm spread to commodities. Oil jumped 3½:

CLF09.NYM

Crude Oil Jan 09

...54.33

.. 3.56 ......(7.0%)

Fri will be a half day of trading, major changes are not expected until next week when traders return in full force. Then they will digest the report of retail business for Black Friday, among others, an important indication of how well the holiday season will go.

Speaking of holidays,

Happy Thanksgiving to all

Stocks keep drifting down

Dow is down 105 & slipping in a very soggy market, decliners over advancers 3-1 & NAZ dropped 22. S&P 500 FINANCIALS INDEX is down a big 9 to another multi year low below 149. Two months ago, the index had a modest rally taking it over 300. In this short time span, the index has been halved. The Alerian MLP Index is slipping badly after a bear market rally last month took it up to the 225 area. It's down to 6 to 179 & may be heading to test the lows under 160 when added selling was brought on by the Lehman demise & related liquidations:


Alerian MLP Index --- 1 month




Even worse off is the Dow Jones REIT Index, dropping 8 to 116, a 10 year low. They are being punished badly & may see worse times in the coming weeks with tax loss selling. Their dividend yields, like for MLPs, are well into double digits. Speaking of high yields, don't even ask about high yield (junk) bond funds. Some of those may be heading for 25% yields. For the very brave, these high yields provide incentive to lock up dividends for the long term. The VIX, volatility Index, is up only 1, mild in these times.


Dow Jones REIT Index --- 1 month




Oil dropped below 55 as world recession news trumps all other factors which would have brought higher oil prices in ordinary times.

Consumer prices dropped a record 1% last month. The good news on the inflation front was expected although the decline was larger than forecasted. This follows plunging prices for commodities in the last few months. Core prices, excluding food & energy, fell 0.1%, the first drop in over 25 years. However the housing report was more of the same dreary news that has been dragging on for months. The highlight was foreclosures in Oct were up 25% from the prior year.

•Consumer Prices in U.S. Fall Record 1% on Drop in Oil, Retailer Discounts
•U.S. Housing Starts Drop to 791,000 Pace, Lowest on Record; Permits Slide


Congress is still trying to figure out what to do with the big 3 auto companies, whether or not to give them added help. Congress is not expected to pass meaningful legislation in the lame duck session & General Motors (GM) has signaled it may not have enough money to stay alive into next year. If one or more auto makers fail, that can be another big jolt to the markets even that possibility is being factored into prices already.

Just another grim week

Markets can't attract buyers in a meaningful way. In 2+ months, Dow has dropped an astounding 3K, but has leveled off with a floor of 8K. Last week, it hit that floor & bounced up 800 on Thurs PM. But that didn't hold, the Dow ended the week down about 450, ugh:


Dow Jones Industrials --- 3 months






Yield issues can provide comfort as long as dividends hold (or are increased). However, market bets are very ugly, assuming the worst. The high yield securities with proven track records of paying & preferably increasing divs should give comfort during a period which can drag on for months & months. Some of the highest yields are with MLPs, REITs & high yield (junk) bond funds. Even regular companies with excellent track records routinely offer 3, 4 or 5+% yields.

Of the top 20 holdings at Charlers Schwab, all are down for the year. The best are Johnson & Johnson (JNJ) & Procter & Gamble (PG), 2 Dow stocks, each down less than 20%. The others are down 21-68%. Among the many problems markets are facing, tax loss selling in the next few weeks will be just another.

Yields are more important than ever

Last week was just another one of those rough weeks we have gotten used to:


Dow Jones --- 1 week




Wed-Thus was the worst 2 day session in years which brought the Dow below 9K. The banking crisis is receding to some extent after central banks around the world have been throwing $B & $B at banks. But huge problems remain.

Las Vegas Sands Corp. (LVS) will announce next week how it plans to avoid defaulting on $3.8B. Maybe problems with this loan helps explain why banks are hesitant about lending.

• Person: Las Vegas Sands to detail plans next weekAP(Fri, Nov 7)

Dividends & yields have become increasingly important for very smart investing during these times. When all divs are under suspicion, looking to the Standard & Poor's 500 Dividend Aristocrats can provide names of companies with reliable divs. Nearly 60 of the Standard & Poor's 500 have track records of at least 25 consecutive years of annual div increases. Unfortunately, S&P is not making the list widely available but recent ones can be found on the web. Since they are dated, it should be kept in mind that most banks have or will be removed removed from the list, only State Street (STT) & US Bancorp (USB) remain. Others on the list may be taken off by next year including: Masco (MAS) even though it has a 50 year track & General Electric (GE) plus Pfizer (PFE) & Eli Lilly (LLY) with their high yields show investors worry about how patent expiration on important drugs may affect their divs in a few years.

However many on the list are doing well & look like they will get thru this financial storm with additional annual div increases. A few that might be checked out because of their good earnings coverage for the div include: Coca Cola (KO), Kimberly Clark (KMB), VF Corp (VFC), Walgreen (WAG), Johnson & Johnson (JNJ), Procter & Gamble (PG) & Wal-Mart (WMT). These are not specific recommendations since I'm not familiar with all their problems, but companies like these with good earnings should be able to remain on the list for many years.

The very brave can also look to other securities with very high yields. Many MLPs, REITs & high yield (junk) bond funds have yields well into double digits. Well run ones should survive & high monthly or quarterly divs will be welcome during continued financial turmoil.

The biggest financial problem today is survival of the 3 big autos. Given the current economic environment, it is difficult to see how stock markets can mount a significant rally for some time. Tax loss season is here, making matters worse. Dividend yields (or distribution yields for MLPs) should make stock market gyrations easier to take.