Stocks are mixed, absorbing 2 days of gains

Dow was up 4, decliners ahead of advancers 4-3 & NAZ rose 5. Banks are having a good day, the Financial Index is up almost 1%.


S&P 500 FINANCIALS INDEX

Value 202.62

Change 1.60

% Change 0.8%

The Alerian MLP index is down 0.35, but at its yearly high in the 252s. The Dow Jones REIT Index fell 1. Junk bond funds were flattish, not disturbed by Moody's prediction that bond defaults will rise in the next few months.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Commodities were strong again, but inching their way up today. For gold, each gain represents a new record price.

CLX09.NYM

...Crude Oil Nov 09

...71.20

... 0.32 .......(0.4%)

GCV09.CMX

...Gold Oct 09

...1,040.70

... 2.10 .......(0.2%)

The yield curve for Treasuries is presented below. The 3 month bill yields essentially zero, a measly 0.06% annualized yield. The 2 year note has a 0.87% annualized yield while the 10 year Treasury bond yields 3.21%. The spread between the 2 year & 10-years is 244 basis points, a very large premium indicating worries about inflation going forward.

Treasury securities

5 Dividend Aristocrats
needing more friends

Below is a list a few of the S&P 500 Dividend Aristocrats (minimum 25 year streak of higher annual divs) which have underperformed the markets this year. They have excellent histories of raising divs, the yields along with future capital gains should be of interest for "value investors."


Exxon Mobil --- 1 year




JNJ --- 1 year




Wal-Mart --- 1 year




McDonald's --- 1 year




Abbott Labs --- 1 year





The markets are absorbing 2 days of big gains. Alcoa (AA) will be the first Dow stock to report earnings (later today). The stock has been rising in anticipation of their smallest loss in a year. That will be viewed as "good earnings" by stock market bulls, but not by those buying gold & Treasury securities.


Alcoa --- 2 weeks




Dow Jones Industrials --- 2 weeks

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.

Banking & housing optimism takes stocks higher

The Dow shot up out of the gate & didn't look back for the rest of the day as AT&T (T) was the only loser in the Dow. Dow gained 235, advancers over decliners 5-1 & NAZ was up 52. After drifting in May, it may be trying for an assault on 8776, starting point for 2009. The S&P 500 closed at 909.71, back in the black for 2009. Leading the Dow, banks had another great day as they are also trying to get back to their starting point of 171 for this year.


Dow Jones Industrials --- YTD




S&P 500 FINANCIALS INDEX

Value 165.72

Change 11.12

% Change 7.2%

Speaking of new highs for 2009, Bank of America (BAC) is also trying to reach a new high for 2009, today up 1.06.


Bank of America --- YTD




MLPs, REITs & junk bond funds were strong as investors keep pursuing high yield securities.The MLP Index was up 5 & the more volatile REIT Index was up 10. The VIX, dropped 3 to only 30. Treasury bonds were also weak. The 10 year Treasury pulled back, taking its yield up to 3.21%

Meanwhile oil is pushing on the $60 ceiling again, ahead of a long weekend requiring a lot of gas for driving holidays.

CLM09.NYM

..Crude Oil Jun 09

..59.22

.. 2.88 ......(5.11%)

The following tables (courtesy of Bloomberg) detail first-quarter earnings results for companies in the Standard & Poor’s 500 Index. For the quarter to date, 463 companies out of the 500 have reported their earnings. Income from continuing operations and net income are given on a year-over-year basis. Sectors & industries are sorted in alphabetical order. The full table is on the link below, I copied only the banking & financial sectors:

              CONT OPS                    NET
TKR                        Q1/09    Q1/08     %      Q1/09     Q1/08     %
SYM   COMPANY              (MIL)    (MIL)    CHG     (MIL)     (MIL)    CHG
==============================================================================
GRAND TOTAL            113299.64 173288.31   -34.6  73960.77 149484.26 

Commercial Banks

BBT  BB&T Corp            294.40    401.00   -26.6    312.00    428.00   -27.1
CMA  Comerica Inc          -2.40    109.00  -102.2      9.00    109.00   -91.7
FHN  First Horizon Nati   -62.04     20.88  -397.1    -67.85      7.92  -956.6
FITB Fifth Third Bancor   -51.00    413.99  -112.3     50.00    286.00   -82.5
HBAN Huntington Bancsha     6.80    112.38   -93.9  -2433.21    127.07 -2014.9
KEY  Keycorp             -361.00    218.00  -265.6   -488.00    218.00  -323.9
MI   Marshall & Ilsley   -143.00    100.85  -241.8    -91.97    146.21  -162.9
MTB  M&T Bank Corp         85.70    175.51   -51.2     64.22    202.20   -68.2
PNC  PNC Financial Serv   679.00    354.00    91.8    526.00    377.00    39.5
RF   Regions Financial   -132.95    383.60  -134.7     77.00    336.67   -77.1
STI  SunTrust Banks Inc  -116.82    216.00  -154.1   -815.17    290.56  -380.6
USB  US Bancorp           529.00   1120.55   -52.8    529.00   1090.00   -51.5
WFC  Wells Fargo & Co    3507.88   1999.00    75.5   3045.00   1999.00    52.3
ZION Zions Bancorporati   -18.01    125.14  -114.4   -826.04    106.75  -873.8
                      4215.55   5749.89   -26.7   -110.01   5724.37  -101.9
Consumer Finance
AXP  American Express C   367.00    974.00   -62.3    437.00    991.00   -55.9
COF  Capital One Financ   -86.92    548.50  -115.8   -111.88    548.50  -120.4
DFS  Discover Financial  -176.61    238.83  -173.9    120.39     81.21    48.2
SLM  SLM Corp              13.88    188.00   -92.6    -21.39   -103.80    79.4
                       117.36   1949.33   -94.0    424.13   1516.91

Quarterly Income Summary for S&P 500 Companies by Industries May


The link below gives the 463 S&P companies in alphabetical order:

Quarterly Income Summary for S&P 500 Companies (Table) May 18


Markets behaved today as if the dreary numbers from Q1 are only a distant memory. Every stock I owned was in the green, but it doesn't feel quite right.

GDP decline fails to stop market advance

Buyers ignored gloomy GDP numbers to bid up stocks. Dow is up 150, advancers over decliners 7-1 & NAZ rose 35. Banks were strong. S&P 500 FINANCIALS INDEX is having a good day in spite of worries that banks may need more capital after stress test results are announced next week. One way to get more capital would be for the gov to convert loans to stock, making the gov the largest stockholder in these banks. A 12 month chart for S&P 500 FINANCIALS INDEX is also shown:

Value 145.05

Change 5.13

% Change 3.7%

The US economy shrank at a 6.1% rate in Q1, similar to the dreary Q4 rate of 6.3%. This is the sharpest 6 month contraction in 50 years. Consumer spending rose at a 2.2% rate, limiting the overall decline. However businesses cut spending on home building, commercial construction, equipment & software while inventories contracted. The Federal Reserve may stop buying Treasury bonds as it sees a glimmer of hope for an improving economy. Even with their buying (sometimes $7B per day), Treasury yields have gone up modestly to 2.99%!

•Economy in U.S. Shrank at 6.1% Annual Rate in Quarter, Worse Than Expected
•Fed May Refrain From Increasing Treasury Buying as `Green Shoots' Emerge


The Alerian MLP Index shot up 1.85 to 213+ (another 2009 high) helped by buyout news. TEPPCO Partners (TPP), up 1.12, received a offer by Enterprise Products Partners (EPD), down 46¢, to buy their units for EPD units & $1 cash. Management has a business relationship with EPD & is studying the offer. There aren't many MLPs, any buyout proposal, & they're both big ones, gets a lot of attention.

• TEPPCO Partners, L.P.'s Special Committee Responds to Enterprise's ProposalBusiness Wire(Wed 8:10am)

Other high yield sectors are strong while the VIX dropped 2 to the 35s, nearing yearly lows.


Time Warner (TWX) had a fairly good report for Q1, stock up 1.41. They are looking for a way to get rid of AOL. Google (GOOG) invested $1B in AOL 4 years ago & is now forcing them to take it public or buy back their interest.

•Time Warner Plans to Begin Spinoff of AOL Unit; Profit Exceeds Estimates


The FED is having its meeting, but lowering interest is no longer an issue with the rate near zero. As usual their comments about the future will be of great interest to the markets. Swine flu worries are diminishing around the globe. Chrysler will find out if it's allowed to live by tomorrow evening.

The guy who authorized spending $328K to fly a 747 over Manhattan for a photo op, will probably have to find another job. But in DC that should be no problem, plenty of work available at high salaries. Sadly the culture of unlimited gov spending remains & it will haunt all of us.

Dividend increases

Good news has been hard to come by this year but there is some. Tanger Factory Outlet Centers (SKT), an REIT which owns malls, increased the distribution for the 16th consecutive year (since going public). OK, the annual increase was only a penny to 1.53. But an increase is an increase, especially for a mall owner.

• Tanger Increases Dividend For 16th Consecutive YearPR Newswire(Thu, Apr 9)

In all fairness, Simon Property (SPG), the largest shopping center & mall REIT has held theirs flat, at least in Q1. They may increase the 3.60 rate later in the year, if they feel they afford it, to extend their streak of higher annual divs.


Plains All American Pipeline (PAA), a healthy MLP, increased their distribution in Q2 to an annualized rate of 3.62, 1.4% above the prior distribution & 4.6% above last year. They also gave guidance that their financials are very healthy.

• Plains All American Pipeline, L.P. Declares Increased Distribution on Limited Partner Units; Comments on Favorable Liquidity Position and First-Quarter GuidanceBusiness Wire(Wed, Apr 8)

Kinder Morgan (KMP), the largest MLP, declared a 1.05 distribution for Q2, matching the Q1 payment but above the distribution last year. In Q1, their guidance was for a annual distribution of 4.20 in 2009 which implies keeping the quarterly payments at 1.05. Their Q2 guidance was favorable although they announced they are facing headwinds. But KMP reaffirmed they intend to pay a 4.20 distribution in 2009.

• Kinder Morgan Energy Partners First Quarter Distribution $1.05 Per Unit; 9 Percent Higher Than First Quarter 2008Business Wire(Wed 4:05pm)

It's nice to know there is some good news in the midst of all the dreary news coming out. Other REITs & MLPs may give gloomier reports & some may have to cut divs. But the 2 sectors are stronger than many give them credit for & offer extremely high yields.

Mixed markets

Dow was up 8, remaining under 8K. Advancers are about 25% ahead of decliners & NAZ is down 15 (hurt by Intel's earnings).

S&P 500 FINANCIALS INDEX was even. Banks which had been leading the charge up are losing their steam.


Reality is cutting into recent enthusiasm for banks. UBS (UBS), Switzerland's largest bank, had an ugly quarter in Q1. They lost 2B Swiss francs as customers withdrew 23B francs from their wealth unit. They will have more layoffs, bringing the total layoffs to 20% of their former workforce. The stock had been 65, now is just below 11. Banking problems are global, American banks may have similar gloomy problems to report.

•UBS to Eliminate Another 7,500 Jobs as Loss Widens on Flood of Withdrawals


UBS ---- 2 years




The Alerian MLP Index is down 2 to 200, giving back gains from the last 2 days. But the Dow Jones REIT Index is up 2 to 115, bargain hunters are being attracted by the high yields. Junk bond funds are mixed.


Intel (INTC), a Dow stock, reported earnings that beat estimates but gave meager guidance, stock down 60¢. They did say revenue would be flat in Q2, some view that as good & others view it as bad. The future of the PC market is in question. Sales of the new netbooks are strong, but they are low priced. Other computers sales are pretty much lower this year.

• Intel shares fall despite bullish PC predictionAP(Wed 10:07am)

Dow will need significant help to break thru 8K. It won't be coming from Q1 earnings reports.

Dow Jones Industrials --- 1 month

Wall Street wavers

Stocks were looking for direction, but couldn't find clues today. Dow has not varied far from 7800 in the last 2 days. Buying in the last hour took Dow up 87 from the low, into the black. It rose 47 to 7837, advancers were ahead of decliners 2-1 & NAZ gained 29. Banks after losing their upward momentum from Mar 6-18, have traded close to 125 since then. Today S&P 500 FINANCIALS INDEX was up 1 to 124.

The Alerian MLP index had a good day, up 2.60 to 196, but still in the 190-200 range where it's been all year. It plunged in mid Feb taking it close to the sub 160 lows from late last year, then rebounded back into the sideways range by mid Mar. A flat performance early in the year showed strength, then sideways in recent weeks indicates weakness. Many of the strong ones are up a good 25% off their recent lows. In 2009 the Dow Jones REIT Index went straight down like the Dow. However, unlike the Dow, it had a limited recovery in the last month. It has pretty much traded sideways near the 100 low, just above the sub 100 lows reached late last year.

Barclays Capital High Yield Bond ETF in 2009 has a track record that follows the Dow, down followed by a recovery. All 3 groups continue with many securities offering double digit yields.

Markets are still groping & searching but may have to wait until next week to get more direction (the trading week closes on Thurs).

Monster rally fades

Asian stocks followed thru after the Wall Street rally last night with strong gains, but European markets were mixed with second thoughts on the Treasury plan to deal with bad loans. Dow pulled back 82, decliners over advancers 3-1 & NAZ fell 24. The Dow has rebounded more than 1K from its low a couple of weeks ago. But even with this rally, it's only back to levels seen in mid Feb:


Dow Jones Industrials --- YTD





Banks lost some of yesterday's glamor. S&P 500 FINANCIALS INDEX is down, but not badly:

Value 126.43

Change -2.78

% Change -2.2%

The Alerian MLP Index remains up for the year. But today MLPs, REITs & junk bond funds are giving up some of yesterday's gains.


Alerian MLP Index --- YTD





Oil fell, taking it under 53 (the highest price this year). Below is a chart for key commodities courtesy of Bloomberg. If not clear on the color bars below, blue is oil, orange is gold, yellow is corn (what else?) & pink is wheat. Gold is the clear winner, fighting its way back to break even.


Key Commodities - 1 Year

Oil

Oil

Gold

Gold Spot

Corn

Corn Spot

Wheat

Wheat Spot

Bernanke & Geithner are testifying before Congress which will give everybody a lot to talk about. Bernanke has said he was against the AIG bonus money & tried to stop payment of the money. More important, he is asking for new powers to seize banks in danger of failing as the FDIC does. The implication is that such banks could even be the whopper size ones. Naturally, inept Congress is focusing on AIG bonuses (something they undertstand) while paying less attention to the bigger issues (i.e. what they don't understand) involving $B. As an aside on the bonus money, perhaps one third went overseas, money that can not be retrieved.

•Geithner, Bernanke Call for New Wind-Down Powers After AIG's U.S. Bailout


The Treasury is spelling out more details about how to invest in these "troubled" mortgages. It looks like a variation of junk bonds, very high yields but with gov backing. At this early stage, nobody knows how successful the effort will be.

•Geithner Tempts Investors With Reduced-Rate Loans, Returns as High as 25%


Congress is center stage today. There will be plenty of fault finding about AIG bonus money, without any mention of Conrgess allowing to this happen after approving bailout packages.

Stocks drift lower ahead of Federal Reserve announcement

Asian markets were mixed last night following the big rally in the US. Today, stocks markets are looking for direction while traders watch AIG officials try to justify stupidity. Dow is down 106, decliners over advancers 2-1 & NAZ lost 9.

S&P 500 FINANCIALS INDEX is taking a slight breather after its recent run up. Citi (C), just a call, is up 26¢ to 2.76.

Value 114.10

Change -0.35

% Change -0.3%

High yield securities are slipping along with the overall market. VIX is up about 1 & oil is down almost 1 for the usual assortment of reasons about why it's declining.

The big news story, overwhelming the enormous financial problems at AIG, is how AIG can justify paying bonuses to the "smart guys" who gave us the AIG mess. While stupidity & insensitivity are key issues, the $Bs & $Bs used to clean up the mess at AIG deserves more attention.


IBM (IBM), a Dow stock, wants to buy Sun (JAVA) for double the market price. This would be IBM's biggest acquisition if it goes thru (maybe this week). Sun is up 3.30 to 8¼ on the news while IBM is down 2, not many details have been released. In prior times major acquisitions were bullish for the markets, not today.

• IBM May Finally Take Sun Out of Its Misery- The Business Insider

Investors await the Federal Reserve announcemnet this PM, hoping to hear encouraging swords about fixing a broken financial system.

Nervous markets in nervous times

Stock markets don't know what to do. Dow is up 12 & NAZ up 15, waffling around break even. Decliners are slightly ahead of advancers. S&P 500 FINANCIALS INDEX is up 1 to 108+ in all the confusion over financials.

High yield securities are little changed while the markets are trying to figure out where to go from here. Oil is having a good day, looks like it wants to make a run on 50.

CLJ09.NYM

...Crude Oil Apr 09

...48.37

... 1.02 .......(2.2%)

The furor of AIG bonuses continues, but it looks like it's a lost cause to avoid paying the money. The money is based on contracts & there's probably not one union person who will suggest that voiding a contract for any reason makes sense. The guys will have to live with embarrassment if the names are brought to light. But for that kind of money most could live with a little embarrassment. AIG tried to justify the payments with the story that this money was used to pay for the brightest & most talented employees. You know, the guys who gave us the AIG mess. The employees are largely not in the dull insurance business, instead the guys who play with $Bs in derivatives. After Stanley O'Neal ran Merrill Lynch into the ground, he was told to take his $150M & go (as per his contract). Sadly the bigger story about AIG spreading its bailout money around the world to help foreign banks involves $Bs & has been lost. After learning an expensive lesson, the gov will clamp down on future aid to AIG. Swell!

• Bonus furor may prompt limits on AIG bailout money- AP

Monthly housing starts jumped 22% last month to a 583K annual rate, demand for new condos & apartments was strong. However, the annualized rate remains at a dreary level & the glut of housing will be around for a very long time.

•Housing Starts in U.S. Unexpectedly Rise Amid Surge in Condo Construction


Corporate borrowing is tough to get & expensive. Pfizer (PFE), a Dow stock, has debt still (barely) rated AAA. They will borrow over $13B to help finance the Wyeth purchase at rates of 1.95-3.45% above benchmark rates. Those rates are considered expensive but necessary during these times. As a result, their debt is expected to be downgraded to AA. Coca Cola (KO), another Dow stock, will borrow long term to pay off commercial paper. This is becoming common among the biggest companies who issue commercial paper. The cost in added interest will exceed $75M but will assure they have funds going forward versus having to worry about constantly rolling over commercial paper. Just another cost of the credit crisis.

•Pfizer Plans to Sell $13.5 Billion of Notes to Fund Acquisition of Wyeth
•Coca-Cola Flees Commercial Paper's Low Rates for Safety in Long-Term Bonds


The fate of financials will determine market changes.

Lower stock prices persist

Despite the encouragement about the largest US spending bill in history, stocks keep sinking. Last week the Dow fell 400, bringing the YTD decline to over 900 (or 10%). There is recognition that "make it up as we go along" carries risk of failure or only mediocre success. It's sad that all this spending had to be rushed thru Congress. There is an old saying, "haste makes waste." That thought is probably weighing down markets.

Even though stocks have gotten off to a bad start, one group, has done very well, MLPs. The first chart shows their rise this year compared to the sinking bars for the Dow. Record high yields of 12% at the start of the year for the Alerian MLP Index brought back buyers. Higher MLP prices caused the yield come to fall to 10.3% (& some distributions were raised in the last few weeks).

Meanwhile REITs (represented by the Dow Jones REIT Index), another high yield group, as shown in the 2nd graph, have followed the Dow down & did much worse in the last week. The strongest in the group have 10% yields, others offer yields well into double digits.


Dow Jones vs MLPs --- YTD





Dow Jones vs REITs --- YTD





How long the REITs can buck the negative trend in the market is uncertain. This performance has come in spite of the decline in oil prices (much of their business is moving oil). REITs are facing the threat of losing tenants while they have to continue paying expenses (i.e. interest). Uncertainty about their future is being priced into the stock prices, producing record yields.

Passing the stimulus bill is only another step in trying to help the economy. Bank bailout II has to be dealt with. Because of the lack of success with the first $350B, there is more scepticism in Congress. It's future is uncertain. In addition, auto companies will give Congress an update report of what they've done with their bailout money. Markets have to decide whether to go with the optimism shown by the MLPs or succumb to the pessimism of the REITs.

Grim unemployment figures sink stocks

The ugly unemployment picture sank stocks. Dow dropped 93, decliners over advancers 2½-1 & NAZ dropped a big 32 (after yesterday's nice gain). For over 2 months Dow has been in a rut, staying close to 8½K. Bulls say that's good, calling it base building.


Dow Jones Industrials --- 2 months





The S&P 500 FINANCIALS INDEX sank, testing the monthly low of 155.

Value 157.76

Change -3.55

% Change -2.2%

Other high yield securities pulled back a little & VIX was down pennies.

Oil slipped on the dreary economic news. Next, it may test recent lows in the high 30s.

CLG09.NYM

...Crude Oil Feb 09

...39.78

... 1.92 .......(4.6%)

The dreaded unemployment came in worse than feared. The unemployment rate shot up to 7.2%, vs 6.9-7.0% expected by analysts, the highest rate since 1992. Recent corp layoffs will only add to this misery. Last year the US economy lost 2.6M jobs, the worst loss in over 60 years. The economy took a severe hit after the Sep financial meltdown, 1½M jobs were lost in Q4.

•Employers in U.S. Cut 524,000 Jobs Last Month; 2008 Losses Most Since 1945


The new administration team is assessing the financial mess, trying to come up with new ideas for repairs. I'm not sure what to expect other than a massive increase in gov deficits will add to the gov debt load. Markets are digesting the negative unemployment, retail sales, etc. news. There probably won't be a lot of action this PM unless it's selling going into the weekend.

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.

Markets up mildly on uncertainty

Markets drifted awaiting the vote on the auto bailout package. Stocks spent most of the day in the green, but couldn't get a good head of steam up. Dow gained 70, advancers over decliners 2-1 & NAZ was up 18. However, banks were weak. The S&P 500 FINANCIALS INDEX slipped 1 on the uncertainty over the outcome of the bailout package.

Oil had a good day bouncing off recent lows:

CLF09.NYM

..Crude Oil Jan 09

...43.82

.. 1.75 ......(4.2%)

After its fall below 8K, Dow Jones has been range-bound, pretty much kicking around in the 8Ks. 9½K is the ceiling it's shooting for. In all fairness, it has shown an amazing amount of strength lately in the face of very ugly news.


Dow Jones Industrials --- 2 months





The Alerian MLP Index has been fighting back from the lows set 3 weeks ago. Today was a very good day, up 8 to 182. If it can hang on to its gains, the next goal will be the 220s.


Alerian MLP Index --- 2 months




REITs have also had a nice bounce off their lows, but many still offer extraordinary yields well into double digits. Today, the index rose 11 to 146½.


Dow Jones REIT Index --- 2 months





The VIX or volatility index has been slipping in the last couple of weeks while the Dow has been rallying off the lows. Fear has been subsiding, but remains at extraordinarily high levels. Today it dropped 3 to 56:


VIX ---- 2 weeks





Meanwhile Lehman High Yield Bond ETF has been just plain flat. High yield (junk) bonds still can't get no respect, down pennies today, offering a 16+% yield. For them, tax loss selling continues to be a major drag:


Lehman High Yield Bond ETF - 2 weeks




Markets are awaiting word about the auto bailout package. It should get thru the House easily, that's why it started there. But there will be a tough fight in the Senate. Dick Cheney is talking with Rep senators, trying to persuade them to vote for it. The outcome is still fuzzy, probably why markets have been trading in an uneasy pattern.

•Automaker Rescue Plan Will Pass House, May Hit Senate Snag, Lawmakers Say


Even if/when the auto bailout bill passes, macro economic problems will continue to drone on. However, it looks like markets have been able to absorb tax loss selling quite well, at least so far.

Top level execs expect the recession to drag on for another year or so. I like to go against the grain, but feel uncomfortable fighting this kind of thinking:

Recession to Last Another Year - Duke Survey of CFOs- CNNMoney.com

Dow plunges 444 to multi year lows

Stocks waffled in the first half of the session, but bears came on strong in the 2nd half taking the Dow down 444, decliners were over advancers 10-1 while NAZ plunged 70. S&P 500 is down to 752, what looks like an 11 year low. Other indices I follow sold off in similar fashion.

Amidst the carnage on Wall Street, oil continues in its bear market, crashing thru the 50 barrier with ease:

CLZ08.NYM

..Crude Oil Dec 08

....48.90

... 4.72 .......(8.8%)

The interest rate on the 90 day Treasury bill has fallen to 2 basis points. Translated, that means the interest discount on it is essentially zero because of all the buyers. The 10 year Treasury bond yields 3.13%. Frightened investors are buying Treasury paper taking their yields to record lows for our times.

Congress will not be helping the autos makers until next month, supporters of aid tried to work out a compromise for help which failed. Next month auto makers will get one more chance to beg for money. Unfortunately for them, while this drama drags on their sales have to be plunging which could be sealing their fate.

The short term outlook for the markets is bleak as buyers have gone on strike. Dow is flirting with the lows set in 2002. If those do not hold, I just don't know. A few months ago, some technical guys had been talking about 11.7K being an important line to hold. Whatever they were thinking, they were proven right:


Dow Jones Industrials --- 10 years




The damage in the last 3 months is difficult for anybody to fathom, a drop of almost 4K (i.e. 1/3) in less than 3 months:


Dow Jones Industrials --- 3 months




Speaking of damage done, MLPs (along with REITs & high yield bonds) have been punished badly. As bad as the selling was in early Oct, partially related to the demise of Lehman, the punishment is being dished out again. The index is down over 40% during the last 3 months to new multi year lows:

Alerian MLP Index --- 2 months




After hours Dell (DELL) reported earnings down from last year but beat forecasts, common theme among company reports. The stock dropped 54¢ during trading hours, but rallied 38¢ (it's now a $10 stock) after hours based on gut reactions. Their report says nothing new, times are tough for everybody including Dell.

Dell posts revenue that misses estimates, profits that beatat CNNMoney.com


The other indices got clobbered badly, no point dragging out more ugly charts. I just saw one of my junk bond funds has a yield of 30%, 2700 basis points above the Treasury yield. Sadly this selling will probably drag on thru year-end with tax loss selling, frightened investor selling, fund managers selling to meet redemptions. I will check to see if Chicken Little left any messages about "The Sky is Falling." For the time being, he may be on to something!

Fate of automakers drags Dow down 427, to below 8000

Markets were down all day but sold off big time in the last hour (getting to be a habit). Uncertainty about the automakers, their customers (car dealers) & suppliers is a lot for markets to absorb even though the talk has been around for some time. Dow tumbled 427 bringing it just under the important 8K support line, decliners over advancers 10-1 & NAZ dropped 97 bringing it below 1400.

S&P 500 FINANCIALS INDEX reached new lows with one of their worst days in history. They are connected with the future of the automakers, auto loans represent a portion of their loan portfolio & is now under a very dark cloud:

Value 139.84

Change -18.29

% Change -11.6%

Amidst all the uncertainty, the Alerian MLP Index dropped 12¼, to 173, another low (aside from the spike down in early Oct) & the Dow Jones REIT Index dropped an enormous 16 to 108. However, the VIX shot up 6.62 to 74.26, approaching its record of 80 set a couple of weeks ago. Fear is going to extremes.

In sympathy, oil slipped pennies taking it below 54.

The Federal Reserve, at their last meeting, expects the economy to shrink thru the middle of next year. As a result, they are prepared for more rate cuts (among other measures) but little is left when interest rates are already at 1%.

•Fed Policy Makers Saw Economy Shrinking Through Mid-2009 at Last Meeting


Dow stocks: Bank of America (BAC), General Electric (GE) & Intel (INTC) have fallen below 15 while American Express (AXP), Microsoft (MSFT) & Pfizer (PFE) are under 20. The 3 under 10 have already been mentioned many times. These are vastly different times when the Dow holds so many "low priced" stocks.

High yield (junk) bonds got a relatively nice mention. One index has their yields topping 20%, one of the highest rates ever. They point out that either they deserve these valuations because the economy is going to get soooo bad or there are extraordinary values out there which can be used to lock up record high yields. One of my junk bond funds dropped 10% today, taking the yield over 25%. I just don't know!

•Junk-Bond Yields Reach Record 20% as Weaker Economy Boosts Risk of Default


Speaking of extraordinary high yields, Kayne Anderson Energy Total Return Fund (KYE) is a closed end fund which invests in MLPs & shown in my Finance badge on the right. At the current price, it yields over 19%. The market is pricing in many distribution cuts on their MLP holdings. It should be mentioned, this is a corp with stock which pays dividends & some of the divs may not taxable (for those interested).

The "big 3" are trying to justify their existence to Congress but that's a tough battle. They have to beg for another $25B to keep them afloat for another year, whatever. I really don't know, but the thought of just one bankruptcy is frightening.

While the auto cloud overhangs the markets, it's difficult to see buying returning in a meaningful way. It could also be this is just another one of the many clouds overhanging the markets.

Those Websense guys are back, off & on, blocking my picture. Sorry about it, was hoping that Google straightened them out. I guess not.