Higher stocks after Bernanke nominated for 2nd term

The Dow jumped over 9600 (another high for 2009) at the opening on news that Ben Bernanke is being renominated to the Federal Reserve for a 2nd term. Dow is up 72, advancers over decliners 2-1 & NAZ rose 10. Banks liked the news, the Financial Index gained & is trying to top 200.


S&P 500 FINANCIALS INDEX

Value 196.87

Change 2.87

% Change 1.5%

The Alerian MLP Index has been stuck in a rut after soaring over 250 at the start of the month. Today it pulled back 1+ to the 241s. REITs found buyers, their index was up over 1 & junk bond funds were mixed. The yield on the 10 year Treasury bond was even at 3.49% & little changed from its general levels over the last 3 months.


Alerian MLP Index --- 2 weeks





Oil slipped but remains in yearly high territory.

CLV09.NYM

...Crude Oil Oct 09

...73.56

... 0.81 .......(1.1%)

Ben Bernanke was renominated for a 2nd term to run the Federal Reserve. This was hardly controversial, difficult to imagine another candidate doing much more. But markets like to see stability.

•Bernanke Named to Second Term at Fed After Keeping U.S. Out of Depression


The White House budget office forecasted a cumulative $9T (that's T as in trillion) deficit over the next 10 years, $2T (again, that's T as in trillion) more than estimated in May. Moreover, the figures show the public debt doubling over 10 years, reaching three-quarters the size of the entire national economy. Pres Obama's economic adviser, Christina Romer, predicted unemployment could reach 10% this year before beginning a slow decline next year. The idea behind rushing the stimulus package thru without anybody reading or understanding it was to keep unemployment below 8%! That was 6 months ago. Romer said, "This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter." Now these same people are telling us to rush thru a health care plan costing $Ts. Huh???

White House Sees $9 Trillion in Deficits Over Decade


The realization of an even larger deficit which will require the Treasury to sell even more debt is not phasing the markets. China will be required to purchase at least 1/3 of the new debt. More debt helps make investors feel better today, but the long term implications are unfavorable especially for higher inflation.


Dow Jones Industrials --- 2 weeks

Another choppy day

Markets shot out of the gate very strong, but that feeling didn't last long. Dow rose to a 70 point gain, but slipped back to down 10, decliners over advancers by 20% & NAZ dropped 16. The Financial Index has been trading sideways around 160 for a couple of months. While it's double the recent low, sideways still spells going nowhere.

S&P 500 FINANCIALS INDEX

Value 166.42

Change -1.10

% Change -0.7%

The MLP index was even, the REIT index slipped 2% while junk bond funds were a little soft. Oil reached 71, another new high for 2009, before settling back a few cents. The average price at the pump rose to $2.63 yesterday.

CLN09.NYM

...Crude Oil Jul 09

...70.55

... 0.54 .......(0.8%)

Treasuries fell again. The 10 year Treasury bond has its highest yield since Nov as the gov prepares to sell $19B in the securities today. There are also rumors that Russia may sell some of its reserves in U.S. debt to buy IMF bonds. Finance Minister Alexei Kudrin said last month that Russia planned to buy $10 billion of IMF bonds using money from its foreign reserves. Russia holds $138B of U.S. debt & China, the largest U.S. creditor, holds $768B.

•Treasuries Decline After Reports Russia May Reduce Reserves in U.S. Debt

10-Year Treasury Yld Index - 1 month





After approval from the Supreme Court, Fiat now owns the bulk of Chrysler's assets, closing a deal that saves the automaker from liquidation & places a new company in the hands of Fiat. The deal clears the way for a new, leaner Chrysler to emerge from bankruptcy, which will focus on smaller vehicles. Fiat won't provide new money but will give Chrysler small car & engine technology.

Fiat Forms Sixth-Largest Carmaker With Takeover of Chrysler


Stocks are stuck in the mud. They want to go higher, but can't muster up enough steam. Yesterday the president announced a new concept about "pay as you go." Huh??? JUST TODAY, the gov has to borrow an additional $19B. Tomorrow brings more borrowings. What's Nancy Pelosi going to do, go over budgets line by line to save nickels & dimes? Gov spending is out of control & their way to solve the deficits is spend another $1+T on a new health plan. This is what $1T looks like:

$1,000,000,000,000

Dow Jones Industrials --- 1 month

The government becomes largest Citigroup stockholder

Dow sank 85, decliners over advancers 2-1 & NAZ was down 8. The economy reported dismal numbers for the last qtr, but that was outweighed by Citi's news.

Adding confusion to an already chaotic situation, the gov may convert up to $25B in Citigroup (C) loans to preferred stock with an 8% div. This would have the immediate effect of boosting the equity base for Citi (C) & they could potentially seek more bailout funds. The markets responded with a strong, DUHHH!! Citi now has a 1 handle & could be delisted if the stock price goes below 1. But then again, it's a Dow stock. Nobody knows what's going on, but Citi is clearly very desperate. Below is their chart for JUST the last year:


Citigroup (C) --- 1 year





On the dreary Citi news, S&P 500 FINANCIALS INDEX is down (96 is the low, reached last week):

Value 105.12

Change -4.10

% Change -3.7%

Somewhat related, Following on the news yesterday about the rising number of bank (primarily smaller) failures, FDIC is raising the fees to banks along with an emergency extra fee. Their insurance fund has dropped to lowest level in 25 years & they estimate $65B will be needed for the next 5 years to handle more failures. Ugh!

• Government could own up to 36 percent of Citigroup- AP
• FDIC raising fees on banks, adds emergency fee- AP

The Alerian MLP Index was flat at 188 (as shown in the Yahoo widget on the right) while REITs & junk bonds were soft. VIX rose 1.


No great surprise that the US economy shrank at an annualized rate of 6.2% in Q4, the worst performance in 26 years. Worse, there is no indication that this decline will end anytime soon. Following thru, the US business activity shrank in Feb for the 5th straight month. The Institute for Supply Management said its business barometer increased to 34.2 (less than forecasts), up modestly from 33.3 in the prior month (the lowest reading since March 1982). Readings below 50 signal contraction.

•U.S. Economy Shrank 6.2% in Fourth Quarter, Weakest Performance Since 1982
•U.S. Business Activity Contracts for Fifth Straight Month, ISM Index Shows


This is what 1T look like:

1,000,000,000,0000

It's a new term being bandied about. Now the only question whether the number in front should be 1 or 2 or 3, whatever. This number was barely heard of just a few weeks ago. Now its used in everyday discussions. When gov people throw this number around, it's scary!