Overdo relief rally

Markets had another wild, volatile day even for recent times. Dow bounced off its low, just under 8K, with a monster 800+ point rally in the last 3 hours. Dow ended up 552, advancers ahead of decliners 3-1 (rather mild considering what 550 points should bring) & NAZ jumped 97. S&P 500 FINANCIALS INDEX had a very good PM, up 12:

Value 178.83

Change 11.84

% Change 7.1%

The Alerian MLP Index was up 3 to 195½, a modest gain all considered. But this is still the lowest level in 5 years (aside from the horrible week of Oct 3). Standard & Poor's talked about difficulty for lower-rated oil & gas companies to access high-yield debt which may pose a liquidity risk. While their discussion did not specifically mention MLPs, this kind of thinking may be bleeding over to them causing the sell-off in the last few days taking the index below 200. Their very long term projects underway have financing in place. However, financing issues might negatively impact them going forward when they arrange new projects. As in the rest of the business world, uncertainty affects the future for all.

Weak appetite for junk bonds poses risk for oil sector: S&P


The Dow Jones REIT Index had an 15 point pop today, a reaction to the greatly oversold conditions for REITs with dividends which offer extremely high yields. High yield (junk) bond funds had more of a mixed day retaining yields near 20% or about 1600 basis points above the Treasury 10 year bond rate. The Volatility Index dropped 7 to 59, fear subsided a bit.

Oil finally had a pretty good day:

CLZ08.NYM

Crude Oil Dec 08

....59.52

.... 3.36 (6.0%)

Nothing dramatic happened causing the 800+ point rally in 3 hours other than just a relief rally. A couple of months ago, a 500+ point rally for the Dow would have been headline news but today it has become routine. In the last few weeks daily point swings for the Dow have been reduced to 300 or fewer points, but today brought back prior times with a 900+ point swing.

Dreary macro economic problems drone on. Republicans look like they want to play hard ball about helping the autos with money from the loan package. The Treasury Dept is trying to figure out how to handle financial lending problems & bad loans. Yesterday reminded everybody they they have to make it up as they go along which brings complaints & uncertain markets. I think Citigroup (C), depending how the figures are calculated, is still the biggest financial institution in the US, but the stock is under 10. I just don't know. The rally today will probably be described as technical in nature. Let's see what tomorrow brings.

Confused markets muddle along

Dow & NAZ are about even while decliners are slightly ahead of advancers. In the Dow 30, General Motors (GM) & Citigroup (C) are under 10 while Alcoa (AA) is just over 10. In the old days, under 10 signaled a very speculative stock. Speaking of down on their luck, American Express (AXP), another Dow stock, is at a 12 year low & probably headed even lower:


American Express --- 37 years




S&P 500 FINANCIALS INDEX is down pennies, the Alerian MLP Index is down 3½ to 189, Dow Jones REIT index is down pennies at a multi year low under 131. The VIX, Volatility Index, dipped slightly to under 66.

Oil rebounded a little, but the fundamentals continue bearish on expectations of lower worldwide demand:

CLZ08.NYM

Crude Oil Dec 08

....57.61

.... 1.45 (2.58%)

• Oil rises above $57, OPEC lends support- Retuers

The Labor Dept reported jobless claims jumped 32K last week to 516K, higher than expected & almost matched 517K claims in 2001. This is only the second time in 16 years that claims exceeded 500K. An important sign of a recession is when jobless claims are above 400K.

• Jobless claims jump unexpectedly to 7-year high- AP

Almost 280K homes received a foreclosure notice last month, 5% over last year's figure. The number of homeowners with foreclosures in Oct grew 25% above last year.

• Foreclosure rates up 25 percent year-over-year- AP

Wal-Mart (WMT), a Dow stock, feels good about THEIR holiday sales. Their guidance for 2008 EPS is $3.42-3.46, up from $3.16 last year. But this projection is down from the prior guidance of $3.43-3.50. Analysts are estimating $3.48 for 2008. The stock fell 73¢ on the reduction in earnings guidance.

•Wal-Mart Says It's `Optimistic' About Holiday Sales; Earnings Advance 9.8%


I feel sorry for the Treasury & Federal Reserve trying to solve seemingly impossible problems for the financials. But that's the world we live in & markets are reacting. More grim news on the economy, etc. will keep coming.

Markets crumble, Dow down 411

Just another down day for the Dow, down 411, near the lows of the day, taking it below 8300, after starting the month at 9336. Decliners were ahead of advancers 10-1 & NAZ dropped 43.

S&P 500 FINANCIALS INDEX set another new multi year low:

Value 166.99

Change -12.39

% Change -6.9%

The indices I follow got slammed very hard. The Dow Jones REIT Index is touching a new multi year low, falling 10¼ to 131. The Alerian MLP Index dropped 9½ to 192. This is an unusually large drop for it, even on a terrible day like today & it's solidly below 200, probably headed to test the lows of 155 (which were aggravated by forced selling after the demise of Lehman). The VIX shot up 5.16 to 66.60, fears rose sharply.

Oil keeps falling on continued worries about a severe global recession:

CLZ08.NYM

Crude Oil Dec 08

....55.89

.... 3.44 (5.8%)

A quickie auto $25B bailout package received White House approval, it will be folded into the $700 bailout program the Federal Reserve is working with.

•Frank Plan Would Give Automakers Extra $25 Billion Through Treasury Funds


American Express (AMX), a Dow financial company, became a bank yesterday (i.e. on a moment's notice). It looks like they are getting hit hard with bad debts from the cardholders, requiring a $3½B investment from the gov. This is now a $20 stock, hard to believe:

• American Express shares plunge on bailout reportAP(Wed 2:14pm)

General Electric (GE), another Dow stock, will guarantee $139B of the debt for GE Capital . Can you spell, "Uh-oh?"

•GE Says U.S. Will Guarantee Up to $139 Billion in Debt for Lending Unit


Las Vegas Sands (LVS) received a big financing package from Asia plus over ½B loan from the Adelson family to remain alive for the time being.

The Treasury had plans to buy troubled mortgages yesterday but that had to be abandoned after complaints that it wouldn't help. Hello!!! What's going on here? Maybe I'll have to check in with Chicken Little tonight, it seems like the sky is really falling. OK, we'll get thru this mess but over the short term life is brutal which is causing stocks to sell off.

The level of redemptions at mutual & hedge funds is important, I have a feeling they are running very high again which means fund managers will throw more stock out the window, maybe they were doing it today. When confusion & chaos are in charge, stocks get hit hard. The Dow low on Oct 27 was 8175, that needs to be tested & probably tomorrow.

Stocks keep tumbling

Dow declined 276 near its session lows, sadly that kind of decline has become common recently. The daily range for the Dow has been settling back in the last few weeks to "only" 300 bringing a relative sense of calm. A few weeks ago, daily ranges were exceeding double that number. Decliners are over advancers 5-1 & NAZ is down 46. NAZ has been punished badly, the chart below for Wall Street darling Google tells that story well:


Google --- 4 years





S&P 500 FINANCIALS INDEX declined 8 to 171. I think Bloomberg TV, which monitors this index, said it's a 19 year low. Their site only shows a 5 year history, 5 years ago it was in 400+ territory. The Alerian MLP Index dropped 6¼ to 195½ taking it below the important 200 line of resistance, the Dow Jones REIT Index fell 5½ to 136 matching the prior yearly low reached a couple of weeks ago (which is really a 6 year low). But the VIX, Volatility index, is back up 4½ to 66 as fear is running higher.

Oil, down 2, is pretty much at a 3 year low:

CLZ08.NYM

Crude Oil Dec 08

...57.25

.... 2.08 (3.5%)

Whopper size financial problems drone on & the US Treasury has to come up with new rescue plans, but making it up as they go along is a tough way to handle it. OK, I don't have any better ideas in the horrible financial crisis they are trying to get us out of. Chaos in solving seemingly unsolvable problems is adding to selling pressure for stocks.

•Paulson Scraps Plan to Buy Troubled Assets, Shifts Focus to Consumer Loans


Company news keeps coming & it's all dreary. BestBuy (BBY), down 1.43, guided EPS for 2008 sharply lower, down almost $1 from the guidance ONLY 2 months ago ($2.30-2.90 vs $3.25-3.40). Since the first 3 quarters are recorded, the negative guidance will come out of Q4 profits!

•Best Buy Drops on Reduced Profit Forecast, `Seismic' Slowdown in Spending

Macy's reported a loss only half what was expected. After rallying in the first hour, it sold off sharply, taking below 9, or down 50% this year.

• Macy's posts loss but tops expectations; shares up- Reuters

After the July 15 low, I was sorry that I missed a chance to get Bank of America (BAC) at just 18 with an enormous yield. Four months later the stock is back at 18 while the div has been halved. This is just one story, but it will be repeated many times as bleak days are ahead. Currently, bigger than Q3 retail sales reports coming in the next few days, is whether or not the gov will save GM & maybe Ford & Chrysler. Horrible days for auto companies is a worldwide problem. Last week Toyota (TM) said this will be their worst year in the last 15.

Dow is heading south fast. It looks like will have to test 8K & probably very soon.

Stocks fall on economic worries

Today began with so much hope, based on the enormous stimulus package announced by China. But the Dow fell 300 points from the highs reached early in day, ending near their lows with a net point drop of 73. Decliners led advancers 2-1 & NAZ dropped 30 led by Google (GOOG) falling 14, near a multi year low, on worries about its earnings.

S&P 500 FINANCIALS INDEX fell 8½ to 184. Alerian MLP Index dropped only 2½ while the Dow Jones REIT Index fell a big 14½ to 144 just inches from its low multi year low set a couple of weeks ago. The VIX popped almost 4 to 60 as even higher levels of fear are returning to the markets. Oil ended with a 1 point gain to 62, rather muted considering all the enthusiasm regarding increased spending by China's gov.

Now Goldman Sachs (GS), down 6.57, looks like it will report its first loss since going public in 1999 bringing its stock price near the lowest levels in the last 9 years. Despite their premier status, they may fall prey to the credit crisis requiring a bailout:

Goldman Shares Fall to 5-Year Low on Loss Estimates (Update1)


Goldman Sachs --- 9 years





Reality will be the main market driver this week led by gloomy numbers from retailers & worries about very big companies. Maybe we should all pray for General Motors, Las Vega Sands, AIG, Goldman Sachs, etc., etc., etc.

SeekingAlpha just published my current article on the S&P 500 Dividend Aristocrats, giving ideas about investing in quality securities during these troubled times:

S&P 500 Dividend Aristocrats and Your Portfolio

I'll be off tomorrow, hope everybody is well.

Early market gains fade fast

Stocks out of the gate started strong following the leads of overseas markets. Asian & European markets rose on news that China adopted a $586B stimulus spending package. Commodity & telecom stocks were strong. Leading gainers in the Dow were Alcoa (AA), AT&T (T), Verizon (VZ) plus McDonalds (MCD) on a 8.2% gain in same-store sales for Oct. Dow is now down 23 (down from a 200 gain early on), advancers equal decliners & NAZ is down 16.

Buyers pulled back on more glum economic news such as Circuit City filing chapter 11, AIG needing even more money for their bailout, Fannie Mae recording a bigger than whopper size loss & GM dropped 1 to 3.39 on predictions it may not have enough cash to last thru next month (their days as a Dow stock are numbered).

•Circuit City Files for Bankruptcy Amid Competition From Best Buy, Wal-Mart
•Fannie Mae Posts Record $29 Billion Quarterly Loss After Asset Writedowns
•AIG Bailout Swells to $150 Billion as Insurer Reports Fourth Straight Loss
•General Motors Plummets After Deutsche Analyst Cuts Price Target to Zero


S&P 500 FINANCIALS INDEX dropped 3, the Alerian MLP Index was even but the Dow Jones REIT Index dropped 7 to 151 (maybe heading for the recent low of 135). The VIX, Volatility index, was up 1½ to 57.60 continuing in astronomical territory.


China's plan for spending is supposed to help the world's economy as they are a big player. They will be spending on infrastructure: roads, bridges, housing & repairing damage form the earthquakes. However, they may be already spending on some of the projects in the plan. China envisions this will take a couple of years to complete. Financing the plan was not addressed. The most directly impacted will be metals. Metals were strong but oil was little changed:

• China says stimulus plan important for world- AP

CLZ08.NYM

Crude Oil Dec 08

....61.46

.... 0.42 ..... (0.7%)

Retailers will be reporting Q3 earnings later in the week, expectations are bleak.

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.

Markets hang on to early gains

Dow rose a couple hundred out of the gate & remained pretty much flat for the rest of the trading day. The negative unemployment report & threats of possible failures by the auto companies did not keep buyers away. With a 180 point rally in the last 30 minutes, Dow ended up 248, advancers led decliners by 2-1 & NAZ was up 38. The indices I follow posted gains, the best being 9.37 for the greatly oversold Dow Jones REIT Index. The S&P 500 FINANCIALS INDEX managed a gain of 3.69 after being flat much of the day. VIX declined 5.10 to 58½, probably due to the rising markets. Oil was up pennies, just under 61.

General Motors (GM), a Dow stock, reported a Q3 loss of 4.2B & said it may not have enough cash to stay alive THRU NEXT MONTH. The mighty auto industry is shaky & implications for the economy of the failure for any or all 3 auto companies boggles the mind. But markets were little concerned today.

•GM Says It May Not Have Enough Cash to Finish Year, Suspends Merger Talks


Goldman Sachs is cutting profit forecast for the S&P 500 by 10% in 2008 & 9% for next year. The are estimating this year, S&P will earn $65 & next year it should rise to $68. No big surprise.

•Goldman Cuts 2008, 2009 S&P 500 Profit Forecasts, Citing Economic Slowdown


Markets had another rough week but pulled into the lower half of the 8-10K trading range. The 11K level which used to be thought of as a floor, now is a level many would like to regain:


Dow Jones Industrials --- 2 months




John Chambers, head of Cisco (CSCO), after reporting earnings this week, said Cisco is gearing up for a very tough economic environment around the world. I think he expressed well what business people & investors are facing.