UBS DOWNGRADES MAGELLAN MIDSTREAM...
IS A PULLBACK COMING FOR MLPS?
Good Wednesday Morning.
I don't think we've had 2 down days in a row in this group since we broke out above the 270 level on the MLP Index which sits this morning ant another new all time high. At some point some sort of pullback is in order. Will it begin today? tomorrow? Wish I had the answer to that one. The rate squeeze continues as 10 year rates sit near 4.40%. Bill Gross of Pimco revised his forecast on the 10 year to where rates could fall to...are you ready for this...a 2 handle in 2007 and that the federal reserve will need to start cutting rates soon as the economy slows. If we keep a 3 point spread on MLPS this would mean yields on MLPS would drop to the low 5's and in some instances for the rapid growers...into the 4's! Forecasts however are just that so who knows where we wind up.
Now back to the question of a pullback.
The daily chart above looks like its in run-away train mode while the weekly chart below is still showing us that we have just emerged from a base. The upleg from May 2004 to July 2005 (15 months of upside) was primarily driven by rising energy prices and risiing distributions with rising 10 year yields.
This leg has gone from the 252 September bottom to just under 282 this morning...a nice move and the drivers now are stable to lower energy prices...lower interest rates and up until now...rising distributions. I believe any corrections are just that...and should be used to add to positions.
Meanwhile this morning UBS Securities downgrades Magellan Midstream Partners (MMP) from buy to hold.
The units have been an excellent performer. A pullback here would be logical.
Good Wednesday Morning.
I don't think we've had 2 down days in a row in this group since we broke out above the 270 level on the MLP Index which sits this morning ant another new all time high. At some point some sort of pullback is in order. Will it begin today? tomorrow? Wish I had the answer to that one. The rate squeeze continues as 10 year rates sit near 4.40%. Bill Gross of Pimco revised his forecast on the 10 year to where rates could fall to...are you ready for this...a 2 handle in 2007 and that the federal reserve will need to start cutting rates soon as the economy slows. If we keep a 3 point spread on MLPS this would mean yields on MLPS would drop to the low 5's and in some instances for the rapid growers...into the 4's! Forecasts however are just that so who knows where we wind up.
Now back to the question of a pullback.
The daily chart above looks like its in run-away train mode while the weekly chart below is still showing us that we have just emerged from a base. The upleg from May 2004 to July 2005 (15 months of upside) was primarily driven by rising energy prices and risiing distributions with rising 10 year yields.
This leg has gone from the 252 September bottom to just under 282 this morning...a nice move and the drivers now are stable to lower energy prices...lower interest rates and up until now...rising distributions. I believe any corrections are just that...and should be used to add to positions.
Meanwhile this morning UBS Securities downgrades Magellan Midstream Partners (MMP) from buy to hold.
The units have been an excellent performer. A pullback here would be logical.
No other breaking headlines this morning and no upgrades or downgrades.
On the Master Limited Partnership discussion group this morning we have lots of talk surrounding Energy Trasnfer Equity (ETE) for those of you interested. Also some posts on the Duke Midstream board about the Barron's arcticle this weekend.
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