QUARTER ENDS WITH GAINS ON MLPS.
NOW COMES THE SECOND HALF!

We ended Q1 on the MLP index at 314 and we are at 330 this morning as the last day of Q2 begins so we holding a 16 point gain or about a 5% gain (plus add another 1.5% or so for distribution) so a total return for the quarter of about 6 1/2%! Excellent in my view. And there have been some big winners this quarter especially among GP's like Buckeye Holdings (BGH) ,Nustar Holdings (NSH), Atlas Resource (ATN), Atlas Holdings among others. All of the above produced double digit percentage gains for the quarter.





Now of course the big question is what about the second half? Well we are now nine months into a bull move that began last October when the MLP index came off a 255 bottom and broke above 270 for the first time. We are 60 points above that now for a more than 20% gain plus 3 completed distribution cycles.

It has been excellent and I still see no sign of topping here but a few caution flags are in order. One is the 10 year note where the rate has crept up above 5%. 5.25% is the tipping point for me so we're okay here as long as that holds. The fed is friendly to us by doing nothing. Energy prices remain firm so demand remains strong. I am less concerned with stable or even falling energy prices (as long as its nothing catastrophic) by i will be concerned by any big spike that might be hurricane induced. 2 years ago MLPS made their top at the beginning of August 2005 and went into a sideways correction for the next 13 months. This came right as oil began its run to 80 bucks and a barrell and natural gas went to 15 bucks. These are things we should keep an eye on. Money flows into the group remain positive an interest in MLPS from new investors continues to increase. The Spectra ipo (SEP) of a few days ago shows that demand for MLPS remains quite strong.





As to what to watch, keep an eye on some underperformers like Crosstex Energy (XTEX,XTXI), Hiland LP (HLND) and for that matter any other MLPS that have not grown their distribution from quarter to quarter.


These 2 issues have gone nowhere recently as money flows into the growers. But should they get back on track they might emerge as leaders in the next run up or at least play catch up. Note that Crosstex (XTEX) has some other issues to deal with so do recognize that there is risk here should the distribution remain static for several more quarters. By the way for disclosure purposes i am long both Crosstex and Hiland and that i trade in and out of theses positions.

Now one other observation. In the last quarter if you had the choice of holding Apple Computer(AAPL), Research in Motion (RIMM) or Terra Nitrogen (TNH); which one would have made you the most money?

The winner...Terra Nitrogen of course with a 150% gain in the quarter verses a "miniscule"50% gains for the others plus you got a 6% plus yield. Who says owning tech is where to be when you could have made lots more money from a company that has lots of shit, knows its shit, and sells lots of shit! No guarantees btw that we'll be able to say this again next quarter. And this is no buy recommendation here by anymeans...just observing what has been going on. It really does pay not to have anyone pay attention to you. Better to make money quietly!

There is nothing on the news front this morning. No upgrades or downgrades. Futures just turned higher on stocks and the energy complex is firm. The 10 year rate is flat.

Finally, back to normal today as my horse yesterday finished a strong second in her race. I was very happy with her performance but i spend 7 hours driving back and forth in hideous traffic including sitting on the outerbridge crossing for 40 minutes as they cleared an accident at the top of the bridge. Wonderful!