MORE OIL NOISE
BUT I AIN'T PREDICTING!
BUT I AIN'T PREDICTING!
After my completely wrong diagnosis of the daily trade yesterday i'm just going to let the market play itself out with regards to oil . We went from being down nearly 3 dollars at this point yesterday to up 2 and change at the high. 130 is trying to hold this morning with crude down nearly 1 dollar and inventory numbers due out later.
Anyone notice yesterday that the 10 year pushed above 4%? Well i haven't put this up in awhile but what about an MLP index vs 10 year rate chart.
Notice that mlps fell as rates fell to that 262 intraday low which pretty much was in lockstep with the 10 year rate low near 3.30 and we've moved to 291 as rates have risen 70 basis points. Since the rate fall is a flight from risk, mlps suffered. The rate rise is a return to risk and MLPs have moved higher from those gut wrenching lows. But from here if the 10 year rise is due to increased inflation risk what does that mean for MLPS? I know you posters in a bad mood; i already know what you are going to say. But it is a relationship we may need to be watching closely again. Or perhaps we should have been watching it all along.
The energy complex is down as of this posting except for nat gas which is up a few ticks. The dollar is rallying nicely this morning. Stock futures are a little lower but nothing tragic as GDP revisions are out later this morning. No headlines this morning on the corporate front and so far nothing on the upgrade downgrade list. But those things could change as the morning is young.
Noticed lots of end of month action yesterday with shares getting moved around on a few mlps. I would expect more distortions in both directions today as players shift positions around.
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3 comments:
The liquidity in the mlp space is atrocious.
it always is. BTW...Notice today...dollar up..mlps up slighty..big energy down with oil.
I tend to think that Mr. Market discounted future inflation(1 to 2yrs. out) very rapidly in the mlp space last july and august. The yields you see in the mlp space amoung the higher and mid quality issues reflect this with yields currently between 6.6% and 8.5%. This is and always will be a game of compounded dividend growth. That's why a rise in the ten year is hardly impacting the mlp space, the yields(mostly tax deferred for the long term holder) have discounted a great deal of any current & future inflation. Food for thought, with an Obama presidency and tax rates sure to go up, this sector is pretty attractive to you capital appreciation junkies.
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