FANNIE AND FREDDIE RESCUE
MLP IMPACT?
Rare Saturday morning post for me but i'm working radio for the tropical storm and i have some down time. After the close yesterday news began to get out about the treasury putting the finishing touches on a rescue of Fannie and Freddie. The WSJ story is here and more details here from the Washington Post. The San Francisco Chronicle story says the equity of the common and preferred will be pretty much wiped out. The journal originally indicated a wipe out of the common; no mention of the preferred. The piece now has been re-written to say its not a complete wipeout for the common. We'll know when final details emerge. The spiders which is a tradeable proxy for the S&P traded up nearly 2 points after the close which translate to a 20 point S&P surge at the open on Monday. So clearly the market sensed something was coming late Friday which rescued us from a close below 11k on the dow and of course a complete breakdown of MLPS.
Which now takes us to potential impact. This developement has to be a positive for MLPS as a group. Why you may ask? The credit market seizure has prevented many businesses from going to the well for much needed money unless they are willing to pay up. Many MLPS have issued equity at lower and lower prices like Teppco this week which priced an offering at 29. Teppco has seen this price in years. IF the market percieves that the rescue takes pressure off the credit markets and takes the pressure off the banks and get them to start lending again we could see a substantial rally from here. Its a big IF of course but certainly one considering. For those of you who like tech anal-isis and candlestics, dogi hammer formations were all over the place yesterday which indicates a change of trend. MLPS close well off their lows as they couldn't overcome the second headwind of falling crude prices...but you got to start somewhere.
Also Hurricane Ike APPEARS to be headed into the Gulf Of Mexico early next week and that could mean a price driver if its headed for the rigs. So Monday morning will bring some excitement and hopefully some much needed relief.
joseph cioffi's Source Page - Associated Content
2 comments:
Excellent post, Joe!
The credit contraction - which is a natural response to individual and government excesses - has produced a sea-change in equities valuations across a broad spectrum of sectors including, of course our beloved MLPs. But a healthy dose of liquidity requirements from a few large MLP stakeholders, MLP's own need to dip into the capital markets to finance growth, a pervasive misunderstanding of the sector by investors at large, and an enormous amount of fear and loathing by yield-seekers who have been badly burned by the descent in "safe" investments, has created mouthwatering, iconic market inefficiency.
When the worm turns, and it will turn, the bitching on this blog from our "anonymous" friends will morph from 'poor-me-I-lost-money' to 'poor-me-why-didn't-I-load-up-at-those-price/yield-levels.'
That's what makes it a horse race.
Mlpsrgood4u,
Exactly!!!
No one can say when the recovery will occur (personally, I am not so sure the ultimate lows are still not ahead of us), but recovery will happen and the hysterical anonymous posters will spend years regretting not being buyers during this bear market.
Bruce Sherman
Oakland, Oregon
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